Peloton CEO Barry McCarthy has stepped down as the fitness equipment maker announced it decided to lay off about 15 percent of its global workforce to tackle a post-pandemic slump in demand for its connected fitness equipment.
In a statement on May 2, the company said the job cuts impact roughly 400 employees and are part of a comprehensive restructuring program expected to reduce annual expenses by more than $200 million by the end of fiscal year 2025.
“This restructuring will position Peloton for sustained, positive free cash flow [FCF] while enabling the company to continue to invest in software, hardware, and content innovation, improvements to its member support experience, and optimizations to marketing efforts to scale the business,” the company said.
Mr. McCarthy, the former chief financial officer of Netflix and Spotify, is stepping down about two years after he took the helm from co-founder John Foley.
He will serve as a strategic adviser to Peloton through the end of the year, the company said in a statement announcing board members have started a search process to identify the next CEO.
Until the company names a replacement, Peloton chairwoman Karen Boone and director Chris Bruzzo will serve as interim co-CEOs. In addition, the company also named director Jay Hoag as the chairperson of the board.
“Barry 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,” Ms. Boone said.
Mr. Bruzzo and Ms. Boone jointly added: “As Interim Co-CEOs, we look forward to working in lockstep with Peloton’s leadership team to ensure the Company doesn’t miss a beat while the CEO search is underway.”
In his outgoing note to employees on May 2, Mr. McCarthy said Peloton “simply had no other way to bring its spending in line with its revenue.”
He added that Peloton is now “on the right path,” noting the company has “a GREAT lead team, and although the stock market hasn’t recognized this yet, they will. It’s simply a matter of time.”
Drop in Fitness Equipment Sales
When Mr. McCarthy took over in February 2022, he led Peloton’s rebranding push to a software-focused company, leaning on its exclusive content to drive subscriber growth to offset lower equipment sales.
So far, the company has taken several cost-cut measures such as changing bike prices, offering its products through third-party retailers, focusing on digital subscription plans, and cutting jobs in an effort to return to profitability.
Still, demand for its equipment has remained weak as customers cut back spending due to elevated inflation and rising borrowing costs.
Peloton said it expects connected fitness members for the full year to be between 2.96 million and 2.98 million, lower by 30,000 members from the prior forecast.
Meanwhile, shares of the beleaguered New York-based company rose 14 percent before the bell as it also aims to pare its retail presence, potentially forcing Peloton to again push back its goal of returning to positive cash flow.
The latest job cuts come after the company reduced its workforce by about 2,800 employees when Mr. McCarthy took over in February 2022.
Reuters contributed to this report.
