Tue. Jul 5th, 2022


John Foley, CEO of everyone’s favorite iPad-with-wheels outfit Peloton, has been ousted. Here’s the story from the Wall Street Journalwhich broke the news earlier today:

Peloton Interactive Inc. plans to replace its chief executive, cut costs and overhaul its board after a slowdown in demand caused the once-hot bike maker’s value to plummet.

Peloton co-founder John Foley, who has led the company for its entire 10-year existence, is stepping down as CEO and will become executive chair, the company told The Wall Street Journal. Barry McCarthy, the former chief financial officer of Spotify Technology SA and Netflix Inc., will become CEO and president and join Peloton’s board.

The New York company will also cut roughly 2,800 jobs, affecting 20% ​​of its corporate positions, to help cope with the drop-off in demand and widening losses. The cuts will not affect Peloton’s instructor roster or content.

Peloton has problems that are unique to it. But we think Foley’s departure also highlights a broader trend: after soaring during the early days of the pandemic, demand for consumer goods is waning.

Here’s a by-no-means exhaustive set of five charts to illustrate our point. First off, Peloton’s share price since late 2019:

At pixel time the company’s shares sit at $ 29.75, marginally above its initial public offering price of $ 29, and some 80 per cent below all-time highs from a year ago. Aside from that Sex and the City sequel storyline, there are a couple of reasons for this. It is in part down to the company struggling to sell its equipment – still the biggest money-spinner despite charging users premium prices for monthly subscriptions to its classes. It has also shelved plans to build a factory in Ohio, calling into question another trend we heard a lot about during the early days of the pandemic: reshoring production.

A big reason for the interest in bringing manufacturing back home was the difficulty in sourcing goods from abroad. Over the past 18 months, shipping costs have soared, container ships have ended up stuck outside ports for weeks on end, and when the goods have reached the shore there have been shortages of truck drivers to take them on to their final destinations.

As we said at the time, this was not just a case of weak links in supply chains. It also reflected a surge in demand for consumer durablesthe vast majority of which reach US and European shores by ship.

So what happened of late? Broadly, the rise in shipping prices has halted (though they remain super expensive compared to pre-pandemic). Here are a couple of container shipping indices courtesy of freight rate specialist Xeneta and data firm Compass:

Line chart of Cost of shipping a 40ft container ($) showing No longer making waves: shipping cost surge is leveling out

Speaking of logistics, shares in grocery delivery specialist Ocado fell 10 per cent this morning to £ 12.63 after it announced a drag on profits from investments, flagged the labor shortage and, perhaps most tellingly, reported smaller order sizes versus 2021. Its shares, like Peloton, have now roundtripped back to levels last seen in March 2020:

The flipside is that punters are returning to restaurants. Data from OpenTable tracking seated diners in the UK shows that, following the Omicron scare over Christmas, we’re almost at pre-pandemic levels when it comes to eating out:

Google Trends shows that worldwide searches for “best restaurants” and “concerts” are on the up too, while those for “home fitness” and “Bikes” – apparently of all varieties – are back at their pre-March 2020 levels.

Line chart of Google searches (worldwide) showing

This does not mean that Peloton and its ilk have not got a future. Its users are loyal – not to say fanatic – with membership renewal rates sky-high. And hybrid working is going nowhere fast. But the assumption made by Foley that people would continue buying its equipment at the rate that they did during the early lockdowns looks misguided in the extreme. In the coming months, we’ll see how many others made similarly pie-in-the-sky bets.



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