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Peloton to outsource all final-mile deliveries as part of broad revamp

Peloton's outsourcing expected to cut 50% off delivery costs

Peloton Interactive Inc. will turn over all of its final-mile warehousing and delivery functions to existing partners J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) and XPO Logistics Inc., (NYSE: XPO) and will end in-house final-mile delivery operations, a company spokesman said Friday.

The shift will occur over the coming weeks, the spokesman said. In addition, the struggling fitness company will close all 16 warehouses that have supported in-house deliveries, according to the spokesman.

The moves are expected to cut Peloton’s (NASDAQ: PTON) per-product delivery costs by 50%, President and CEO Barry McCarthy said in a memo in which he laid out a broad restructuring of the New York-based company. The shift will also result in a “significant reduction” of Peloton’s delivery workforce, McCarthy said.

He said the company has been working with the 3PL partners to improve the delivery experience. McCarthy said Peloton is “seeing positive momentum” in customer satisfaction scores. Without elaborating on the delivery problems, he said the effort “has been a challenge. We won’t fix it overnight, but we have no choice” but to make it work.

The company did not break out how much of the final-mile deliveries had been handled in-house and how much had been outsourced.

As part of the restructuring, Peloton will raise prices on its Bike+ and Tread products, according to the memo. It will also significantly reduce its in-store network across North America. In addition, all Peloton workers, except for those hired to work remotely, will be required to return full time to their offices by mid-November.

Peloton experienced soaring product demand during the pandemic as many gyms were closed and more consumers turned to at-home exercising. However, the company miscalculated how long the at-home fitness craze would last once gyms reopened and COVID-related concerns abated. Sales of equipment and supporting subscriptions have stagnated. Meanwhile, the company is stuck with too much inventory during a period of declining demand.

In its fiscal third quarter, Peloton posted a massive net loss of more than $757 million, compared with an $8.6 million net loss in the same quarter in fiscal 2021. Revenue dropped 24% year-over-year to $964.3 million. The company reports its fourth-quarter and full-year fiscal 2022 results on Aug. 25.

Peloton shares rose 13.6% on Friday to close at $13.53 a share. Shares are down 88% over the past 12 months.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes J.B. Hunt (No. 4) and XPO Logistics (No. 8).

2 Comments

  1. You’ve got a picture of the truck platooning company “Peloton” being used for the fitness / bicycle company “Peloton”, which was highly confusing. You may want to change your header photo since it is confusing.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.