Peloton's management of the Tread+ has been a disaster

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Today, Peloton announced that it's recalling all treadmills and its CEO John Foley finally apologized for not cooperating with the U.S. Consumer Product Safety Commission (CPSC) sooner. Honestly, as an investor, I'm shocked the CEO has not resigned yet because his handling of this crisis has been a disaster.

Peloton was the epitome of a Coroneconomy thriver. Its stock ~5X'd in 2020, as its connected home fitness products flew off shelves. It has been trying to expand beyond its spin bikes — so it launched treadmills. Those are causing major problems. In March, Peloton's CEO disclosed that a child had died in an accident involving a Tread+. The CPSC said people should stop using Peloton's Tread+ if small children or pets are at home. The CPSC cited 39 incidents involving a Tread+, including instances of children and pets getting sucked underneath it.

So instead of following rule #1 of crisis management, i.e overcorrect, Peloton got defensive - the company called the agency’s claims inaccurate, saying there’s no reason to stop using the Tread+ if people follow safety instructions (which are included in the manual and on the treadmill). Peloton's instructions say that children, pets, and objects should always be kept away from the Tread+. Peloton also reminded adults to remove the "Safety Key," which prevents the Tread from being turned on post-workout.... Big deal.

Even if Peloton and its CEO may think they are not technically at fault, they could've done much more to maintain trust and safety with users. Potential examples: shipping a protective tread cover to owners, or releasing a safety-related software update. Instead, all they did was warn people to follow instructions. They should have issued a recall from the very beginning. Yes, that entails a big financial hit but is there anything worse than losing your fanbase trust??

As mentioned in a previous article, according to the customer satisfaction and subscription retention rate metrics, Peloton has established a cult-like member base. I think it all got to its CEO's head. He thought just as Apple's customers/fanbase protected it during the legal tussle with the FBI over access to the iPhone used by a shooter in San Bernardino attack, Peloton's fans would shield it from recalling its treadmills. He was totally wrong and now needs to step down to save Peloton.

Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.





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