Peloton announced Wednesday voluntary recalls of both its treadmill machines over safety concerns.
The announcement marked a major reversal of Peloton's initial reaction and comes after weeks of discussions with the U.S. Consumer Product Safety Commission.
In a statement, Peloton apologized for not acting more quickly to resolve the issue after reports of one death and dozens of injuries.
"I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission's request that we recall the Tread+," CEO John Foley said in a statement Wednesday. "We should have engaged more productively with them from the outset. For that, I apologize."
Peloton shares closed the day down nearly 15%, hitting a low not seen since September. That wiped about $4.1 billion from Peloton's market value.
The company is advising customers who already have either the Tread or Tread+ products to immediately stop using the equipment and contact Peloton for a full refund or other qualified remedies. It added that it is working on a repair that will be offered to treadmill owners in the coming weeks.
The recall affects about 125,000 Tread+ machines and roughly 1,050 Tread products in the U.S.
The CPSC said it has received 18 reports about the touchscreen loosening and six reports of the touchscreen detaching and falling from the Tread. The group had previously warned about Peloton's Tread+ product last month, after one child died in an incident involving the machine. There were also dozens of other reported injuries.
The regulatory agency said Peloton's treadmills are designed differently than its peers, with "an unusual belt design that uses individual rigid rubberized slats or treads that are interlocked and ride on a rail." That's instead of a thinner, continuous belt. There is also a large gap between the floor and the belt of the Tread+, leaving room for things to wiggle their way under.
The commission in April simultaneously released a graphic video, captured by a home security camera, of a young boy being pulled under one of the Tread+ machines and struggling to free himself.
But Peloton pushed back on the recommended recall at the time, telling customers there was no reason to stop using its treadmills, so long as children and pets were kept out of the area while in use. The company had also recommended a key be used to lock the equipment after each workout.
Peloton said Wednesday it will work with the CPSC to set new industry safety standards for treadmills.
"This recall is the right step — though dangerously delayed," said Sen. Richard Blumenthal, a Democrat representing Connecticut and chair of the Subcommittee on Consumer Protection, Product Safety, and Data Security. "Peloton unacceptably put consumers at risk, obstructed the CPSC's investigation and its consumer warnings."
It's unclear how much damage Peloton has done to its reputation. The company is known for its at-home cycling classes that have exploded in popularity during the Covid pandemic. It didn't sell a treadmill until 2018.
The product was first called the Tread but is now known as the Tread+ because Peloton was preparing to begin selling a less expensive version in the United States later this year. The original model costs $4,300.
The smaller, cheaper version is already on sale in the U.K. and it doesn't include the same rigid slats as the Tread+.
A spokesperson didn't immediately respond to CNBC's request for comment about Peloton's plans for the upcoming launch.
While Peloton doesn't break out sales of its treadmills, research firm Cowen had previously estimated that the Tread+ would represent about 2.2% of unit sales in 2021. That's out of about 1.63 million stationary bikes and treadmills combined, it said.
Peloton reported in 2020 revenue of $1.8 billion. That's up from $915 million a year earlier. Peloton is set to report earnings after the market close on Thursday.
"We acknowledge that this recall will likely result in significant near-term one time financial costs and operational disruption, with potential reputational damage," Truist Securities analyst Youssef Squali said in a note to clients. "Stepping back and looking at the broader picture, however, we believe that the secular growth trends in the home fitness industry remain intact."
The company's stock is down about 45% year to date. It has a market cap of $24.3 billion.
Here's the link the full statement from Peloton and the CPSC.
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Peloton recalling all treadmills after reports of injuries, one death - CNBC
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