Earlier this week Peloton held their Q2 2023 earnings call and also published a letter to shareholders. In the letter Peloton revealed that they no longer plan to sell Precor, the commercial fitness equipment company they acquired in 2021 for $420 million. In addition, the sale of the Peloton Output Park has been delayed by six months.
The letter states:
This past quarter we expected to complete the restructuring of our manufacturing strategy by selling our Ohio manufacturing facility, but that closing has been delayed by up to 6 months.
We also had plans to sell Precor, but it turns out the clearing price was significantly lower than we think it’s worth. Precor meets a significant need in the commercial marketplace and is a well regarded brand, but over the two years we’ve owned it we’ve underinvested in its growth and leadership team to the detriment of Precor’s revenue growth and profitability. We’ve decided to change course, injecting new leadership, rightsizing Precor’s cost structure, with the goal of restoring its growth.
As a refresher, Peloton first announced the Peloton Output Park in May 2021. It was intended to be Peloton’s first U.S.-based factory designed to open in 2023. In early 2022 the opening was delayed until 2024; but shortly thereafter Peloton announced they would close the factory entirely. This announcement was made at the same time Founder and former CEO John Foley stepped down.
Now it appears Peloton will delay the sale of the Peloton Output Park by approximately six months. Current Peloton CEO Barry McCarthy maintains that this sale is an important piece of Peloton’s restructuring phase, which they have been undergoing since early 2022.
Peloton CFO Liz Coddington expanded on the sale during the earnings call, saying:
We had expected to sell or to sell the Peloton Output Park facility in Ohio by the end of calendar year ’22. Unfortunately, that process got delayed, but we are hopeful that we will be able to sell it by the end of the fiscal year. And we are confident that we will be able to sell it. It’s just — it’s literally just taking us longer. Now end of the fiscal year is not guaranteed, but that is our goal.
In addition, Peloton has decided not to sell Precor – which they acquired in an effort to gain U.S.-based manufacturing – after previously exploring a potential sale. As announced this week, Peloton will instead focus on growing Precor. According to McCarthy:
We maximize the value of our Precor investment by running Precor like a free- standing business, capitalizing on its core strengths, and leveraging the value it provides to owner-operators across the fitness industry.
Barry elaborated on his thoughts during the earnings call:
We had the worst kept secret in the planet is that we’ve been exploring the sale of Precor. And we got pretty far down the path and the price that the buyer was willing to pay dramatically dropped. And we walked away from the table. I mean at some point, across a stupid line to the point where you’re just not willing to dance anymore. And that happens for us.
Now for all of the time that we have owned it we’ve done nothing to invest in the performance of the business to its own detriment.
So we’re going to reverse course. I think we understand how to add some incremental value without great expense and have a disproportionate increase in the value of the business and the overarching strategy would be run Precor for the benefit of Precor and to not dilute those efforts for the benefit of our own operating business, run it as a freestanding subsidiary.
And so that’s the path we’re on. And when we see success, we will see a dramatic increase in its market value. And then unless we have a shift in strategy where they have a shift in their product strategy. At some point, we would look to divest.
This follows the news from late last year that Peloton had appointed an interim CEO at the company, and indicates that a permanent CEO could be in place at Precor soon.
Support the site! Enjoy the news & guides we provide? Help us keep bringing you the news. Pelo Buddy is completely free, but you can help support the site with a one-time or monthly donation that will go to our writers, editors, and more. Find out more details here.
Get Our Newsletter Want to be sure to never miss any Peloton news? Sign up for our newsletter and get all the latest Peloton updates & Peloton rumors sent directly to your inbox.
Precor has good standing (or did) in the overall fitness industry. Known for selling equipment, whether at a facility or at home, that was a step above. We bought one of their ellipticals and that thing went steady for 10+ years before it needed work. Best piece of fitness equipment we ever bought (well, the Keiser M3i is giving it a run for the money now). Now, it wasn’t cheap, but you definitely got what you paid for (and then some). Wise choice by Peloton.