The fitness firm, which boomed during lockdown as people took to home exercising, has seen a plummet in shares after waning demand
Peloton is set to replace its CEO and co-founder John Foley and slash nearly 3,000 jobs in a desperate bid to save the struggling exercise company.
Foley will step down and take a new role as executive chair of the company while Barry McCarthy, the former chief financial officer of Spotify and Netflix, will become the new boss.
Peloton will also cut roughly 2,800 jobs, affecting 20 per cent of its corporate workforce the Wall Street Journal reported.
The job losses will not affect its roster of instructors or its content staff, and comes after whispers last month that 41 per cent of sales and marketing staff would be laid off.
The fitness firm, which has offices in the US, UK, Australia, Canada, Germany, China, Ireland and Taiwan, boomed during lockdown as people took to home exercising, has seen a plummet in shares after waning demand.
Its value has dropped from a high of around $50billion a year ago to $9.7billion.
Other high-profile personnel changes include company president William Lynch who is stepping down from his executive role but will remain on the board.
Erik Blachford who has been a company director since 2015 will also leave the board.
Two new directors are being added: Angel Mendez, who runs a private AI company for supply-chain management, and Jonathan Mildenhall, the former chief marketing officer for AirBNB.
Peloton is set to replace its CEO and co-founder John Foley and slash nearly 3,000 jobs in a desperate bid to save the struggling exercise company
Foley will step down and take a new role as executive chair of the company while Barry McCarthy (pictured), the former chief financial officer of Spotify and Netflix , will become the new boss
The company has drawn interest from potential buyers in recent days including e-commerce giant Amazon.com Inc, according to a person familiar with the matter.
This has prompted the share price to rally slightly to its current price of $29.75, but still well below its offering this time last year of $154.67.
The current figure is only slightly above its September 2019 IPO offering of $29 a share.
Shares of the company were down 3.2 per cent in premarket trading today.
Last month, investment firm Blackwells Capital urged the company’s board to fire its chief executive officer and put the company up for sale.
The investment firm, run by Jason Aintabi, has also urged the board to put the company up for sale to a buyer like Walt Disney Co, Apple Inc, Sony Group or Nike Inc.
Peloton will also cut roughly 2,800 jobs, affecting 20 per cent of its corporate workforce
Foley said in an interview: ‘We are open to exploring any opportunity that could create value for Peloton shareholders.’
The current CEO, who cofounded Peloton 10 years ago, retains shares and voting power, meaning any new deal would require his support.
Investors have been awaiting details of the new plans which are set to accompany the fiscal second-quarter results.
Foley said: ‘I have always thought there has to be a better CEO for Peloton than me. Barry is more perfectly suited than anybody I could’ve imagined.’
McCarthy, who is in his late 60s, plans to leave New York for California for the new job.
As part of the cost-cutting process, Peloton hopes to save $800million and reduce capital expenditures by $150million this year.
It will also call off the development of its $400mllion factory in Ohio and reduce its delivery teams.
The rumors of a potential sale come at a critical time for Peloton, whose market value had dipped to $8 billion after it’s high of $50 billion a year ago
The news comes after Peloton’s shares soared more than 30 pecent in after-hours trading on Friday after reports that Amazon and others were interested in a potential deal with the beleaguered fitness company.
After closing at $24.60 on Friday, the company’s shares jumped to a high of $34.09 in after-hours trading.
Meanwhile, the Financial Times reported late on Friday that Nike is also evaluating a bid for Peloton, citing people briefed on the matter, who said the considerations are preliminary and Nike has not held talks with Peloton.
Amazon and Nike are reportedly interested in buying Peloton, which has seen its value plummet during the past year
There are also other potential unnamed suitors interested in purchasing the exercise equipment company – although there is no imminent deal on the horizon.
The deal would make sense for Amazon, which could have multiple potential ties between Peloton and their already existing businesses, WSJ reported.
Amazon’s fleet-and-logistics arm could help with Peloton’s supply-chain issues and a Peloton subscription could potentially be bundled with Amazon Prime, which offers users waived shipping costs, a streaming service and more for a monthly or annual fee, WSJ reported.
Its quarterly revenue has been steadily dropping in recent months due to slumped demand. Although the company references its latest time frame as first quarter 2022, its earnings for that period were released last November
Amazon has already bundled the services of other companies for Amazon Prime, which starting this month will cost $139 a year.
Amazon has also been pushing into connected health in recent years, launching its Halo Health and Wellness tracker.
The fitness giant has sought help from consulting group McKinsey & Co. to get its finances in order after it slashed its future earnings outlook for 2022 by $1 billion last November, down to between $4.4 billion and $4.8 billion.
Days later the company’s share prices plummeted 27 percent to $24.22, a two-year low.
The huge dip came after a leaked presentation revealed that the company has seen a ‘significant reduction’ in demand for its products.
The report, first seen by CNBC, said the company planned to temporarily pause bike production in February and March and will not manufacture the Tread treadmill machine for six weeks, beginning in February.
It was reported that the company is not looking to produce any Tread+ machines in fiscal year 2022 and has thousands of cycles and treadmills lying in warehouses or on cargo ships.
It is unknown how many products are currently sitting in warehouses.
Foley attempted to quash the damaging ‘rumors’ in a statement, saying: ‘Rumors that we are halting all production of bikes and Treads are false.’
He added that the company had ‘experienced leaks’ this week ‘containing confidential information that have led to a flurry of speculative articles in the press’.
But he said this information was ‘incomplete, out of context and not reflective of Peloton’s strategy,’ adding that the leaker had been identified and legal action will be launched.
In May last year, the company was forced to recall 125,000 treadmills following reports of multiple injuries and the death of a child in an accident. U.S. regulators are investigating the company over the injuries.
Peloton received 72 additional complaints of adults, kids and pets being pulled under the back of the treadmill, resulting in 29 injuries, the Consumer Product Safety Commission (CPSC) said.
The safety agency also released a video that showed how a person could become trapped by the device.
Mr. Big was killed off in the premiere episode of the Sex and the City reboot, And Just Like That, after suffering a heart attack following a workout on a Peloton bike
In November, it slashed its full-year outlook by up to $1billion with analysts warning about a tough path was ahead.
Peloton also suffered from bad publicity from an episode of the Sex and the City reboot And Just Like That, which suggested the company’s exercise bikes could be lethal.
Carrie Bradshaw’s husband, Mr. Big, slumped to the ground moments after wrapping up a cycle session with his favorite instructor. He died of a heart attack in the episode.
Peloton later retorted that its equipment did not contribute to the fictional character’s death, which it blamed on his cigar-smoking and unhealthy diet.
Peloton then responded with a parody ad of its own, but retracted the ad after actor Chris Noth, who plays Mr. Big, was accused of sexual assault.
Peloton’s 12 months of disasters
March 2021: Peloton warns parents to keep children away from its Tread+ treadmills after a six year old child is killed after being pulled underneath one of them
May 2021: Peloton recalls the running machines after reports of at least 72 other injuries emerge. Class action lawsuits against the company are filed
June 2021: Firm is accused of greed after disabling ‘Just Run’ feature on Tread+ which lets users run for free, instead forcing them to pay a $39 fee. Brought the free option back after an outcry
August 2021: Peloton slashes cost of its entry-level bike by $400 as revenue growth slows
November 2021: Peloton reports sales of its products fell by 17 percent for the most recent quarter, with the smallest gain in subscribers since going public in September 2019. That saw Peloton’s market cap tumble by $8 billion, and John Foley lose his billionaire status
December 2021: Mr Big – played by Chris Noth – dies of a heart attack after using a Peloton in the Sex and the City reboot And Just Like That. Shares continue to drop. Days later, Peloton is hailed for producing an advert featuring the revived character joking about the exercise bike. But it is forced to pull the hailed commercial after Noth is hit by multiple claims of sexual assault, which he denies
Firm hit by fresh scandal after John Foley hosts lavish Christmas party at CEO for select employees, after annual bash was scrapped for rank-and-file staff
Chris Noth, who plays Mr Big in Sex and the City, dies from a heart attack after using his Peloton
January 2022: Leaked audio reveals plans to fire 41% of sales and marketing teams. Stock price tumbles further after it emerged production of bikes and treadmills would be slowed due to sinking demand.
Calls for Foley to be fired emerge.
The PR gets even worse as another TV character is almost killed off from a heart attack after a Peloton session. Showtime’s popular series Billions used the bikes to give Mike Wagner, played by David Costabile, a scare in the season six premiere. He survives, and declared he is not going to die ‘like Mr Big’
Mike Wagner, played by David Costabile, is seen in the Season 6 premiere of Showtime’s Billions having a heart attack after riding a Peloton bike
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