Among other things, Peloton cuts around a fifth of the jobs with 2800 jobs and stops the construction of a factory in the USA. Co-founder John Foley is also stepping down as CEO. Barry McCarthy, who was previously CFO at streaming specialists Netflix and Spotify, will take on the top job. McCarthy said few people in the world understand subscription business models as well, Foley said.
Peloton was one of the big winners early in the pandemic. Many customers of closed fitness studios took the company’s comparatively expensive exercise bikes and treadmills home. But the boom slowed with the easing of corona restrictions, while Peloton apparently overestimated demand. In November, the company had to slash its sales forecast for the fiscal year ending in mid-2022 – by up to a billion dollars.
Since Peloton’s stock market value collapsed from around 50 billion to 8 billion dollars in the face of the problems, according to media reports, Amazon and Nike, among others, were considering takeover offers. The change of boss and the austerity measures are a sign that Peloton wants to secure its independence.
At the same time, CFO Jill Woodworth emphasized that Peloton continues to see a great future for connected fitness technology in the home and wants to remain at the forefront of the market.
The austerity course and measures for greater efficiency should reduce costs by 800 million dollars annually. In addition, Peloton is capping capital expenditures by $150 million this year. The future boss McCarthy criticized in the “Wall Street Journal” that Peloton had let the costs get out of hand “as if Covid were the new normal”.
When Peloton couldn’t get its equipment fast enough early in the pandemic, the company decided to build a $400 million factory in Ohio. The construction freeze now entails costs of 60 million dollars. In order to be leaner, Peloton no longer wants to operate larger parts of the logistics itself.
In the past quarter, sales rose by a good 6 percent year-on-year to $1.13 billion – but only thanks to an acquisition, as Woodworth admitted in a conference call with analysts. At the same time, revenue from training subscriptions rose 70 percent to $337.5 million, underscoring the decline in the hardware business.
The bottom line was a loss of almost $440 million from being in the black from $63.6 million a year earlier.
At the same time, subscription customers continue to use their Peloton equipment actively, with an average of 15.5 training sessions per month. In Corona everyday life a year earlier, there were still a good 21. At the end of the quarter, Peloton had 2.77 million subscribers – over two million more than before the pandemic.
Foley was already under pressure: The activist investor Blackwells Capital called for his resignation and accused the management team of mismanagement. At the same time, he and the early team remain in control thanks to shares with 20 times more voting rights than ordinary investors.
Peloton also cut its own flesh last year with a price cut. In August, the price of the original training bike was cut by a fifth. Customers then increasingly preferred it to the new version, which was more expensive and more lucrative for Peloton. Before the price drop, the two models had sold about equally well. After that, the older device dominated with around 75 percent. That depressed sales. At the same time, Peloton is under price pressure because other providers are fighting for the market with cheaper devices.
Peloton shares, which recently rose by around a fifth in the face of takeover speculation, finally rose by 25.28 percent to $37.27 in US trading on the NASDAQ on Tuesday.
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