Peloton is set to invest $100m in its supply chain as port disruption causes “significant delays” to customer orders.
The firm apologised to customers for delays in delivering orders, blaming a “global increase in shipping traffic”, despite efforts to increase manufacturing capacity.
John Foley, CEO of Peloton, said: “Unfortunately, dramatically scaling our manufacturing capacity alone has not gotten us out of the woods.”
Foley cited issues such as port congestion at Los Angeles and Long Beach in the US, where shipping container volume has doubled in the last 12 months.
As a result of delays, Foley confirmed Peloton would be spending over $100m on expedited shipping and increased use of air freight in order to manage the backlog of orders. The firm would incur transportation and delivery cost that is “over ten times” the usual cost per machine as a result of the disruption, Foley added.
“These unprecedented measures are for these unprecedented times. We will not always fly bikes in airplanes over the ocean… We care about the environment and are committed to continuing to create more local jobs.”
In the firm’s second quarter results investor call, Foley said the investment included “air shipments, expedited ocean freight and incremental costs to get containers to other ports that are less congested”.
Foley said the firm was also investing in its “systems, teams and manufacturing capabilities” to meet the increased demand.
Jill Woodworth, the firm’s CFO added: “There's a container shortage... extended time of container ships sitting out on the ocean, there is a backlog to get those containers unloaded. This investment is essentially to circumvent all of those issues.”
Peloton’s stock fell by almost 8% after the firm revealed the delivery delays, despite producing a net profit of almost $64m in the quarter.
Disruption to delivery had also extended to inventory bound for the UK and Germany as a result of Brexit, the firm said.
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