Peloton and the US Consumer Product Safety Commission (CPSC), a government watchdog agency, have announced a recall of the fitness company’s Tread+ and Tread treadmills. The decision comes less than a month after Peloton criticized the group’s April warning about the safety of its treadmills as “inaccurate and misleading.”
Peloton shares fell about 13% on the news.
“The decision to recall both products was the right thing to do for Peloton’s Members and their families,” Peloton CEO John Foley said in a statement. “I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+. We should have engaged more productively with them from the outset. For that, I apologize.”
It’s another bump in what’s turned out to be a wild ride for Peloton since it went public in September 2019. In that time the company has experienced a tremendous surge in growth as well as challenges as it manages its public image and the supply-chain strains of the pandemic.
A few months after its IPO, the company found itself on the defensive over its so-called “Peloton wife” ad, which featured a woman receiving one of Peloton’s $2,000 stationary bikes—its most popular product—as a Christmas gift. Critics labeled it sexist, classist, and dystopian.
The backlash didn’t slow the company down. When Covid-19 began to spread in the US and gyms around the country closed, many Americans turned to home fitness, buying up Peloton’s bikes faster than it could supply them. The company entered the fourth quarter of 2020 with backlogged orders in every region and continues to contend with manufacturing constraints and delivery delays that have left customers angry. In the six months through Dec. 31, Peloton’s sales of fitness equipment rose nearly 170% compared to the same period the year before, reaching almost $1.5 billion.
But in April, the company encountered a much more serious issue after reports emerged that children were getting caught in the belt of its standard Tread+ treadmill and being pulled under the machines, even causing the death of one child. CPSC issued a warning to shoppers to stop using the machines, prompting Peloton to strike back at the claims before finally reversing course today.
The recall will affect about 125,000 Tread+ treadmills, and roughly 6,450 of its lower-cost Tread treadmill in Canada and the US, where the product had only been released as part of a limited, invitation-only program but was expected to receive a broader roll out later this month. (The Tread features a different design than Tread+ and CPSC said the risk with that product was of the touchscreen falling.)
Treadmills are just a fraction of Peloton’s equipment sales. While the company doesn’t break those out by category, investment firm Cowen estimated in an April research note to clients that the Tread+ would account for about 2.2% of Peloton’s unit sales of hardware in 2021, out of about 1.6 million treadmills and bikes combined.
In a note to clients about the recall today, Cowen said while the Tread+ represents a small portion of Peloton’s sales, a delay in the rollout of the Tread model “would be more concerning.” It intends to update clients after Peloton reports its next quarterly earnings tomorrow.