Indoor fitness company Peloton announced its latest and disconcerting financial results on Thursday, along with the news that CEO Barry McCarthy is stepping down and the brand's intent to lay off 15% of its workforce and reduce its retail showrooms.
The company's revenue has been falling for nine quarters in a row, with sales dropping 4% from the previous year. In recent history, Peloton's financial performance has been mixed, with periods of strong revenue growth at the start of the COVID-19 pandemic but also significant losses. The company has been investing heavily in research and development and international expansion but has yet to make a net profit since December 2020.
On Thursday, Peloton announced its intention to reduce its annual expenses by more than $200 million by the end of the 2025 fiscal year. These restructuring efforts are expected to have a significant impact on several areas within the company, with its workforce taking the biggest hit. Some 400 jobs are expected to be cut worldwide across various departments and functions within the company.
"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," writes exiting CEO Barry McCarthy. "The mission is powering Members to be the best version of themselves through connected fitness, but Peloton can't pursue its mission if it can't sustain its business."
Additionally, the company's revamped retail strategy will reduce Peloton's physical presence as it continues to close retail stores while focusing on new international partnerships and a new go-to-market approach.
Despite cost-cutting measures, Peloton is committed to investing in software, hardware, and content innovation. While some areas may see cutbacks, investments in product development and member support experience are likely to be prioritized.
But who will shepherd Peloton through these reduction efforts is yet unknown as McCarthy is stepping down from his roles as CEO, President, and Board Director. He will continue to serve as a strategic advisor to the company until the end of the year. Board Chairperson Karen Boone and director Chris Bruzzo will serve as interim co-CEOs.
The brand states that McCarthy's time at the Peloton helm was brief but impactful. In February 2022, McCarthy replaced the company's co-founder John Foley as CEO in a shake-up that saw some 2,800 jobs cut.
"[McCarthy] joined Peloton during an incredibly challenging time for the business. During his tenure, he laid the foundation for scalable growth by steadily rearchitecting the cost structure of the business to create stability and to reach the important milestone of achieving positive free cash flow," said Boone.
In his company letter, McCarthy likened a company turnaround to a full-contact sport yet left on a hopeful note.
"Intellectually challenging, emotionally draining, physically exhausting, and all consuming, the decisions never more consequential, the urgency ever present, the teamwork never more central to the mission. From where I sit today, that pretty much summarizes my experience these last two years.
A lot of blood sweat and tears have been shed to make Peloton's turnaround possible," he writes. "I've never been more optimistic that Peloton is on the right path to achieve this objective… You've got the talent, the resources, and the tools you need to win, and I'm counting on you to win it."
