When fitness company Peloton (PTON) became a breakout star last year, the company’s story was clean and transparent. As fitness centers closed their doors and as people quarantined at home, sales of PTON’s equipment and digital subscriptions surged, leading up to the stock slamming all-time highs this past January. It was smooth sailing for the company and its investors until a pair of recent developments sabotaged it’s evidently unstoppable run.
First, PTON came under fire late last year due to substantially extensive shipping delays that caused some clients to cancel their orders. Originally, the company was battling to keep up with demand, but it eased that situation by ramping up capacity. However, another issue cropped up over the winter as rising COVID-19 cases swept across shipping docks on the west coast. This constructed a new shipping bottleneck, pushing PTON to invest over $100 mln in freight expenses to better its order-to-delivery windows.
While PTON worked to lessen shipping times, a much darker matter began to unfold. On March 18, the company disclosed that a child was involved in a fatal accident connected to the Tread+ product. The tragic event, along with 70 other reported incidents, prompted the Consumer Product Safety Commission (CPSC) to issue a safety warning regarding PTON’s Tread+ products. After initially refuting the report, PTON relented, and on May 5 the company and the CPSC announced the recall of its Tread+ treadmills.
Meanwhile, questions about whether the company could maintain its premier growth rate in a post-pandemic world circulated in the background. These items in combination have spoiled PTON’s formerly immaculate image among consumers and investors, resulting in a nearly 50% plummet from the stock’s record highs.