Peloton Shares Rise On Treadmill Software Safety Fix

Peloton Interactive Inc PTON shares traded slightly higher in a down day for the market on Wednesday after the company announced a software update for its recalled treadmills.

What Happened? Peloton has announced it is rolling out a software update for its Tread and Tread+ treadmills just two weeks after the products were recalled due to safety issues that led to dozens of injures and one death of a child. The update includes a new “Treak Lock” feature requiring a four-digit passcode to unlock the device for use and re-locks the machine automatically after 45 seconds of inactivity.

Related Link: Peloton Analysts Bullish After Earnings Beat: 'Recalls Not As Bad As Feared'

Why It’s Important: On the company’s earnings call on May 6, Peloton said it was in the process of working on both software and hardware fixes to its treadmills. For now, sales and deliveries of Tread and Tread+ machines remain halted.

Peloton also said the company will take a $165 million hit from the recall in its fiscal fourth quarter.

Peloton management also apologized for delaying the recall of its products, even after a U.S. Consumer Product Safety Commission (CPSC) report on April 19 found the products dangerous for pets and small children.

“I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+,” CEO John Foley said when the recall was issued on May 5.

Peloton shares held their ground on Monday but are now down 36.9% overall year-to-date in 2021.

Benzinga’s Take: The financial impact of the recalls on Peloton’s numbers appears to be manageable. However, the reputational damage to Peloton’s brand remains to be seen, and the company is facing extremely difficult comps in coming quarters as gyms open back up throughout the country.

(Photo: Peloton Interactive)

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Posted In: NewsSportsTechGeneralConsumer Product Safety CommissionExercise EquipmentGymshome exercisehome exercise equipmentJohn Foleyrecallstreadmills
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