Peloton CEO apologizes for describing warnings about his treadmills as ‘inaccurate and misleading’
Peloton CEO apologizes for describing warnings about his treadmills as ‘inaccurate and misleading’ as company is forced to recall all 126,000 machines following dozens of injuries and one child’s death – and share prices fall 14%
- In April safety regulators warned people with kids and pets to immediately stop using a treadmill made by Peloton after one child died and others were injured
- Peloton described the warning as ‘misleading and inaccurate’
- On Wednesday the CEO, John Foley, apologized for dismissing the warning
- He spoke as the US Consumer Product Safety Commission (CPSC) issued a statement saying consumers ‘should immediately stop using’ two treadmills
- News of the recall of 125,000 Tread+ treadmills and around 1,050 Tread treadmills tanked shares in the company which closed down 14% Wednesday
- The treadmills are thought to make up around 2.2% of unit sales in 2021
- Those who own the treadmill in the US can get a full refund from Peloton by November 6, 2022; DailyMail.com has contacted Peloton for worldwide sales
- It was also revealed on Wednesday that Peloton users’ private data including their age, workout statistics and weight were exposed by a bug in the software
Peloton’s CEO has apologized for a design fault in his $4,000 treadmills, after a nationwide recall was issued following dozens of injuries and the death of a child.
Shares in the company tanked by more than 14 per cent on Wednesday after the company was forced to recall all of its 126,000 Tread+ and Tread treadmills across the United States.
Peloton CEO John Foley has apologized for his company’s initial dismissal of warnings
John Foley, who founded the company with a group of friends, said: ‘The decision to recall both products was the right thing to do for Peloton’s Members and their families.’
He admitted Peloton ‘made a mistake in our initial response to the Consumer Product Safety Commission’s request’.
In April safety regulators warned people with children and pets to immediately stop using the $4,295 Tread+, releasing footage which showed how one boy became trapped head-first under the running treadmill before eventually wriggling free.
Peloton at the time insisted their products were not dangerous, if used correctly, and said the warning was ‘inaccurate and misleading’.
On Wednesday, they admitted their mistake.
‘We should have engaged more productively with them from the outset,’ said Foley. ‘For that, I apologize.
‘We believe strongly in the future of at-home connected fitness and are committed to work with the CPSC to set new industry safety standards for treadmills.
Peloton has announced it is recalling all of its Tread+ and Tread treadmills across the United States after they were linked to the death of a child and multiple injuries
Foley founded the company in 2012 with his friends as a way to work out at home
‘We have a desire and a responsibility to be an industry leader in product safety.’
On Wednesday, the Consumer Product Safety Commission (CPSC) issued a statement saying consumers ‘should immediately stop using’ either treadmill and ‘contact Peloton for a full refund or other qualified remedy’.
News of the recall of 125,000 Tread+ treadmills and around 1,050 of the cheaper $2,495 Tread treadmills saw shares in the company close down 14.56% Wednesday at $82.62.
Its stock had already fallen sharply over the past three months.
It was also revealed on Wednesday that Peloton users’ private data including their age, workout statistics and weight were exposed by a bug in the software.
Jan Masters, a security researcher, found he could make unauthenticated requests to Peloton’s application programming interface (API), for user account data without it checking whether the person was allowed to request it, according to TechCrunch.
Peloton confirmed on Tuesday it had fixed the user account vulnerabilities.
The treadmills are thought to make up around 2.2 per cent of unit sales in 2021 versus the company’s more popular cycles.
A spokesperson confirmed to DailyMail.com Peloton ‘is taking corrective action in the US, UK, and Canada’.
Those who own the treadmill in the U.S. can get a full refund from Peloton by November 6, 2022.
Peloton has also stopped further sales.
Peloton had called the safety commission’s earlier warning ‘inaccurate and misleading.’
News of the recall of 125,000 Tread+ treadmills and around 1,050 Tread treadmills tanked shares in the company which were down more than 11 per cent Wednesday
The CPSC said in April that it was aware of 39 incidents involving the treadmill, including ‘multiple reports of children becoming entrapped, pinned, and pulled’ beneath the roller. One pet was also reportedly sucked under the machine.
Peloton’s Tread+ is a ‘slat-belt’ treadmill, which needs a higher torque motor and ground clearance than a typical home treadmill, making them a risk around children and pets.
It is understood concerns on the Tread arise from its touchscreen which may fall off.
A terrifying video uploaded by the CPSC to YouTube The graphic clip shows a young boy being sucked beneath a Peloton Tread+ and grappling to free himself from the exercise machine.
Robert S. Adler, acting chairman of the CPSC said Wednesday: ‘I am pleased that the U.S. Consumer Product Safety Commission and Peloton have come to an agreement to protect users of the Peloton Tread+ and Tread products.
‘The agreement, which the Commission voted this morning to accept, requires Peloton to immediately stop selling and distributing both the Tread+ and Tread products in the United States and refund the full purchase price to consumers who wish to return their treadmills.
‘The agreement between CPSC and Peloton is the result of weeks of intense negotiation and effort, culminating in a cooperative agreement that I believe serves the best interests of Peloton and of consumers.
‘I would like to thank the CPSC technical staff who have worked tirelessly to protect consumers and to warn the public. Today we have taken steps to prevent further harm from these two products.’
Peloton is due to put out its earnings report after markets close on Thursday. Analysts are expected to seek more clarity on the company’s response to the issue.
The company generates most of its revenue from exercise bikes and subscription services, and analysts estimate that only 6% of its connected fitness subscribers own a Peloton Tread+.
In the video released by the Consumer Product Safety Commission, a young boy is seen walking behind the Peloton Tread+ with a large pink ball while a young girl is on it, which gets pulled under the treadmill. Luckily, he walks away from his encounter with the device
The boy in the video struggles to get free from underneath the Peloton Tread+ before eventually breaking free
On Tuesday one runner had described the moment her $4,000 Peloton treadmill threw her into wall and ripped off her skin after she lost her footing.
Cary Kelly says she fell facedown on the Tread+ May 2019, becoming trapped between a wall and the machine and leaving her with burns and bone fractures.
The marathon runner told Business Insider: ‘It seemed like a million minutes, like I was there forever. I’m very, very lucky that my arm didn’t get sucked under.’
Kelly says she was not wearing the security clip as recommended – but thinks the company could do more to communicate the safety procedures needed.
She describes how the running track pushed her into the wall with such force one her legs broke through it. After becoming trapped in that position the belt continued to move, burning her skin.
Kelly, who has no plans to take legal action, says she was not told to keep more than six feet between the machine and the wall during installation.
A father, Brandon Ratliffe, had earlier told Good Morning America that his six-year-old daughter suffered severe abrasions to her legs after she was sucked under the family’s Tread+.
He shared photos of his daughter, Jocelyn, that showed bruising and severe scrapes on her legs. Jocelyn was dragged under the device feet-first, her dad said.
And one former employee told Insider: ‘There’s some stuff that I’ve had to troubleshoot for members personally, which led me to believe that this thing should not be used by anyone at all.
‘It is a huge safety concern for anyone and everyone.’
Dan Ellis’ Roomba vacuum got caught underneath his Tread+.
He said: ‘I jumped off and there was smoke coming off the front.
‘It smelled like a burnt-up motor, and I could hear stuff underneath.
‘For a split second, I thought, ‘Oh my gosh, it’s my dog.’
‘You just start to think that they fundamentally have a design problem.’
Brandon Ratliffe, right, recounted to Good Morning America how his daughter, Jocelyn, 6, had been sucked under a Peloton, and scraped her legs as a result
Jocelyn Ratliffe, 6, suffered from severe abrasions to her legs after being sucked under a Peloton Tread+, her dad said, sharing these photos. The U.S. Consumer Product Safety Commission said people with young children and pets should stop using the machines
While it acknowledged that one child had died in March while using the Tread+ and that another had suffered a brain injury, Peloton initially said there was no reason to stop using the machine so long as safety instructions were followed.
Peloton said that its members had been reminded that ‘children, pets, and objects should be kept clear of the Tread+ at all times.’
The company also advised storing the safety key out of children’s reach.
By Wednesday it had agreed to recall the product.
In April safety regulators warned people with kids and pets to immediately stop using a treadmill made by Peloton after one child died and others were injured
Peloton’s stock has fallen sharply over the past three months
According to the safety commission, in at least one incident a child was injured while a parent was running on the treadmill ‘suggesting that the hazard cannot be avoided simply by locking the device when not in use.’
Peloton, primarily known for its stationary exercise bike, sells the Tread+ treadmill for upwards of $4,300.
Sales of Peloton equipment have soared during the pandemic as people seek to maintain a fitness regimen in the absence of an open gym.
Of the 39 incidents, 23 involved children, according to New York-based Peloton Interactive Inc.; 15 included objects like medicine balls, and one included a pet, it said.
The company brought in $1 billion in revenue in the last three months of 2020, more than double its revenue from the same period a year before.
The commission did not say how many of the Peloton treadmills have been sold.
THE RISE AND FALL OF PELOTON
Home workout company Peloton was founded in 2012 by CEO John Foley with his friends and co-founders Graham Stanton, Hisao Kushi, Tom Cortese, and Yony Feng.
The company’s stationary bike – which retails from $1,895 – has become wildly popular amid the coronavirus pandemic, as gym closures have forced many Americans to start working out at home.
Foley, pictured with his wife Jill and their children Quinn and Mae, became a newly minted billionaire this year as demand for Peloton products spiked during the COVID-19 lockdowns
Foley had lived in a penthouse in this West Village building which he attempted to sell for $7.5million in 2013 after he and his wife spent more than a million renovating
Foley, who was born in Florida, began his career as an engineer in 1990 for Mars Inc. in 1990. According to the New York Times profile, he had previously put himself through college working nights at a Skittles factory.
The Harvard Business School graduate later helped to build CitySearch.com before becoming CEO of Evite.com, Co-founder and CEO of Pronto.com, and President of ecommerce at Barnesandnoble.com, where he helped launch the Nook e-reader.
He left Barnes & Noble in 2012 to start up Peloton on New York City after family life left it difficult for him to enjoy the boutique fitness classes he loved and he decided to find a way to bring them into the home.
According to Bloomberg, he initially posted a video to Kickstarter in 2013 which raised him $307,000 to get the company off the ground.
In the beginning, Foley also personally pushed the bikes, spending Sundays in Short Hills Mall in New Jersey trying to sell them, according to the Times.
He told Master of Scale in August that he spent the first three years pitching the company to thousands of investors, but nobody was interested.
‘No investors wanted to look at this thing. They wanted nothing to do with it,’ he said.
‘They couldn’t understand how we’d possibly be able to build the bikes, deliver them, produce the tablet software and then create the content, all by ourselves,’ he also told the Wall Street Journal in 2018.
Foley, pictured, with his wife Jill, came up with the idea for Peloton after the couple struggled to get to boutique classes after having children. They are pictured with their son Quinn who is now 12
Yet having sold its first bike in 2013, Peloton now has more than 2.6 million members and 3,500 employees worldwide.
And once the pandemic hit and demand skyrocketed, Foley found himself a newly minted billionaire by September.
Bloomberg estimated then that he was worth $1.2 billion, his wealth having tripled this year. He owns 8 percent of stock in the company.
The former engineer now lives in the West Village with his wife Jill, 42, their son Quinn, 12, and daughter Mae, 9.
They had previously listed a home in the area for $7.5million, according to Curbed.
Jill, who is the company’s vice president of apparel, said the idea for the company had come up because she and her husband were ‘addicted to fitness’.
‘Our first dates were centered around fitness—running, indoor cycling, surfing, yoga, boot camps, etc.,’ she told Heymama.
‘We loved the way we felt after a high-energy, instructor-led interval training class.’
However, once they started having kids, their lifestyles and jobs became more demanding.
‘We found it hard to get to these classes and we actually would get in arguments about whose turn it was to work out!
‘So, one day, John came home and said, ‘I have a great idea!’ What if you could get a high-energy, instructor-led interval training class in your own home!? Working out at home was traditionally so boring and not very effective’, she said.
John Foley is pictured with his wife Jill who is the company’s vice president of apparel
In December last year it was announced that Peloton was joining the Nasdaq 100 index and its stocks enjoyed a boost from the inclusion on Monday.
The company’s sales had grown by 172 percent that year as its stationary bike became wildly popular when coronavirus-related gym closures forced many Americans to start working out at home.
The company halted their own lives classes for a while in April after an employee in the New York City studio contracted COVID-19 and members urged for them to be shut down to keep the instructors safe.
This year’s meteoric rise came just months after the company lost $942million market value in a single day after its 2019 holiday advertisement sparked fierce social media backlash.
The exercise equipment company was vilified over the commercial titled ‘The Gift That Gives Back’, which shows a woman receiving a stationary bike from her husband on Christmas morning.
She then documents her year-long fitness journey in a series of selfie clips that she compiles into a thank you video for her husband.
The 2019 holiday commercial was slammed by viewers on social media
Viewers trashed the ad on social media, calling it sexist, misogynistic, humiliating and cringeworthy.
Before this, Peloton shares had risen steadily through November 2019 in anticipation of a strong holiday season. The company had gained almost 10 percent just the week before after strong Black Friday sales.
The company’s stock fell 9.12 percent just two days after the commercial’s debut and dropped the market cap to around $9.4billion.
Shares would continue to fall in early December after Citron RESEARCH, an online stock commentary website, claimed in a report that the firm is worth $1billion rather than the $8.8billion they claimed.
The report found that Peloton’s true stock price should be just $5 per share by 2020, a dramatic drop of 85 per cent, and it could be worth as little as $1bn.
It based the downgrade on the fact that other manufacturers produce smart exercise bikes for just $500 and that existing bikes can be converted into Pelotons with a $12 attachment and the use of the firm’s app.
The report also criticized the firm for charging customers who buy their exercise bike $39 dollars a month to access online classes – and only charging $12.99 for their app for people who don’t own a Peloton.
And it called into question the reliability of CEO Foley who it said wrongly claimed the firm is profitable.
In February 2020, before the pandemic hit, shares plunged as much as 12 percent further and Peloton reported a loss of 20 cents per share.
It came as the company was embroiled in a lawsuit with Flywheel Sports over patent infringements.
Peloton accused Flywheel Sports of infringing two patents, as well as copying their streaming service on bikes, right down to metrics model and display.
Ultimately, Flywheel sports was forced to stop offering its At Home service and gave customers one month to trade the $2,000 bikes for Peloton models.
After these losses, Peloton has since regained ground and continues to climb, yet this year has not been without its own setbacks.
The company’s most famous product is a $1,895 stationary bike that has become wildly popular amid the coronavirus pandemic, as gym closures continued
It was also hit with a patent infringement lawsuit from a company credited with sparking the world’s indoor cycling craze over a quarter of a century ago.
Mad Dogg Athletics (MDA), which brands itself as ‘the creator of the Spinning and indoor cycling category’, filed the lawsuit against Peloton in the US District Court for the Eastern District of Texas on Monday.
The suit alleged that Peloton infringed upon two of MDA’s patents that are ‘directed to core features of an exercise bike designed to bring the experience of an instructor-led class into the rider’s home’.
Peloton has reportedly brought in revenue upwards of $1.8billion in 2020, and the company’s daily stock price climbed above $100 in September.
The soaring demand during the holiday season has caused headaches for the company, however, as customers complain of months-long delays in deliveries that have caused some to cancel their orders and defect to rival brands such as SoulCycle.
Last month Peloton told The Wall Street Journal that the delays ‘are primarily due to shipping logjams, particularly at ports as the bikes are transported to the US from manufacturers overseas’.
A spokeswoman stated: ‘The wait times right now are not how we want people to experience Peloton’.
Peloton bosses stated in a recent letter to shareholders that they were ‘doing everything we can to get our products to our prospective Members as quickly as possible’.
Then in May this year Peloton announced it is recalling all of its 126,000 Tread+ and Tread treadmills across the United States after they were linked to the death of a child and multiple injuries.
Safety regulators had already warned people with kids and pets to immediately stop using the $4,000 running machine.
The US Consumer Product Safety Commission (CPSC) issued a statement saying: ‘Consumers who have purchased either treadmill should immediately stop using it and contact Peloton for a full refund or other qualified remedy.’
