Slumping home-exercise company Peloton Interactive Inc on Tuesday announced a leadership shift and layoff plan as it scales back expansion plans due to weakening demand in the shifting COVID-19 pandemic.
Founder John Foley is to step down as chief executive, but remain as executive chairman. Under a cost-cutting plan, the company is to eliminate 2,800 jobs in an acknowledgement that it expanded too quickly.
“This has been a humbling time for Peloton, but we remain confident in the fundamentals of our business, the strength of our platform, and the significant growth potential for connected fitness and our leadership position within it,” Foley said.
Photo: David Paul Morris, Bloomberg
Foley is to be replaced by Barry McCarthy, former chief financial officer at Spotify Technology SA and Netflix Inc.
The company, which has seen growth slow with the end of widespread COVID-19 lockdowns, said it would trim its planned capital expenditures for this year by about US$150 million.
Annual costs are expected to fall “at least” US$800 million as the company cuts corporate positions by 20 percent, Peloton said.
The company has reportedly been looked at as an acquisition target by Amazon.com Inc, among other companies.
Executives on Tuesday depicted the overhaul as intended to capitalize on long-term growth, even if the short-term is bumpier.
“We don’t think the opportunity has changed,” chief financial officer Jill Woodworth said on a conference call with analysts.
Woodworth said the company had miscalculated growth due to the unpredictability of the pandemic, which has more recently led to many consumers returning to gyms.
However, “connected fitness” would remain a growth category in light of the trend of more employees working from home or in hybrid formats, she said, adding that Peloton was well-positioned as a leader in this segment.
The shake-up came as the company reported a quarterly loss of US$439.4 million as revenues grew 6.5 percent to US$1.1 billion.
The company also trimmed its full-year revenue forecast and its estimate for connected fitness subscriptions.
Foley, a former Barnes & Noble executive, acknowledged missteps at the outset of a conference call outlining the changes.
“We scaled too quickly,” Foley said. “We own this. I own this and we are holding ourselves accountable. That starts today.”
Besides appointing a new CEO, the company named to the board Angel Mendez and Jonathan Mildenhall, as well as McCarthy.
The announcements did not allay criticism from Blackwells Capital LLC, which has called for Foley’s ouster and a potential sale of the company.
“Peloton CEO John Foley naming himself executive chairman and hiring a new CFO does not address any of Peloton investors’ concerns. Mr Foley has proven he is not suited to lead Peloton, whether as CEO or executive chair, and he should not be hand-picking directors, as he appears to have done today,” Blackwells chief financial officer Jason Aintabi said.
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