Peloton stock drops to 9-month low after 125,000 treadmills recalled for ‘risk of injury or death’
Shares of Peloton Interactive Inc. plunged on Wednesday, setting them on course for the biggest one-day sell-off in six months, after the home-based fitness company said it was voluntarily recalling 125,000 Treadmills Treat + after more than 29 reports of injuries in children. , and one death.
The company also recalled 1050 Tread treadmills, saying the touchscreen could come off and fall off and pose a risk of injury.
The recalls come a day before Peloton released its third quarter tax results, and more than two weeks after denying a US Consumer Product Safety Commission request to recall treadmills. General Manager John Foley apologized for waiting so long, saying the recall of treadmills was the “right thing to do” for his customers.
“I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request to recall the Tread +”, Foley said in a statement. “We should have engaged more productively with them from the start. For that, I apologize. “
On April 17, the company said the CPSC’s warning to consumers was “inaccurate and misleading” and insisted its treadmills were safe if consumers heeded the warnings. And it was March 18, when CEO Foley first revealed a fatal accident involving a child and the Tread +.
“You must be wondering why Peloton so strongly resisted the CPSC’s efforts to protect the public when it learned that the machines were injuring consumers and then accepted the recall, but this may reflect pressure from the CPSC to proceed with the recall,” said Carl Tobias, president of Williams. in law at the University of Richmond Law School, in an e-mailed statement to MarketWatch.
The PTON stock,
fell 14.4% by noon to the lowest close since September 16, 2020. The one-day percentage drop would be the largest as it fell a record 20.3% on November 9 2020, as big actions that had benefited from COVID- Home care measures linked to 19 suffered from the optimistic news about vaccines.
The recalled Tread + treadmills follow 72 reports of adults, children, pets, and objects being pulled under the back of the treadmill. These reports included the death of a 6-year-old child and 29 reports of child injuries, such as abrasions, fractures and lacerations.
The recalled products were purchased on the company’s website and at Peloton showrooms from September 2018 through April 2021 for approximately $ 4,295.
“Consumers should immediately stop using the recalled Treat + and contact Peloton for a full refund until November 6, 2022,” the company said on the CPSC website.
Peloton said it also offers customers who do not wish a refund the option of moving the Tread + “for free” to a room where the treadmill is not accessible to children or pets. The company is also implementing software enhancements that automatically lock the Tread + after each use.
The company is expected to release its fiscal third quarter results after Thursday’s closing bell.
Peloton is expected to report a loss that narrows to 12 cents per share, according to an analyst survey conducted by FactSet, after losing 20 cents per share in the same period a year ago.
Revenue is expected to more than double to $ 1.12 billion, and sales of connected fitness products are also expected to more than double to $ 877.2 million, according to FactSet.
Wedbush analyst James Hardiman wrote in a research note last week that, because he estimates just a small contribution from single-digit sales of Tread +, the stock’s selling on safety concerns was likely to be viewed as an overreaction.
He said that a greater concern is that the negative press received by Peloton for its response to the safety risk could “negatively impact the demand for the cheaper tread,” which is slated to launch in the United States. United at the end of May.
The stock has fallen 45.4% year-to-date, while the S&P 500 SPX index,