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Peloton stock plunges after 20,000 members canceled subscriptions while waiting for recall

FILE - This Nov. 19, 2019 file photo shows a Peloton logo on the company's stationary bicycle in San Francisco. (AP Photo/Jeff Chiu, File)

NEW YORK (CNN) — A Peloton recall involving the adjustable seat on more than two million bikes is becoming a bigger headache than expected.

Shares of the fitness company plummeted 20% in early trading Wednesday after another dismal earnings report that revealed the recall’s price tag “substantially exceeded” Peloton’s expectations, costing the company $40 million and about 20,000 members who paused their monthly subscriptions because they were waiting for a replacement seat post.

In May, Peloton told owners of its PL-01 Bike to stop using the model because of a safety hazard that could result in the seat breaking during use. Peloton said Wednesday that it has received 750,000 requests for new seat posts, which the company said was “more than we expected.”

So far, only about half of those requests were fulfilled, and the company expects to complete the remainder by the end of September — three months sooner than it originally told members.

Peloton (PTON) said its fourth-quarter results are a “reminder we operate a seasonal business,” as it braced investors for a bigger-than-expected loss of $242 million and sales dropping to $642 million, down from $679 million a year earlier.

“The slowdown exceeded our expectations through May and through the first three weeks of June as consumer spending shifted toward travel and experiences,” CEO Barry McCarthy said in a letter to investors. “Then eight weeks ago the trend reversed itself, and we began to see a reacceleration in hardware sales.”

McCarthy joined the once-hot company in 2022 and has made a number of changes to restore its early pandemic success, implementing layoffs and store closures, while giving the Peloton app a brand refresh and new pricing tiers. Shares of the company are down 30% year to date.