Rexon Industrial Corp Ltd (力山工業), a maker of fitness equipment and power tools, saw its shares drop 15.63 percent in the past two sessions after a major client, Peloton Interactive Inc, last week announced recalls of its Tread+ and Tread treadmills.
In a statement on Wednesday last week, Peloton said that it had reached an agreement with the US Consumer Product Safety Commission to recall and stop distribution of its Tread+ and Tread products in the US, refund consumers, and work on additional hardware modifications, following reports that a child died and others were hurt in accidents involving its treadmills.
Since 2017, Rexon has gradually increased the contribution of fitness equipment to its overall revenue, becoming a major supplier for Peloton’s exercise bikes, and Trade+ and Tread treadmills.
Photo: Chan Chao-yang, Taipei Times
Rexon also manufactures fitness equipment for other global brands, such as Life, Precor, True and Freemotion.
Last year, fitness equipment revenue accounted for 77.6 percent of Rexon’s revenue, with Peloton contributing about 71 percent, Jih Sun Securities Investment Consulting Co (日盛投顧) said.
“At present, Rexon has not commented on the recalls. Given Peloton’s large-scale recalls and treadmill modifications, we believe that Peloton might request Rexon to slow down the shipment of treadmills and repair those products,” Jih Sun said in a note on Friday.
“In addition, it was originally expected that Tread would be launched in the US at the end of May and start to contribute revenue. But due to the recall, the launch of Tread might be delayed until the third quarter, which is expected to have a certain degree of impact on Rexon’s business.”
In the US market, the Tread product was only sold as part of a limited invitation-only release from November last year to March, Peloton said in a statement.
Taichung-headquartered Rexon on Friday reported revenue of NT$1.47 billion (US$52.7 million) for last month, up 197.58 percent from a year earlier and hitting the highest for the month of April, as shipments of exercise bikes and treadmills rose amid the COVID-19 pandemic.
In the first four months of the year, cumulative revenue totaled NT$5.51 billion, an annual increase of 188.04 percent and also the highest for the same period in the company’s history, company data showed.
Net profit in the first quarter increased 264 percent year-on-year to NT$324.46 million, with earnings per share rising from NT$0.49 to NT$1.79, a company financial statement showed.
Rexon shares on Friday closed 6.34 percent lower at NT$78.3 in Taipei trading, while Jih Sun downgraded the stock to “neutral” from “buy.”
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