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New York (CNN Businss)Bikes, both stationary and non, did a brisk pandemic business.
Bike shops around the country couldn’t keep them in stock as orders spiked and supply chains buckled. Peloton spent hundreds of millions of dollars in late 2020 to beef up its production and shipping operations as consumers complained about having to wait for weeks and months for their $2,000 bikes and treadmills to arrive.
It’s not hard to see why: Riding outside was a way to exercise, socialize and get from point A to B without risking Covid exposure on public transit. Riding indoors had a similar appeal — if you couldn’t work out in a big sweaty studio, at least you could connect virtually to a class led by reliably effusive instructors.
Cut to summer 2022, and the bike business is in trouble.
Here’s the deal: On Friday, Peloton said it would lay off another 800 people and jack up prices on some bikes and treads — part of a major cost-cutting revamp under its new CEO, who’s been tasked with righting the ship after the company failed to anticipate consumers’ desires to return to gyms. Peloton’s stock is down more than 90% from its peak in late 2020.
And bike retailers, not unlike other consumer goods peddlers, now face the opposite problem they had in 2020: Too much inventory, not enough demand. According to the Wall Street Journal, revenue at US bicycle retailers fell 7% in the first half of 2022 compared with last year (versus gains of 46% in 2020 and 4% in 2021).
SoulCycle, a similarly trendy, upscale bike business, suffered the inverse of the pandemic boom because it focused primarily on in-studio classes. Like many gyms, it was forced to shut down in 2020 and didn’t reopen for about a year.
Even as people return to gyms, SoulCycle is contending with another blow to business: inflation.
On Monday, SoulCycle said it’s closing about 25% of its 80 locations and laying off 1,350 people. A spokesperson cited “many shifts as a result of the pandemic” and the company saw an opportunity to “right-size in certain markets.”
Meanwhile, more affordable gym chains like Planet Fitness appear to be thriving. The chain reported in its earnings last week that it grew its membership base as people are “trading down” from high-priced gyms, my colleague Jordan Valinsky reports.
For comparison, a no-frills membership to Planet Fitness in New York costs about $10 a month. A single Soul Cycle class costs $38.
NUMBER OF THE DAY: -31.3
In the latest sign of turbulence in the US economy, New York-area manufacturing suffered a large and unexpected setback in August, according to a survey released on Monday. The Empire State Manufacturing Survey plunged 42 points in August to minus-31.3. That marks the second-largest monthly decline on record for this closely watched gauge of economic activity.
Any reading below zero indicates a contraction. Economists had expected a more modest slowdown in the survey that would still signal expansion.
“Startlingly terrible,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note on Monday. “Momentum in the manufacturing sector certainly has slowed, but this is a collapse.”
There is so, so much wrong with the credit scoring system in America, it’s hard to know where to start. But the recent blunders by Equifax offer yet another reminder of the absurd power credit rating firms wield over Americans, my colleague Alexandra Peers writes.
ICYMI: Earlier this month, Equifax disclosed that it had sent out incorrect credit scores to banks and other lenders for potentially hundreds of thousands of customers. For nearly 300,000 people, that error resulted in a 25-point or higher shift in their credit scores — enough for some people to be denied a loan.
To be clear: Equifax has, like, one job. It’s one of three big credit scoring firms that are supposed to accumulate consumer data that gets mysteriously boiled down to a number between 300 and 850 and then sold to financial institutions for a profit (more on that in a minute).
A higher score, of course, is a shorthand way of telling a bank that a person is reliable and likely to pay back whatever loan they’re seeking. Lower scores = less reliable, which means lenders may deny you financing, or grant it with punishingly high interest rates.
Oh, and even though that data can have life-altering consequences, you do not own it, nor have much power to dispute it. The process is deliberately murky. And you cannot opt out of the system. I repeat, you cannot opt out.
The Equifax screw-up from this spring is just one that we know about, thanks to an investigation by the Wall Street Journal, which forced the company to acknowledge the mistakes.
If all of this sounds familiar it may be because Equifax also disclosed in 2017 that hackers had exploited a security flaw in its system to gain access to data for as many 145 million people — roughly half the country. Oops…
Errors are so rife that in 2019 the Equifax CEO, Mark Begor, told the New York Times that when he first checked his own report, it showed he bought a vacuum cleaner he didn’t own, a mobile phone service he hadn’t signed up for and a credit card he didn’t have.
Credit data is being used in broader ways that it was initially intended to be, sometimes quite sloppily, consumer advocates warn.
“Credit scores are increasingly being used as a measure of character, when sometimes its just luck,” said Chi Chi Wu, an attorney at the National Consumer Law Center.
The pandemic has further thrown the reliability of the data into question. People and businesses that struggled to pay their bills on time during lockdowns and layoffs that were far beyond their control may have seen their creditworthiness take a hit through no fault of their own.
How can a system so flawed be so powerful?
Again, no one can opt out, so the consumer base is built in. The for-profit companies have no motivation to provide any real service for consumers.
“One of the reasons that [errors] keep happening is that they can get away with it — they are an oligopoly, you can’t pick between them, like you can with mobile carriers, says Wu.
All a consumer can do in the current system is dispute any errors, which relies on consumers knowing their rights and wading into the intimidating muck of their own reports. Oh, and be prepared to wait because there’s a huge backlog in those complaints, the CFPB says.
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