Peloton will replace its CEO, cut about 2,800 jobs, and revamp its leadership team as the company faces declining demand for its exercise equipment. The layoffs account for around 20% of the corporate workforce but will not affect instructors or content.
In a press release, Peloton co-founder John Foley, who has led the company since its inception 10 years ago, announced that he would be stepping down as CEO and becoming executive chair. Barry McCarthy, the former chief financial officer of Spotify and Netflix, will take over as chief executive and president.
“I have always thought there has to be a better CEO for Peloton than me,” Foley told The Wall Street Journal. “Barry is more perfectly suited than anybody I could’ve imagined.”
Peloton has faced increasing resistance in recent months after demand for its fitness equipment plummeted. Foley claims the company invested heavily in “near-term capacity, inventories, and logistics” in response to high demand caused by the pandemic and supply chain disruptions, but that the “post-covid demand picture” didn’t turn out as planned.
Potential suitors for the once-pandemic darling have been raised in recent weeks, with The Wall Street Journal reporting interest from Amazon. Citing unnamed sources, the report claims Amazon is speaking to advisers about a potential deal. Nike, Apple, Disney, and Lululemon are other names being thrown around, though their interest in acquiring Peloton is unknown.
When asked about rumors of the company being sold off, Foley said “We are open to exploring any opportunity that could create value for Peloton shareholders.”
Along with laying off workers, Peloton hopes to cut costs by abandoning its plans to build a $400 million “Peloton Output Park” factory in Ohio, reduce delivery teams, and decrease warehouse space that it owns and operates.
As part of a compensation package, Peloton will give affected employees a rather ill-conceived benefit: a one-year subscription to Peloton, “The Peloton monthly membership will be complimentary for impacted team members for an additional 12 months.”
Peloton’s rapid decline since enjoying massive pandemic-fueled demand has been steeped in controversy and questionable leadership. Toward the end of last year, Peloton reduced its entry-level Bike price to $1,495 (almost 20%) to renew interest, but the tactic failed. Now the company reportedly has thousands of spin bikes and treadmills sitting in warehouses and cargo ships.
Plummeting demand only accounts for so much of Peloton’s recent struggles. In 2021, the company voluntarily recalled two treadmills, including its expensive Tread+, which was involved in an accident where a 6-year-old child died after being pulled under the equipment. Prior to the recall, the U.S. Consumer Product Safety Commission (CPSC) reported 72 instances of adults, pets, and objects being dragged under the machine.
While its products are widely acclaimed and its instructors lauded, a steady cadence of trouble has marred the brand’s image. From commercials being flagged as elitist and sexist to unfortunate TV cameos, Peloton has become a magnet for controversy in recent years.
In January, after Peloton’s stock had declined 84% over a roughly one-year period (it is now at $8 billion, down from $50 billion), activist investor Blackwells Capital urged the fitness brand to fire its CEO. Blackwells now wants Foley to leave the company entirely; the now-executive chairman will likely need to sign off on any acquisition given that he and other insiders control 80% of Peloton’s voting power.