- Amid reports of a possible acquisition, Peloton co-founder and CEO John Foley is set to leave the post and step into the role of executive chair, according to a letter to shareholders.
- The high-end cycle maker tapped Barry McCarthy, a veteran of Spotify and Netflix, as its next CEO to replace Foley.
- The company also announced plans to slash about 2,800 jobs globally, or about 20% of its current corporate positions, and pull back on capital expenditures. The moves come as Peloton reported $439.4 million in net losses for its most recent period.
Peloton has gotten a rough start to the year after the fitness tech company became a pandemic success story.
The public troubles began after CNBC reported in January that Peloton unexpectedly opted to halt production of new exercise bikes and treadmills as it faced a downswing in demand. That was followed by another CNBC report that the company was slashing sales goals for its recently launched apparel line.
At issue was an apparent miscalculation that the growth that began during the pandemic, when gyms closed and consumers avoided them even once they re-opened, would continue. Peloton's business model mixes high-priced, high-performance fitness technology with subscription-based classes. A broad-based return to gyms and other activities generally pose a threat to growth of both products and services.
Foley moving out of the chief executive spot is a stark sign that Peloton "is now a business in crisis mode," according to GlobalData Managing Director Neil Saunders.
"The problem for Peloton isn't that it has a bad product. Nor is it that there is no demand for what it sells. Nor, indeed, is it that there is no room for future expansion. The central problem is one of hubris and bad judgment," Saunders said in emailed comments. "Peloton incorrectly assumed that the demand created by the pandemic — as people switched away from gyms to home fitness — would continue to curve upward."
Instead, subscriptions to Peloton's services came in below projections, connected fitness sales fell and the company swung from $63.6 million in net income a year ago to a loss of $439.4 million in its most recent reporting period.
News and analyst reports have named Amazon, Nike, Apple, Lululemon (which has traded lawsuits with Peloton over the latter's apparel line) and others as potential suitors. For each of them, Peloton would represent a major expansion into fitness tech and a complement to some existing business. Amazon, for example, could integrate Peloton's digital subscriptions with its Prime offering. Nike and Lululemon would get access to Peloton's loyal following of fitness buffs to sell their wares to.
But analysts have offered mixed opinions on all of these possibilities. Anyone taking on Peloton would have to deal with a business undergoing a painful restructuring and currently making steep losses.
In the letter to shareholders, Foley acknowledged the company's current difficulties but also sought an optimistic note. "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 in it," Foley wrote.