Peloton to exit in-house manufacturing of its bike, tread products

The Peloton logo is displayed on the company's stationary bicycle, Sept. 26, 2019, in New York. (AP Photo/Mark Lennihan)

Exercise equipment maker Peloton Interactive said on Tuesday it will cease in-house production of its bikes and treadmills and move manufacturing to partners in an effort to simplify its operations and reduce costs.

Once a pandemic darling, Peloton has seen its fortunes plummet following easing COVID-related restrictions and soaring costs that have led to bloated inventories and subscription cancellations.

"We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility," chief executive officer Barry McCarthy said.

Shares of Peloton fell 1.8% premarket before reversing course to move up by 1.4% after the company said it will extend its partnership with Taiwan-based Rexon Industrial Corp., which will become the primary manufacturer of the hardware for Peloton's product lines.

Earlier this year, Peloton replaced its CEO under pressure from an activist investor and unveiled measures including price cuts, subscription plans and large layoffs.

McCarthy warned in May the company was "thinly capitalized" and that unsold inventory coupled with mounting costs pushed the company into a big quarterly loss.

Peloton will also be suspending operations at its Tonic Fitness Technology Inc. facility through the remainder of 2022, the company said.

(Reporting by Kannaki Deka in Bengaluru; Editing by Anil D'Silva and Shinjini Ganguli)