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Peloton faces cost cutting amid bust after pandemic boom

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Yahoo Finance Live's Julie Hyman and Brian Sozzi discuss exercise equipment company Peloton hiring management consulting company McKinsey & Co. to review its finances in addition to the company announcing its newly added delivery and setup fees.

Video Transcript

JULIE HYMAN: And another story that we continue to watch today has to do with Peloton. We talk about it a decent amount here on the program. There was a report yesterday from CNBC that the company had hired McKinsey to do an assessment of its business, to review cost structure, maybe eliminate some jobs.

And then the Wall Street Journal reported later yesterday that the company is set to start charging customers hundreds of dollars in delivery and setup fees, effectively an increase in price here. $250 for delivery and setup of some of its bikes. $350 delivery and set up for some of the treadmills. That starts on January 31.

Now, it was interesting because the shares were a little rocky yesterday. They started to reverse higher after that report from the Wall Street Journal. But the shares, Soz, they haven't been doing so hot. Down 80% since the record high they reached back on January 13 of last year. Recall they went public in September of 2019 at $29 a share. They haven't gone below the IPO price, basically, since the pandemic in April of 2020. But they have been heading in that direction.

BRIAN SOZZI: Yeah, it probably makes sense, Julie, if they do cut back on some of these stores. I believe they have over 120 stores, which essentially just act as showrooms for treadmills and bikes. So if they're looking to cut costs, that is probably one way to do it.

But look, Julie, this was a $167 stock on December-- about December 21 of 2020. It is now $30. The haircut in valuation that has come to Peloton is just absolutely striking. In many respects, though, it is deserved, just given how their financials have shaken out the past two quarters. But there is a lot of concern, I would say, on the Street going into this next earnings report from Peloton in a few weeks.

JULIE HYMAN: And again, $29 was that IPO price. So getting back nearly down to that level. We'll see what the next shoe to drop might be.