A Peloton recall involving more than 2 million bikes that have an issue with their adjustable seat is creating a bigger problem than previously expected.
Shares of the fitness company fell on Wednesday by 20% in early trading after an earnings report was published and shared that the recall costs “substantially exceeded” what the company initially thought they would.
In total, the recall cost the company upwards of $40 million. But the costs continued to grow, as about 20,000 members of Peloton’s monthly subscription decided to put their membership on pause while waiting for the replacement part to fix the recalled seat.
A recall was issued by the Consumer Product Safety Commission in May after it was discovered that Pelonton’s PL-01 Bike’s seat could break during use and cause harm to riders.
On Wednesday, the company shared that it had received upwards of 750,000 requests for new seat posts, which it said was “more than we expected.”
Only half of the requests received by Peloton have been fulfilled, and the company expects to complete the remaining by the end of next month.
The situation with the seats comes as the company faces stark fourth-quarter results, losing $242 million and seeing sales drop $37 million from last year. The company said in a release to investors that they need to remember “we operate a seasonal business.”
“The slowdown exceeded our expectations through May and through the first three weeks of June as consumer spending shifted toward travel and experiences,” CEO Barry McCarthy said in a letter to investors. “Then eight weeks ago the trend reversed itself, and we began to see a reacceleration in hardware sales.”
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