The recall of Peloton’s $4,000 treadmills will shrink the company’s revenue by $165 million in the current quarter, the company said on Thursday.
Peleton agreed on Wednesday to recall about 125,000 of its Tread+ treadmills, after refusing to do so for weeks even though the machine was linked to the death of one child and the injuries of 29 others. Peloton also agreed to stop selling the treadmills.
John Foley, Peleton’s CEO, again apologized for not working with the safety commission sooner in a call with Wall Street analysts. He acknowledged that there is work to do to repair the image of the company, which is worth $34 billion.
Foley, who founded the company with a group of friends, first apologized for the safety of its Tread+ and Tread products on Wednesday.
‘The decision to recall both products was the right thing to do for Peloton’s Members and their families,’ Foley said, backtracking on comments previously made by people at the company.
He admitted Peloton ‘made a mistake in our initial response to the Consumer Product Safety Commission’s request’.
The recall of Peloton’s $4,000 treadmills will shrink the company’s revenue by $165 million in the current quarter
A market summary shows that Peleton’s stock was down to trading at $83.78 after plummeting on Wednesday amid news of the recall
In the video released by the Consumer Product Safety Commission, a young boy is seen walking behind the Peloton Tread+ with a large pink ball while a young girl is on it, which gets pulled under the treadmill. Luckily, he walks away from his encounter with the device
Last month, federal regulators with the U.S. Consumer Product Safety Commission warned people with children and pets to immediately stop using the Peloton Tread+ treadmill after a 6-year-old child was pulled under the rear of the treadmill and died.
Injuries to the other children, who were also pulled under the Tread+, included broken bones and cuts.
Despite the safety concerns, Peloton fought the federal safety recall for weeks and allegedly delayed an investigation into the potential safety problems.
Last month, regulators told the Washington Post that the CPSC issued an administrative subpoena requiring Peloton to name the child who died and provide family contact information within 24 hours.
Jessica Kleiman, a spokesperson for Peloton, told the outlet at the time that the company did not provide personal information about the child to the agency because it ‘respects its customers’ privacy.’
The child’s family ‘asked us not to provide the information to the CPSC,’ she said. However, officials claimed that the company complied.
Kleiman had also told the Washington Post that Peloton ‘does not believe a recall is necessary’ and noted that the company has issued ‘repeated safety warnings’ to its customers since reports of incidents regarding the treadmills.
The CPSC then released a terrifying video of a child being dragged under a Peloton treadmill as they warned consumers to stop using the equipment.
Foley founded the company in 2012 with his friends as a way to work out at home
Peloton has announced it is recalling all of its Tread+ and Tread treadmills across the United States after they were linked to the death of a child and multiple injuries
The Peloton logo is seen the company’s stationary bicycle in San Francisco
The graphic video shows a young boy being sucked beneath a Peloton Tread+ and grappling to free himself from the exercise machine while trying to retrieve a ball. He was ultimately able to free himself from underneath the treadmill, the video shows.
On Tuesday, one runner had described the moment her Peloton treadmill threw her into wall and ripped off her skin after she lost her footing.
Cary Kelly says she fell facedown on the Tread+ May 2019, becoming trapped between a wall and the machine and leaving her with burns and bone fractures.
The marathon runner told Business Insider: ‘It seemed like a million minutes, like I was there forever. I’m very, very lucky that my arm didn’t get sucked under.’
Kelly says she was not wearing the security clip as recommended – but thinks the company could do more to communicate the safety procedures needed.
A father, Brandon Ratliffe, had told Good Morning America that his six-year-old daughter suffered severe abrasions to her legs after she was sucked under the family’s Tread+.
Brandon Ratliffe, right, recounted to Good Morning America how his daughter, Jocelyn, 6, had been sucked under a Peloton, and scraped her legs as a result
Jocelyn Ratliffe, 6, suffered from severe abrasions to her legs after being sucked under a Peloton Tread+, her dad said, sharing these photos. The U.S. Consumer Product Safety Commission said people with young children and pets should stop using the machines
He shared photos of his daughter, Jocelyn, that showed bruising and severe scrapes on her legs. Jocelyn was dragged under the device feet-first, her dad said.
And one former employee told Insider: ‘There’s some stuff that I’ve had to troubleshoot for members personally, which led me to believe that this thing should not be used by anyone at all.’
The company had said that there’s no reason to stop using the treadmill as long as children and pets are kept away from it at all times, it is turned off when not in use, and a safety key is removed.
But the safety commission said that in at least one episode, a child was pulled under the treadmill while a parent was running on it, suggesting it can be dangerous to children even while a parent is present.
The company, best known for its stationary bikes, has seen its sales explode during the pandemic as virus-wary people have avoided gyms and worked out at home
Robert S. Adler, acting chairman of the CPSC said Wednesday: ‘I am pleased that the U.S. Consumer Product Safety Commission and Peloton have come to an agreement to protect users of the Peloton Tread+ and Tread products.
‘The agreement, which the Commission voted this morning to accept, requires Peloton to immediately stop selling and distributing both the Tread+ and Tread products in the United States and refund the full purchase price to consumers who wish to return their treadmills.
Peloton users’ private account data including their age, city, workout statistics and weight are leaked by software bug
Peloton users’ private data including their age, workout statistics and weight were exposed by a bug in the software.
Jan Masters, a security researcher at Pen Test Partners, found he could make unauthenticated requests to Peloton’s application programming interface (API), for user account data without it checking whether the person was allowed to request it, according to TechCrunch.
In his blog, ‘Tour de Peloton: Exposed user data‘, Masters details how an unauthorized user could view sensitive information for all users by exploiting vulnerabilities in the data management system. The unauthorized user could also spy on live class statistics and its attendees – which can top 800 people at one time.
Among the data anyone on the internet could access: a Peloton user’s age, birthdate, city, gender, weight and workout statistics, all of which can set to be private by a user but were still accessible.
Masters reported the API issues to Peloton on January 20, 2021 with a 90-day deadline to fix the bug as is a standard request researchers give before letting the public know about vulnerabilities with user account data.
Peloton ignored the 90-day deadline established by Masters, aside from an initial report acknowledging the issue.
Peloton was contacted by TechCrunch to question why the vulnerability report had been ignored.
Peloton confirmed Tuesday it had fixed the user account vulnerabilities.
‘The agreement between CPSC and Peloton is the result of weeks of intense negotiation and effort, culminating in a cooperative agreement that I believe serves the best interests of Peloton and of consumers.
‘I would like to thank the CPSC technical staff who have worked tirelessly to protect consumers and to warn the public. Today we have taken steps to prevent further harm from these two products.’
Before the recall was announced, regulators had said that if adults wanted to keep using the treadmill then they should do so only in a locked room so children and pets can’t come near it.
The commission also said to keep exercise balls and other objects away from it, because those have been pulled under the treadmill, too.
The safety commission, which is still studying the Peloton Tread+, said it appears that its design, including the band and its height off the floor, made it more dangerous than other brands.
‘This doesn’t happen with other treadmills,’ an official familiar with the case told the Washington Post last month.
The official said regulators were concerned that the Peloton treadmill seemingly has a ‘different hazard pattern than is typically seen.’
News of the recall came as it was also revealed on Wednesday that Peloton users’ private data including their age, workout statistics and weight were exposed by a bug in the software.
Jan Masters, a security researcher, found he could make unauthenticated requests to Peloton’s application programming interface (API), for user account data without it checking whether the person was allowed to request it, according to TechCrunch.
Peloton confirmed on Tuesday it had fixed the user account vulnerabilities.
The company, best known for its stationary bikes, has seen its sales explode during the pandemic as virus-wary people have avoided gyms and worked out at home.
On Thursday, the company said its sales soared 141% to $1.26 billion in the quarter that ended March 31, compared to the same period a year ago.
It posted a loss of $8.6 million in the quarter, or 3 cents per share, which was better than the loss of 11 cents per share that Wall Street analysts expected, according to Zacks Investment Research.
Peloton said on Thursday the $165 million hit to revenue this quarter includes $105 million in missed sales of the treadmills, and $50 million that will go to paying full refunds to those who want to return the recalled treadmills, which cost $4,200 each.
The company estimates about 10% of the recalled treadmills will be returned between now and the end of June, but said others may be returned later since people have until November of next year to get a full refund.
Shares of New York-based Peloton Interactive Inc., which are down 45% since the beginning of the year, rose nearly 6% in after-hours trading Thursday.
The stock was trading at $83.78 after plummeting on Wednesday amid news of the recall.