Peloton Interactive Inc. will turn over all of its final-mile warehousing and delivery functions to existing partners J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) and XPO Logistics Inc., (NYSE: XPO) and will end in-house final-mile delivery operations, a company spokesman said Friday.
The shift will occur over the coming weeks, the spokesman said. In addition, the struggling fitness company will close all 16 warehouses that have supported in-house deliveries, according to the spokesman.
The moves are expected to cut Peloton’s (NASDAQ: PTON) per-product delivery costs by 50%, President and CEO Barry McCarthy said in a memo in which he laid out a broad restructuring of the New York-based company. The shift will also result in a “significant reduction” of Peloton’s delivery workforce, McCarthy said.
He said the company has been working with the 3PL partners to improve the delivery experience. McCarthy said Peloton is “seeing positive momentum” in customer satisfaction scores. Without elaborating on the delivery problems, he said the effort “has been a challenge. We won’t fix it overnight, but we have no choice” but to make it work.
The company did not break out how much of the final-mile deliveries had been handled in-house and how much had been outsourced.
As part of the restructuring, Peloton will raise prices on its Bike+ and Tread products, according to the memo. It will also significantly reduce its in-store network across North America. In addition, all Peloton workers, except for those hired to work remotely, will be required to return full time to their offices by mid-November.
Peloton experienced soaring product demand during the pandemic as many gyms were closed and more consumers turned to at-home exercising. However, the company miscalculated how long the at-home fitness craze would last once gyms reopened and COVID-related concerns abated. Sales of equipment and supporting subscriptions have stagnated. Meanwhile, the company is stuck with too much inventory during a period of declining demand.
In its fiscal third quarter, Peloton posted a massive net loss of more than $757 million, compared with an $8.6 million net loss in the same quarter in fiscal 2021. Revenue dropped 24% year-over-year to $964.3 million. The company reports its fourth-quarter and full-year fiscal 2022 results on Aug. 25.
Peloton shares rose 13.6% on Friday to close at $13.53 a share. Shares are down 88% over the past 12 months.