Peloton will face investors one day after it recalled thousands of treadmills. Here are the top questions executives will face.

Peloton Treafd
  • Peloton recalled its treadmills on Wednesday, following pressure from federal regulators.
  • The company is set to hold its quarterly earnings call Thursday, one day after the recall.
  • Executives are likely to face questions about the long-term financial and reputational impact.
  • See more stories on Insider’s business page.

Peloton recalled more than 125,000 treadmills on Wednesday, sending the company’s stock price plummeting.

On Thursday, executives will face questions from analysts and investors who will likely be looking to assess the long-term ramifications of the recall and its impact on Peloton’s bottom line.

CEO John Foley and other leaders will likely be grilled on the $4,295 product’s future, other forthcoming products, and the recall’s impact on Peloton’s reputation in the fitness industry.

Read more: Experts say Peloton will emerge from the treadmill recall with its bottom line intact – even as its delay in issuing a recall exposes larger safety issues

How long will it take to repair the treadmills?

In its notice, Peloton told customers to immediately stop using the product and contact the company for a potential refund. The company also stopped selling the product.

For the users who do not return the product, Peloton pushed a software update that automatically locks the treadmill and requires a four-digit code to unlock for each use.

It is unclear how long it will take Peloton to repair the treadmills and implement new safety practices for new Treads. Customers have until November 2022 to request a full or partial refund, the US Consumer Product Safety Commission said.

What is the new timing for the Tread release in the US?

Before a fatal accident in March and other reported injuries dating back to 2019, Peloton was set to release a slimmer model of its treadmill on May 27. The product was supposed to be a cheaper option and would sell for a little over half the price of the original treadmill or about $2,495.

Since Peloton told users to stop using their treadmills immediately, the company has not commented on its plans to release the newer model, though a new Tread release seems unlikely.

“We expect that it will be delayed by at least a few months (possibly longer) while considerable existing inventory is repaired & Peloton waits for negative PR & recall overhang to subside,” JP Morgan analysts said in a note to clients Wednesday.

Will Peloton continue to sell the Tread+?

In light of its plans to release a cheaper model, investors may question whether Peloton may choose to ditch the more expensive Tread+ entirely.

By doing away with the model, the company could potentially further distance itself from the incidents and recall. According to JP Morgan analysts, the Tread+ will also likely lose much of its revenue to the cheaper Tread.

Will Peloton continue to advertise its treadmill or any other products in the coming months?

In the past, Peloton has been relatively heavy-handed with its advertising campaigns. This year, the company advertised during the Super Bowl and has launched several commercials for its treadmills.

Investors may question whether the company will choose to continue advertising its Tread and Tread+ and whether Peloton might choose to take a step back from the limelight until concerns over its treadmill ease. It could also change its marketing strategy entirely.

“What’s less clear is the impact the Tread recalls will have on N-T Bike & Bike+ sales, and on Peloton’s willingness to market into difficult headlines,” JPMorgan said.

The company has even come under criticism for its ad campaigns in previous years. In 2019, the workout company lost over $1.5 billion in value after its Christmas advertising campaigns were dubbed “sexist and dystopian” on social media.

Will the recall and Peloton’s initial lack of response to the federal investigation impact the company’s future viability?

Prior to the recall, Foley was hesitant to take any steps even in light of the fatal accident. At the time, Foley called CPSC’s warnings about the treadmill “inaccurate and misleading.”

While the CEO has since apologized for the initial response, his actions could impact his credibility and the future reputation of the company.

Customers and investors may be wary of future Peloton products after seeing how the company was slow to recall its treadmill. Hesitancy over the treadmill could also leak into sales Peloton’s famous bike.

Despite the recall, analysts expect Peloton to report another solid quarter of growth, fueled by the pandemic as Americans sought out new ways to exercise outside of the gym. The period ended March 31, prior to the recall. Analysts polled by Bloomberg expect $1.12 billion in revenue, up 113% from 2020, and a loss per share of $0.10.

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Peloton drops 7% after the cycle-maker said it’s struggling to keep up with surging demand for its flagship fitness products

Peloton
  • Peloton’s shares dropped 7% at the market open on Friday after the release of its second-quarter earnings.
  • The cycle-maker said it would invest $100 million to accelerate the speed of product deliveries worldwide.
  • Wedbush maintained its outperform rating on Peloton as analysts expect the at-home fitness trend to last.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Peloton fell 7% on Friday after the company said it continued to struggle with delivering its bike and treadmill products on time.

The company reported its first ever billion-dollar quarter on Thursday, helped by a boom in demand for fitness products during the holiday season. But over the past year, Peloton’s customers have complained of months-long waits, delivery delays, and last-minute cancellations.

Manufacturing lags were not the only challenge for deliveries. Shortages of containers, extended port delays, and a backlog to get containers unloaded were other problems the company faced, finance chief Jill Woodworth told the Financial Times.

Pandemic-related factors continue to hurt the business. So, Peloton has now invested $100 million to accelerate the pace of air and ocean freight to boost its “longer than acceptable wait times” over the next six months. 

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“While this investment will dampen our near-term profitability, improving our member experience is our first priority,” Peloton said. 

 The company now expects full-year revenue to exceed $4 billion, up from a prior outlook of over $3.9 billion. Wedbush raised its 12-month price target on Peloton to $162 from $160, maintaining an “outperform” rating.

That’s because analysts say the company is unfazed by the momentum of COVID-19 activity because there is a favorable shift away from traditional gyms and toward at-home fitness.

Peloton’s stock closed at $157.53 on Thursday, but was lower, around $146 during regular trading on Friday.

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