Amid the height of COVID in 2020, Peloton’s stocks skyrocketed and increased by almost 440%. While many consumers were investing strongly in at-home workout machines, Peloton continued to advance its business goals by producing more, creating a wider variety of product, and making business decisions for 2021 and the years so come. Ah, the power of business planning – where did Peloton go wrong? In 2021, stocks dropped 76% and most recently in Q4 of 2021, the numbers were their lowest growth quarter ever. Now, the CEO is under fire as Peloton is halting production in 2022 to remodel their production, prices, finances, and business plans to reflect a more accurate valuation, as COVID numbers decrease and people are going back to work and have less of a need for at-home fitness equipment, especially when gyms are opening back up world-wide. Many competitors have emerged in the marketplace, most notable – Lululemon and NordicTrack. The bottom line, Peloton projected their numbers at their highest value point and quite frankly, didn’t do what we tell every client – “plan for adversity”. It seems like common sense and can be seen as naïve to think production would maintain at the momentum it was during a time where everyone was forced to stay indoors, but the mistakes were made and now their reputation is on the line.
Peloton is currently laying off employees and closing stores due to their misjudgment on projections and finances. Right now, the CEO is denying that they are halting productions but gave a vague statement regarding their efforts towards increasing margins and improving costs for the company (which creates a very selfish image). Wall Street and the court of public opinion are not reacting well.
What could have been done differently and what can they do in the future?
Peloton failed to plan for a time in which competitors and adversity would cast a shadow on their product. The mishaps in production and projections were discovered early enough to make changes sooner, and this was a smoldering issue that the corporate offices new about and tried to do small things to change a big mistake. They began to slash prices, sacrifice quality, but then increased prices for delivery and set up; it was a complete scramble to correct margins. There was a complete disregard to consumer impact, and people began to learn the smoldering issues of Peloton very quickly. There is a trust that the court of public opinion shares with companies, especially those that align themselves with that organization and actually work for them. These very people are being laid off due to the corporate failures, and the court of public opinion is waiting to see how they will handle it. Peloton needs to be transparent, take responsibility for their miscalculations, and ultimately ensure that the corporate office, the stores, employees, and consumers are all aligned in how they are going to maintain integrity and the steps they will take to prevent this from happening in the future.