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Peloton outsources production entirely to Taiwanese company Rexon

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Yahoo Finance anchors discuss Peloton's turnaround attempts, which include outsourcing manufacturing.

Video Transcript

JULIE HYMAN: All right, let's talk about another company that has had its own inventory issues. I'm talking about Peloton. It is stopping all of its in-house manufacturing. It's planning to now outsource all of its production to a Taiwanese company, Rexon International.

The move is part of Peloton's attempt to turn itself around. Remember, it had layoffs earlier this year, did some other types of cuts. And the shares, they were up as much as around 6% in pre-market trading. Now they're up just 2% in the regular session here. So it looks like there's still a little bit of uncertainty about whether this is going to be the right path for Peloton.

BRIAN SOZZI: I would say this is mostly expected. Keep in mind, it was a couple of months ago that they came out with a new cost savings target of $800 million by fiscal 2024. Now, Peloton declined to comment to me on how much this move will save them in terms of money, but Simeon Siegel, who's been all over this Peloton route, analyst at BMO telling me as long as Peloton is still spending to grow its business, which they are, it's likely that they still produce losses, even if they're not making their own bikes.

BRAD SMITH: Well, it also comes where they're going to get the materials to make these bikes and where they're working with this potential kind of expansion of a company that they had already been working with as well. So that kind of put out there that they're just leaning further into this partnership because it's tested and because perhaps they can have an easier throughput in getting anything from conception all the way through to delivery for a customer.

But at the same time, they're still going to have to figure out a way to sell the bikes, the treadmills, any rower that they would like to put out on the market. And it's a question of, do people still want to put the equipment in their homes? And are they going to work out with it on the same cadence? Because then that decreases the actual value for the spend that many of those consumers are actually perceiving, prior to them even opting into a monthly payment plan [INAUDIBLE].

BRIAN SOZZI: You ordered a rower, right? Julie, you got a rower, Peloton rower?

JULIE HYMAN: No.

BRIAN SOZZI: OK. [CHUCKLING]