Peloton CEO blasts rumours of production halt

Peloton Interactive Inc (NASDAQ: PTON) closed Thursday about 25% down on reports it was suspending production of its exercise bikes and treadmills due to waning consumer demand. This morning, however, CEO John Foley blasted the rumours as speculative.

CEO Foley’s remarks on Friday

In a letter to employees, Foley reiterated that the company wasn’t going into a production halt and that Connected Fitness was there to stay. He wrote:

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We’ve experienced leaks containing confidential information, leading to a flurry of speculative articles in the press. The information that media has is incomplete, out of context, and not reflective of our strategy. Rumours that we’re halting all production of bikes and treadmills are false.

Foley, however, confirmed that the fitness products company was focusing on cutting costs, which might include, as a last resort, layoffs. Shares opened about 5.0% up on Friday.

BMO’s Simeon Siegel isn’t convinced

BMO Capital Markets’ Simeon Siegel is not fully satisfied with Foley’s remarks and is still sceptical about what’s happening at Peloton on the production side. On CNBC’s “Squawk Box”, he said:

They’re very good with their words. They said they’re not halting ‘all production’. So, I think it has a hint on something that’s actually happening. To what extent are they shutting down; all factories as opposed to shutting down a lot or some, that we don’t know.

According to Siegel, the strategic reset is challenging for Peloton since the bulk of its expenses is linked to sales. On top of it, increasing competition, he added, will add to its woes as well. Despite the sharp decline in the stock price, Siegel continues to rate PTON at “underperform”.