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Peloton stock value drops 20%, company blames recent recall

Peloton saw its stock drop 22% on Wednesday after company leaders said a recent recall cost the company over $40 million.
Peloton stock value drops 20%, company blames recent recall
Posted at 6:32 AM, Aug 24, 2023

Peloton's stock dropped 22% on Wednesday after the company released its earnings for the months of April through June. In its release, the company said it has 6.5 million members, down from 6.9 million members a year earlier. 

Peloton's total revenue in the quarter was $642.1 million, which was down about $26 million from last year. 

Company Chief Financial Officer Liz Coddington suggested that seasonality and the company's recent seat post recall were major factors. 

"People started pausing, you know, in kind of the June — end of May, June time frame," Coddington said. "And we also know that some people are still awaiting their seat posts. They should all receive them by the end of September. But we don't know that people will immediately unpause the moment that they get their seat post."

Peloton said it believes about 15,000-20,000 members paused their memberships due to the recall. The company said, however, that some continued to use their bikes despite the recall. 

"But among the members who didn't and notwithstanding the fact that in our notification, we asked them to stop using their bike, they just kept using their bike and as if we — as if there was no notification. And I think that probably explains why we didn't see in aggregate a dip in engagement like perhaps you might have expected given the kerfuffle around the seat post," Peloton CEO Barry McCarthy said. 

SEE MORE: Peloton recalls 2.2 million bikes because seat post can break

In May, the company ordered a recall of 2.2 million bikes. A notice posted on the Consumer Product Safety Commission's website said the bike's seat post can break while a person is riding, causing them to fall or injure themselves. 

As of Wednesday, the company had 750,000 requests for replacement seat posts, which it said was more than it expected. 

Peloton said the cost of the recall "substantially exceeded" its expectations. Peloton said it accrued $40 million in costs due to the recall.

At the time of the recall, 13 injuries were reportedly tied to the faulty seat post. 

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