Peloton cuts 2,800 jobs, even asking its boss to get on his bike if sales falter | business news
Peloton, the provider of connected exercise bikes and treadmills, has announced plans to cut costs drastically, including losing 2,800 jobs – even prompting its chief executive to get on his bike after a slump in performance.
Shares soared more than 30% as the company – which has seen rising demand for its subscription products during the COVID crisis lockdown – said it would cut a fifth of its corporate workforce as part of the restructuring, although its teams of screen instructors would be spared.
The move, which also includes another round of production cuts as part of an effort to save $800 million annually, comes in response to a dramatic drop in sales since gyms reopened, stiffer competition and poor PR in the wake death of a child.
Peloton has faced intense investor pressure to overhaul its board and strategy — building on price and production cuts announced late last year.
Peloton said its CEO, co-founder John Foley, would be succeeded by Barry McCarthy – a former chief financial officer of Spotify and Netflix, with Mr Foley taking on the role of chief executive instead.
He had become a particular target of activist investor anger over a drop in market value below $10 billion.
Peloton was worth $50 billion a year ago.
The collapse of its shares is said to have been prompted to do so last week acceptance test from Amazon and Nike amid growing calls for Peloton to put itself up for sale.
Investment firm Blackwells Capital accused Mr Foley of “gross mismanagement” and lack of credibility.
He told shareholders on Tuesday, “Peloton is at an important juncture and we are taking critical steps.
“Our focus is to build on the already amazing experience of Peloton members while optimizing our organization for profitable growth.
“With today’s announcements, we are taking action to ensure Peloton capitalizes on the major long-term connected fitness opportunity.
“This restructuring program is the result of careful planning to address key areas of the company and to realign our operations so that we can pursue growth opportunities with efficiency and discipline.”
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Commenting on the changes, Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown said: “The calls of activist investors calling for a radical restructuring of Peloton appear to have been met, with the CEO poised to step back from what has increasingly become is difficult treadmill.
“Peloton has clearly been having a rough time leaving pandemic favorites behind by reopening games to overtake popularity with investors and this move will add further upset at a volatile moment in the stock price.
“However, Peloton already has one foot firmly planted in the much-touted metaverse, and its die-hard fans are still deeply addicted to virtual sessions.
“That’s why the company is considered so attractive to big hitters like Nike and Amazon. If it can form up and get back on a recovery course in terms of sales, there may be more potential suitors eager to jump into the alternate reality of fitness.”
Peloton stock had already received a big boost from reports of takeover interest earlier in the week and was further strengthened following the announcement of the restructuring.