As Peloton is working to turn around its business, its CEO Barry McCarthy is reportedly stepping down after two years with the company. McCarthy’s move comes as the company is cutting approximately 400 jobs worldwide to restructure.
Last year, Peloton began shifting its identity as a supplier of luxury exercise bikes and equipment to the global health technology sector and has continued to work on this rebranding since. Shares in the company have now dipped from 12% down to $2.81.
In 2020, during the coronavirus pandemic, the New York-based company experienced an explosion in sales growth as its share price multiplied by over five times during lockdowns. Isolation during the pandemic made Peloton’s costly bikes and treadmills excessively popular among people who didn’t mind the monthly fee in exchange for interactive workouts.
However, as vaccines allowed people to move back out into the world (and places like the gym) in 2021, sales began to slow down.
Altogether, the company lost $1.26 billion in the June fiscal year and another $350 million in the six months ending in December. In fiscal year 2023, the amount of money left over after paying the costs of running the company was sitting at a negative $470 million.
From there, the losses only continued. On Thursday, Peloton reported losing $167.3 million for the third quarter (45 cents per share). The loss reported on Thursday is better than one year earlier when the company lost $275.9 million (79 cents per share). Nevertheless, the most recent report still fell short of the loss of $0.39 per share that was expected by analysts polled by Zacks Investment Research. Wall Street estimated revenue to be at $719.9 million, which came in below the total of $717.7 million.
On Thursday, Peloton Interactive Inc. stated that the reduction of approximately 400 jobs will amount to about 15% of its global headcount. The move is expected to lower the company’s annual run rate expenses by over $200 million by the end of fiscal 2025 and is only one part of their restructuring efforts as they will also continue to close retail showrooms.
The latest round of job cuts is not exceptionally surprising considering the company announced cutting approximately 500 jobs in October 2022, which came after almost 800 layoffs were announced in August of the same year.
McCarthy is stepping down from his position as president and board member but will remain with the company as a strategic advisor until the end of the year. He took over CEO duties from founder John Foley in an attempt to stabilize the business after it suffered several setbacks, from mere marketing missteps to entire recalls. As CEO, McCarthy pushed stringently for a shift in the company’s focus from high-priced hardware to fee-based app and software development.
McCarthy stated in a note to Peloton’s team on Thursday morning that the job cuts were a way of “dealing with the world as it is and not as we want it to be.”
He continued, “Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue.”
Chairperson of Peloton Karen Boone and director Chris Bruzzo will serve interim roles as co-CEOs while the company searches for McCarthy’s replacement. Current board member Jay Hoag will take over as the new chairperson for the time being.
