Peloton shares tank after it decides to recall treadmills

After feuding for weeks with the U.S. consumer safety agency over several dozen accidents involving its treadmills—including one that killed a child—Peloton Interactive changed tack on Wednesday and said it would recall its Tread+ and Tread machines after all.

The news sent Peloton shares down 8% in morning trading and the stock closed down 15%.

Only two weeks ago, Peloton CEO John Foley went on the offensive in response to an “urgent warning” from the U.S. Consumer Product Safety Commission that anyone with kids to should stop using the treadmills. Foley slammed the agency’s warning at the time as “inaccurate and misleading” and brushed away any suggestion that Peloton stop selling or recall the treadmill. “I want to assure you that we have no intention of doing so,” Foley said then. He argued that the products were safe if customers followed instructions.

But on Wednesday, Foley struck a decidedly different tone, expressing regret at Peloton’s initial response in a joint press release with the CPSC. “I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request,” he said in a statement Wednesday. “We should have engaged more productively with them from the outset. For that, I apologize.”

Peloton will work with the CPSC to set new industry safety standards for treadmills, the company said.

The company’s initial response to the CPSC was unusual in its belligerent tone. Typically, the agency works with companies to issue new safety guidance or voluntarily recall products. The CPSC can’t impose a recall, but it can sue companies in an effort to make them comply.

Peloton has advised customers who already have the treadmills to immediately stop using them and contact Peloton for a full refund, or other qualified remedy. Treadmills are a small source of revenue for Peloton, which still gets about 90% of revenue from its bikes.

One of the hottest stocks in 2020, Peloton is down 43% in 2021 so far on concerns about the impact of gyms re-opening as the pandemic’s grip on the country loosens, waitlists for its products, and now the recall.

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