Is Peloton’s Crash A Warning For Connected-Fitness Startups?

platoon said on Tuesday that the CEO John Foley will resign and the company will cut 2,800 jobs after seeing demand for its product decline.

Peloton quickly emerged as a “pandemic winner,” a company that experienced the financial upside of the COVID-19 pandemic and its associated stay-at-home orders. With gyms closed and people looking to work out at home, Peloton saw demand for its product and its stock price soar at the start of the pandemic.

But the company has faced obstacles in recent months. CNBC reported last month that Peloton is pausing production on its bike after demand slowed. With more people vaccinated and returning to gyms, fewer consumers are willing to shell out roughly $2,000 for the company’s high-end stationary bikes.

With its stock price down, Peloton is cutting costs, including scrapping plans for a factory in Ohio.

Potential acquirers, including Amazon Y Nike would have expressed interest in the company. activist investor Blackwells Capital LLC asked Peloton to fire its CEO and seek to sell the company, The Wall Street Journal reported on Tuesday.

“While Foley owns majority B shares and ultimately controls the fate of Peloton, we believe shareholder pressure will increase to solicit bids and sell Peloton to a strategic player with potential bidders AppleAmazon and Nike probably in the fold,” dan ives from Webbush Values he said in a research note to investors.

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In 2021, venture capital-backed fitness companies raised nearly $5.9 billion in funding, up from $2.4 billion in 2020, according to data from Crunchbase. In other words, investors bet big on the category after 2020 showed that consumers would spend at fitness companies instead of or in addition to gyms. diet app noom led the pack with a $540 million funding round and connected fitness companies including Tonal Y Tempo it also raised nine-figure rounds.

But it remains to be seen whether connected fitness startups can keep up their momentum in 2022.

In general, Peloton’s problems might just be company-specific. The main issue is how fast Peloton grew, according to helaine knappCEO of a fitness startup city ​​row, a connected fitness company for rowing. Peloton’s problems are its own and probably have more to do with certain management decisions, as the company is growing and has a high retention rate and brand loyalty, he said.

At-home physical activity isn’t going anywhere, as gym-goers want a mix of at-home and in-person experiences, Knapp said.

“People want to be able to exercise at home, but they also want to be able to exercise with other humans… It’s really not surprising that we’re recalibrating the results of the last two years,” Knapp said.

In fact, CityRow has seen its machine sales, virtual class enrollment and in-person attendance increase as people have returned to gyms, according to Knapp.

“Overall fitness continues to grow like crazy,” Knapp said. “And digital fitness is a part of that. If anything, Peloton can really pave the way for a tremendous wave of connected fitness behind it.”

Illustration: Dom Guzman