Peloton has shut down production of its products, laid off employees, replaced its CEO, and seen its stock price drop to record lows. At the same time, demand for all types of bicycles is off the charts right now. So much so that some World Tour teams are choosing to keep last year's bikes for a while longer. Consumers are not doing so well either. If you try to buy a bike, you might get a message that says something like, "Order now and we'll deliver at the end of the summer." How can these two realities exist simultaneously?

In 2020, when a global pandemic abruptly shut down gyms, demand for the best exercise bikes skyrocketed. Home fitness equipment like Peloton's was in particularly high demand, and the company rode the wave of interest until 2020, when sales surged. Peloton increased production at a rapid pace. It invested in increasing production capacity and increased supply to meet demand.

However, all waves were shattered and consumers are fickle when it comes to fitness gear. Pandemic fatigue has set in, and consumers are less interested in working out at home and more interested in participating in activities that bring them into contact with other people; as we head into 2022, supply is plentiful and demand is declining.

As a result, the peloton is experiencing an adjustment: after posting a net loss of $439.4 million in the three months ending December 31, the company is correcting course and restructuring; CEO John Foley is stepping down and will be replaced by former Spotify CFO Barry McCarthy. The company also announced plans to cut approximately 2,800 employees worldwide and canceled plans to build a U.S. plant. The goal is to cut costs.

Overall, the news is bad, and there is no arguing that the company is facing challenges, but growth has not stopped: after experiencing unprecedented growth in 2020 and 2021, the number of connected fitness subscriptions is steadily increasing from Q2 2020 to Q1 2022, although it is currently slowing down. numbers are steadily increasing. Over the same time period, total quarterly revenues have increased, as have average monthly workouts per Connected Fitness sub. Peloton has also promised that cost-cutting measures will not affect the user experience.

An open question is whether Peloton can change course. Will cost-cutting be enough to overcome slowing growth and maintain the brand? Ultimately, it's up to the users. We put the Peloton bike on our list of best exercise bikes because the hardware is solid. This type of connected business model relies on trust, which can be a delicate cord.