The Week in Business: Peloton’s Tough Times
What’s Up? (Feb. 6-12)
Peloton Hits a Steep Hill
Early in the pandemic, with gyms closed and people stuck at home, demand for Peloton’s bikes and virtual classes soared. So did its share price. But sales growth has slowed as gyms and fitness studios reopened. The company’s outlook has not been helped by a recall of its treadmills over safety concerns and fictional characters suffering heart attacks while riding its bikes in not just one, but two popular television shows. Peloton has been forced to hit the brakes, halting production of its bikes and treadmills, scratching plans for a new factory in Ohio and on Tuesday announcing that it would lay off 2,800 workers, about 20 percent of its work force. The company’s founder, John Foley, said he would step down as chief executive and become executive chairman. Barry McCarthy, a former chief financial officer of Spotify, was named chief executive and president.
Inflation Sticks
Speaking of hills, prices continued their steep upward trajectory in January, according to new numbers released by the Department of Labor on Thursday. The Consumer Price Index, a key measure of inflation, showed that prices have climbed 7.5 percent over the past year. While increases in car prices, which were mostly because of pandemic supply chain issues, moderated somewhat, the cost of food, rent, electricity and other services continued to rise, suggesting that there are more than just pandemic factors at play. That could put more pressure on the Federal Reserve to cool the economy. Investors now expect the Fed to raise interest rates by half a point in March, rather than its standard quarter-point increase.
Big Deals Under Review
The Biden administration has made cracking down on corporate consolidation a priority, an effort that started last year with hiring the most aggressive antitrust enforcement team in decades. Regulators’ concerns came into play in several big deals last week. On Monday, the Silicon Valley chip maker Nvidia announced that it would end its efforts to buy Arm, which licenses chip technology, because of “significant regulatory challenges.” The same day, Spirit Airlines and Frontier Airlines announced plans to merge, a deal that would create the fifth-largest airline by market share and could also face opposition from regulators. (The Justice Department sued to prevent American Airlines and JetBlue Airways from merging last year.) Microsoft also began lobbying for approval of its $70 billion deal to buy the video game company Activision Blizzard, which would be the largest deal in its history, by promising to keep Activision franchises like Call of Duty available on other platforms and to not require game makers to use its payment systems. And Discovery and AT&T cleared a significant regulatory hurdle on Wednesday in their deal to combine Discovery and WarnerMedia, which would create one of the biggest media companies in the United States.
What’s Next? (Feb. 13-19)
The ‘Crypto Bowl’
In the latest sign that crypto has become mainstream — if not in transactions, in conversation — at least three online services for buying and selling cryptocurrencies will run ads during Sunday’s Super Bowl. Brands that have nothing or little to do with the blockchain, including Bud Light, Expedia and TurboTax, will also reference the technology in their ads. About 100 million people are expected to watch the game between the Los Angeles Rams and the Cincinnati Bengals, and NBC Universal charged up to $7 million for a 30-second commercial during the event.
The Ripple Effects of Trucker Protests
Protests by truckers angry about vaccination requirements have already taken an economic toll that could spread in the coming days and weeks. The protests have blocked major border crossings between Canada and the United States, including main routes for steel, aluminum and other car parts needed by factories in both countries. In response, Toyota, Ford Motors and Honda have cut production at factories in Michigan and Ontario. The parts shortages will first affect smaller auto parts suppliers, independent truckers and workers whose hours have been cut with production, which could also affect communities heavily dependent on the auto industry as workers spend less on goods and services. “If it stretches on for weeks, it could be catastrophic,” said Peter Nagle, an analyst at the research firm IHS Markit who covers the car industry.
Masks Come Off
The governors of New York, Rhode Island, and Illinois announced an end to their statewide indoor mask mandates on Wednesday, adding to a growing list of city and state governments that have eased pandemic rules in recent weeks. But the Centers for Disease Control and Prevention has not changed its recommendation that people wear masks in schools and public indoor spaces in places where the virus is surging. As a patchwork of mandates expire, it will be left to businesses previously covered by the rules to decide for themselves whether to require masks.
What Else?
Peter Thiel stepped down from the board of Facebook’s parent company. The U.S. trade deficit hit a record. Crypto wealth is gentrifying Puerto Rico. Pharmacists are burned out. And employees at more Starbucks stores are starting efforts to unionize.
