Dive Brief:
- Peloton said Thursday that its CEO is stepping down as the struggling fitness company also prepares to cut its global workforce by about 15%.
- Barry McCarthy is vacating Peloton’s chief executive seat after about two years in the role as the company tries to rebound from financial challenges. Peloton’s board has initiated a search process to identify a replacement for McCarthy, who will become a strategic advisor to the company through the end of the year, according to a press release.
- The planned layoffs, which are expected to impact roughly 400 jobs globally, are part of a restructuring and cost-reduction effort intended to position Peloton for “sustained, positive free cash flow,” the company said in a separate release.
Dive Insight:
The company expects the restructuring effort to reduce expenses by more than $200 million by the end of its 2025 fiscal year.
“We made some very tough decisions, and while we firmly believe these actions are the right thing to do for the business, cuts like this are painful both because we’re disrupting people’s lives and because we’re saying goodbye to genuinely good and talented people,” Peloton CFO Liz Coddington said in a Thursday earnings call.
Karen Boone, Peloton’s chairperson, and Chris Bruzzo, a Peloton director, will serve as interim co-CEOs, the company said. Jay Hoag, another Peloton director, was named the board’s new chairperson.
The leadership change and job cuts come in the wake of dwindling sales at New York-headquartered Peloton, which is also saddled with debt.
Peloton is at “high risk” of bankruptcy based on multiple factors, including its revenue, operating expenses, debt and late payments to vendors, according to Ragini Bhalla, head of brand at credit monitoring and risk management firm Creditsafe.
“There are a lot of things going on that are clearly putting pressure on their cash flow,” Bhalla said in an interview.
Peloton experienced a boost during the early days of the Covid-19 pandemic as gyms were forced to temporarily close and consumers spent more time at home, CFO Dive sister publication Retail Dive has reported. But the fitness company struggled to maintain this momentum and attract new customers as businesses began to reopen and consumers returned to their old habits, the report said.
The company’s total revenue for its fiscal third quarter of 2024 reached $717.7 million, down from $748.9 million a year earlier, according to a Thursday letter to shareholders, which also reported a net loss of $167.3 million.
Peloton said it believes that achieving sustained positive free cash flow will make the company a more attractive investment for debt holders.
“We are mindful of the timing of our debt maturities, which consist of convertible notes and a term loan, and we know this is also on the minds of our shareholders,” the letter said.
