Tags: peloton | buying | precor | smoother ride

Peloton Buying Precor Makes for a Smoother Ride

Peloton Buying Precor Makes for a Smoother Ride
(Mohamed Ahmed Soliman | Dreamstime.com)

By Tuesday, 22 December 2020 01:32 PM Current | Bio | Archive

At the same time that Peloton Interactive Inc. is racing to keep up with explosive demand fueled by the pandemic, the maker of stationary bikes is trying to ensure that new coronavirus vaccines won’t also soon eradicate its growth. 

The fitness company announced Monday that it’s acquiring rival brand Precor for $420 million — Peloton’s largest purchase yet. The biggest benefits of the deal would seem to be gaining Precor’s 625,000 square feet of manufacturing space in North Carolina and Washington state as well as its large roster of commercial customers, such as hotels, gyms and apartment buildings. The first helps to solve Peloton’s supply difficulties now, while the latter will give it an edge in the post-Covid economy when consumers are no longer forced to exercise at home and avoid travel.

Notably, Peloton was among so-called stay-at-home stocks that initially tanked in early November after Pfizer Inc. and BioNTech SE said their vaccine was more than 90% effective. On Tuesday morning, shares of Peloton surged more than 14% to a new high, giving it a market value of $48 billion.

In September, Peloton began selling Bike+, a more expensive version of its most popular item, adding the handy ability to swivel the screen for strength workouts off the cardio bike. The demand proved more ferocious than the company anticipated, and getting the product from its Asia manufacturing facilities to customers has been difficult. It cited port congestion, virus-related warehouse shutdowns and wildfires on the U.S. West Coast as delivery obstacles, which made for some unhappy shoppers tying up its customer service phone lines. Peloton said during its earnings call last month that it had added expedited air shipping from its Taiwanese factories. Even so, Chief Financial Officer Jill Woodworth said at the time that there would be “Bike+ supply constraints for the foreseeable future.” With the Precor transaction, which Peloton expects to close in early 2021, order fulfillment should improve.

Combining with Precor may seem like a brand mismatch to the cultlike fans of Peloton. One is tired, one is wired. The biggest draw of Peloton relative to other spin bikes is its live and on-demand classes that subscribers can join virtually using the monitors affixed to its bikes. But Peloton users can probably admit that the bikes themselves aren’t the best. After trying others at a number of boutique spin studios and big-box gyms over the years, it feels fair to say that the Peloton feels a bit less sturdy (though it is conveniently slim so as to not take up much space at home). Joining forces with Precor’s research and development team may help lead to an improvement in Peloton products and perhaps a greater variety of them. On Precor’s home fitness page, the main photos aren’t even bikes — they’re elliptical machines.

Precor might just be the workhorse that elevates Peloton from fad spin brand to fitness juggernaut. At nine times revenue, Peloton needed to do something to have any hope of living up to such a wildly rich valuation.

Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.

© Copyright 2021 Bloomberg L.P. All Rights Reserved.


   
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TaraLachapelle
Precor might just be the workhorse that elevates Peloton from fad spin brand to fitness juggernaut.
peloton, buying, precor, smoother ride
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2020-32-22
Tuesday, 22 December 2020 01:32 PM
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