Peloton CEO Barry McCarthy was out of a job when he took the helm in February as the company cut 2,800 jobs. Now, roughly six months later, McCarthy has sent a memo to employees warning that the company plans to cut an additional 784 jobs in a third round of layoffs, Bloomberg reports. Peloton will also raise the prices of Bike Plus and Tread, while closing retail showrooms from 2023.
Peloton spokesperson Ben Boyd confirmed the news in a statement to The Verge, writing:
“Today, Peloton took several steps to further advance our transformation strategy, better positioning the company for long-term success as the largest global connected fitness company. Moves we’ve made include implementing more strategic pricing; the elimination of our last-mile distribution network in North America and the expansion of our third-party logistics (3PL) partnerships; the reduction of our member support team in North America; and signaling our intention to significantly reduce our North American retail footprint. Unfortunately, these workforce changes result in the departure of 784 employees from the company. Every decision we make that affects team members is not taken lightly, but these moves allow Peloton to become more efficient, cost-effective and flexible as we continue to define and lead the global Connected Fitness category.”
The staff cuts and plans to close retail showrooms are a continuation of Peloton’s tough restructuring plans after a disastrous year. Last month, Peloton cut nearly 600 jobs in Taiwan as part of a move to reduce domestic production. In February, the company also announced it was ending plans for a $400 million factory in Ohio. Meanwhile, McCarthy noted that while the company is cutting jobs in its delivery and customer support teams, it is actively looking to fill roles in its software engineering team. McCarthy also cited plans to expand Peloton’s e-commerce presence as a reason the company will reduce its retail footprint starting next year.
Today’s news was announced during Peloton’s Q3 earnings call in May. At the time, McCarthy also floated ideas for exploring partnerships with third-party retailers, as well as eliminating the need for white-glove shipping for its bikes and treadmills.
The Peloton Tread was originally intended to be the company’s more affordable treadmill. It will now be $800 more expensive at $3,495. Photo by Amelia Holowaty Krales/The Verge
However, consumers will be most directly affected by the planned price increases. To deal with excess inventory, Peloton dropped the prices of the original Bike, Bike Plus, and Tread in April to $1,445, $1,995, and $2,695, respectively. The Bike Plus will now return to its original price of $2,495, while the price of the Tread will increase by $800 to $3,495. That’s up from the Tread’s original starting price of $2,495 (later increased to $2,845). The Tread was originally conceived as the more affordable of Peloton’s two treadmills. However, Tread Plus was subsequently recalled and discontinued after causing several injuries and in one case the death of a toddler. However, the price of the original bike and the recently launched Peloton Guide will remain unchanged.
McCarthy acknowledged in the memo that the price hike was a sharp turnaround in strategy. That’s because, according to McCarthy, the company has been successful in managing its inventory and supply chain woes. A $750 million bank loan has also been secured, and the promotions aim to enhance the “premium” image of Bike Plus and Tread.
The cuts and price increases are also part of an ongoing effort to restore Peloton’s cash flow. In a shareholder letter last quarter, McCarthy noted that Peloton’s problems have left it “undercapitalized” for its needs and that the company needs to strengthen its balance sheet. “These changes are essential if Peloton is ever to become cash flow positive,” McCarthy wrote in the note. “Money is oxygen. Oxygen is life. We just have to become self-sustaining on a cash flow basis.”
The manual will remain the same price. Photo by Victoria Song / The Verge
According to the memo, the money saved by today’s measures will go towards further research and development as well as marketing. This is in line with the plans McCarthy proposed last quarter. At the time, for example, he revealed that Peloton spent almost no money on marketing its standalone app subscription. The company has since remedied this with an ad promoting the stand-alone app featuring actor Christopher Meloni practicing his buff. Cheeky (literally) ads aside, McCarthy is adamant about recasting Peloton as a connected fitness brand, as opposed to “that bike company.” This has so far included proposed plans to change the company’s subscription model and build an app store. McCarthy’s also implemented a recent pilot program for company bike leasing.
McCarthy ended the note optimistic about Peloton’s prospects — even though in the first six months, investors didn’t seem too convinced by Peloton’s restructuring plans. Peloton’s stock has tumbled about 90 percent in the past year. Still, investors seemed receptive to today’s news, with shares rising 8.2 percent. Later this month, Peloton is expected to release its fourth-quarter earnings, which could paint a clearer picture of how McCarthy’s restructuring strategies have fared.
Add Comment