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Peloton stock hits record low after 2.2 million bikes recalled

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Peloton Interactive Inc. shares slipped to a record low Thursday after the fitness company announced a recall of about 2.2 million exercise bikes due to a safety hazard posed by the product’s seat.

Consumers should immediately stop using the bike and contact Peloton for a free repair, the US Consumer Product Safety Commission said in a notice. Customers won’t have to return the equipment, though. Instead, the company will provide a new seat post, which users can install at home. Play Video

Shares of the New York-based company fell 8.9% to $6.86, reaching the lowest closing price since its initial public offering in 2019.

Peloton news/articles/2023-05-05/peloton-discloses-bike-seat-defect-and-says-a-fix-is-planned” target=”_blank” rel=”noreferrer noopener” class=”sc-bcXHqe kzcJbQ styledLinkColor “>identified the flaw on its entry-level bike earlier this month. The defect involves the seat post — the part that attaches the saddle to the frame — on its original bike model, which costs $995. In certain circumstances, the post can break at the weld joint. The recall notice cited 13 injuries. Peloton said initially there were 12, including one wrist fracture, and it wasn’t immediately stopping sales.

This marks the fourth time Peloton has disclosed a product defect in recent years, following recalls of bike pedals and both its treadmills. In 2021, Peloton was forced to cease sales of its high-end treadmill, the Tread+, after it was revealed that a young child died after being swept under the device. It remains off the market two years later while Peloton works on a fix, and refunds are still being offered.

“Our commitment to Member safety is unwavering,” the company said in a statement. “For Peloton, it was important to proactively engage the CPSC to address this issue and to work swiftly and cooperatively to identify a remedy.” 

The recall comes after the company news/articles/2023-05-04/peloton-gives-upbeat-forecast-as-comeback-effort-makes-headway” target=”_blank” rel=”noreferrer noopener” class=”sc-bcXHqe kzcJbQ styledLinkColor “>said last week the current quarter would be among its “most challenging.” It’s trying to boost growth while dealing with a post-pandemic slump in demand for its at-home exercise equipment that’s left it with a glut in inventory. It’s also coping with the hit to its cash flow from a $75 million to settle an International Trade Commission dispute with Dish Network Corp. over content-streaming technology.

“Peloton’s recall of 2.2 million bikes due to potential injury hazards comes at a bad time given demand trends haven’t fully normalized, and cash burn continues to be an issue especially with an upcoming settlement payment to Dish,” Geetha Ranganathan, analyst at Bloomberg Intelligence, said in a research note. 

The decision to disclose the seat-post concern contrasts with how Peloton handled earlier recalls. When the problems emerged with its treadmills, the company — under previous management — said it disagreed with the government’s findings and that a recall wasn’t necessary. It ultimately apologized for that approach.

BMO Capital Markets analyst Simeon Siegel said that exercise bike recall is “notably different” from the Tread+ recall in 2021 given that it’s for a repair, not a full refund. 

As of the end of April, the company identified 35 reports about the problem — out of 2.4 million units sold since the bike’s launch in the US and Canada. There’s no impact to bike owners in the UK, Germany and Australia, Peloton said in a separate statement.

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