Peloton on Wednesday announced voluntary recalls of its two treadmill machines over safety concerns.
The announcement represented a major reversal of Peloton’s initial response and comes after weeks of discussions with the US Consumer Product Safety Commission.
In a statement, Peloton apologized for not acting swiftly to resolve the problem after reports of one death and dozens of injuries.
“I want to make it clear that Peloton made a mistake in our first response to the Consumer Product Safety Commission’s request to recall the Tread +,” CEO John Foley said in a statement on Wednesday. “We should have been more productive with them from the start. I apologize for that.”
Peloton stock closed the day nearly 15% down, hitting a low that has not been seen since September. That wiped around $ 4.1 billion from Peloton’s market value.
The company recommends customers who already have Tread or Tread + products stop using the devices immediately and contact Peloton for a full refund or other qualified remedial action. It added that a repair is in progress and will be offered to treadmill owners in the coming weeks.
The recall affects approximately 125,000 Tread + machines and approximately 1,050 Tread products in the United States
The CPSC said it received 18 reports of the touchscreen becoming detached and six reports of the touchscreen becoming detached and falling off the profile. The group had already warned about Peloton’s Tread + product last month after a child died in an incident with the machine. There were also dozens of other reported injuries.
The regulator said that Peloton’s treadmills are constructed differently than their counterparts. “An unusual belt design that uses individual rigid rubberized slats or treads that are connected to each other and run on a rail.” That’s instead of a thinner, continuous strap. There is also a large gap between the bottom and the belt of the Tread +, leaving room for things to move underneath.
The commission simultaneously released a surveillance camera video in April of a boy being dragged under one of the Tread + machines and struggling to break free.
However, Peloton pushed back on the recall recommended at the time, telling customers there was no reason to stop using its treadmills as long as children and pets were kept out of the area while in use. The company had also recommended using a key to lock the equipment after each workout.
Peloton said Wednesday it will work with the CPSC to set new safety standards for treadmills in the industry.
“This recall is the right step, albeit dangerously delayed,” said Senator Richard Blumenthal, a Connecticut Democrat who chairs the Consumer, Product Safety and Data Security Subcommittee. “Peloton has put consumers at unacceptable levels, hampered the CPSC’s investigation and its consumer warnings.”
It is unclear how much damage Peloton did to its reputation. The company is known for its home cycling classes, which grew in popularity during the Covid pandemic. A treadmill was only sold in 2018.
The product was first called Tread, but is now known as Tread + as Peloton prepared to sell a cheaper version in the US later this year. The original model is priced at $ 4,300.
The smaller, cheaper version is already available in the UK and doesn’t include the same rigid slats as the Tread +.
A spokesman did not immediately respond to CNBC’s request for comment on Peloton’s plans for its upcoming launch.
While Peloton doesn’t break down sales of its treadmills, research firm Cowen had previously estimated that the Tread + would account for around 2.2% of sales in 2021. This equates to about 1.63 million stationary bikes and treadmills combined.
Peloton had sales of $ 1.8 billion in 2020. That’s an increase of $ 915 million last year. Peloton will show profits after the market closes on Thursday.
“We recognize that this recall is likely to result in significant one-off financial costs and business disruptions in the short term, with potential reputational damage,” said Youssef Squali, an analyst at Truist Securities, in a statement to clients. “We’re stepping back, however, and looking at the bigger picture. However, we believe that worldly growth trends in the home fitness industry will remain intact.”
The company’s stock has fallen around 45% since the start of the year. It has a market cap of $ 24.3 billion.
Here is the link to the full statement from Peloton and the CPSC.
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