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Peloton's solution to delivery delays: Fly its bikes from Asia

Published February 5, 2021
CEO says the company will spend $100 million on expediting deliveries, including air freighting bikes and treadmills.

NEW YORK (BRAIN) — While Peloton Interactive’s sales surged past the $1 billion mark in its most recent fiscal quarter, slow deliveries continue to hold the company back. Its co-founder and CEO said Friday that Peloton will send $100 million to expedite shipping, including paying to air freight its products from Asia to the U.S.

“On average, in the coming months, we will be incurring a transportation and delivery cost that is over ten times our usual cost per Bike and Tread, including, in many cases, shipping them by air instead of by sea,” John Foley wrote in the blog. [

Peloton sales totaled $1.06 billion in its second fiscal 2021 quarter, which ended Dec. 31. The revenue included $870 million from hardgoods sales and $195 million in subscriptions. Quarterly earnings were up 128% year-over-year. The company said it has seen a 134% increase in the number of connected fitness subscribers; it now has 1.7 million, up from 712,000 a year prior.

The company’s net income for the quarter was $63.6 million, for earnings per share of $0.22.

Peloton has agreed to buy fitness brand Precor from Amer Sports Corporation for $420 million in cash. The purchase is expected to close early this year.

Supply remains one of the company’s major challenges. Its new Taiwan factory is now officially on line and Peloton is looking to its Precor acquisition to boost domestic production capability eventually. But shipping capacity is the biggest challenge, Foley wrote in the blog, in which he apologized for the delays.

“Unfortunately, dramatically scaling our manufacturing capacity alone has not gotten us out of the woods. We obviously need to get the Bikes and Treads from our overseas production facilities into your homes, and that has also proved challenging in this environment,” Foley wrote.

“The global increase in shipping traffic has added significant delays to all sorts of goods coming into US ports, including Peloton products. These unpredictable delays have resulted in painful delivery reschedules for many people as Peloton Bikes, Treads, and accessories have been held at Port for upwards of five times longer than usual. For that, I again apologize.”

He went on to say that he understood air freighting heavy exercise bikes is not sustainable economically or environmentally. On-shoring production is the long-term solution.

“These unprecedented measures are for these unprecedented times. We will not always fly bikes in airplanes over the ocean. In addition to caring about our Members, we care about the environment and are committed to continuing to create more local jobs. Today we operate nearly 50 of our own dedicated Field Operations centers throughout the US, Canada, UK, and Germany. In these facilities, local Peloton employees assemble and test thousands of Bikes and Treads per day, right in-country. In the coming quarters, we plan to expand our US-based manufacturing operations on an even more impressive scale. “

Topics associated with this article: Mergers & Acquisitions

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