Peloton’s demise could spell trouble for Lululemon, NordicTrack and Bowflex

Peloton is spiraling, and its demise could be the harbinger of real trouble for the entire industry. The home digital fitness company is one of the few that has thrived during the pandemic and promised arrive change forever how we work out. But now, it’s not clear if they’ll be able to finish home fitness revolution They start.

There’s no denying that the pandemic has made working out at home extremely popular. After gyms were forced to close, people canceled their memberships and instead invested in exercise equipment and signed up for online classes. So much so that companies like Peloton can’t keep up with demand, leaving many customers wait many months to deliver their bicycles and treadmills. But the Covid-19 restrictions don’t last forever. Eventually, when gyms started to reopen, people stopped buying – and use – exercise equipment with the same enthusiasm they had in spring 2020.

This transition has been brutal for Peloton. New bike for sale has gone downhilland people haven’t bought enough of the company’s newer products, including two models of treadmill and weight, to make a difference. After losing $439 million last quarter, Peloton decision in January that it would temporarily stop making bicycles and treadmills to cut costs, According to internal documents obtained by CNBC. Then, on February 8, the company said that they would lay off 2,800 people, cancel plans to build new $400 million factory in Ohioand its CEO, John Foley, will step down. Former Spotify CFO Barry McCarthy has taken his place and says he hopes to rescue Peloton by investing in an online library of fitness content and developing new exercise machines. , which may include connected rowing machines and strength training equipment. While some of Peloton’s investors wanted to put the company up for sale, McCarthy opposed the idea.

Many of the problems Peloton encountered were company-specific. Some investors have Discuss that Foley – who had led the company for a decade – was just not up to the task of scaling the company so quickly. Peloton also encountered a series of problems, including supply chain problems, very public recall of its treadmilland a Controversial advertising campaign.

But Peloton’s departure also coincides with a trend that more and more people are exercising as they once did: at the gym. Request to meet in person Fitness classes and gym memberships has increased again, while Google searches all home gym equipment continued to fall since their peak in March 2020. Walking traffic to gyms is now back to the same levels as January 2020, according to data from SafeGraph, a geospatial data company physical. Planet Fitness alone speak that by November it had recovered 15 million customers, which is only half a million customers from its pre-pandemic peak.

After returning to the gym, Peloton’s opponents also began to show signs of difficulty. Mirror is one of them. The company sells a Smart Mirror $1,495 Stream virtual workout classes on the device’s surface as you work out. Just a few months after the pandemic, Lululemon bought Mirror for 500 million dollars in an effort to capitalize on the big transition to home fitness. More than a year later, the sports brand has slashed estimates revenue expectations give Mirror half.

“As you know, 2021 is a challenging year for digital fitness,” said Lululemon CEO Calvin McDonald tell investors in December. “We have seen increasing pressure on customer acquisition costs that is affecting the entire industry.”

Meanwhile, NordicTrack’s parent company, iFIT, announced that it would go public last September, but a month later it delayed the move, citing “adverse market conditions. ” And Nautilus, which owns fitness brands like Bowflex and Schwinn, also last year’s report that some of their products haven’t sold as well as they did during the pandemic, although many are still more popular than they were in 2019.

It’s likely Peloton could find a way forward if a larger company acquires it. But yes reason to believe that won’t happen, even with its new CEO. Several activist investors wanted a larger company to buy Peloton and proposed at least 19 possible candidates, including Apple, Netflix, and Lululemon. But these companies can Do not care in a niche but expensive fitness business. For example, Apple has been wary of buying more companies and attracting the attention of antitrust regulations. Netflix is ​​not in the equipment business, and the streaming giant generally avoids fitness content. Lululemon has a Mirror.

But as Peloton looks for buyers, many other companies are building streaming platforms for fitness content that let people use any device they want — and for a lot less money. These services include Apple Fitness +On-demand home workouts from ClassPassand millions of fitness videos on YouTube. These streaming options tend to make money through ads or low-cost monthly subscriptions that don’t drive people to buy specialized equipment.

Whether other companies will follow Peloton’s path remains to be seen. Of course, this is hardly the first time the home gym fad has come and gone. Every generation of technology seems to come with its own spin in the home fitness revolution, from VHS aerobics to exercise equipment sold on QVC. This time, Peloton thinks streaming and touchscreens will be the breakthrough to attract people. Unfortunately for Peloton, the company may have just built another expensive clothes rack.

Update, Feb. 14, 12:20 p.m. ET: This section has been updated with new information about Peloton CEO Barry McCarthy’s plans for the company.

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Fry Electronics Team

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