Peloton lays off nearly 3000 employees, CEO John Foley steps down
Peloton is cutting off over 2,800 staff as part of a restructure plan, but instructors will be spared.
After drastically misjudging the lasting potential of the exercise-at-home trend that boosted its sales early in the COVID-19 epidemic, Peloton is changing its CEO, reducing staff, and curbing in aggressive development ambitions.
Peloton was founded by John Foley in 2011, with the goal of disrupting the fitness industry. He will step down as CEO and take on the role of executive chair at Peloton Interactive. In addition, the corporation will eliminate 2,800 employees.
The layoffs were announced on Tuesday as part of a reorganisation strategy in response to a drop in demand for Peloton’s home workout equipment as pandemic restrictions loosen. The layoffs began on the same day.
For individuals laid off, Peloton would provide a “significant cash severance allowance” and prolong stock vesting periods. According to the company’s news release, they will also receive a complimentary one-year Peloton subscription.
Not every employee is impacted. “The efforts launched today will have no influence on Peloton’s roster of instructors or the breadth and depth of its material,” the business said in a statement on Tuesday.
Instructor retention appears to be consistent with Peloton’s new business strategy. As Bloomberg reported in January, the new strategy places teachers at the centre of the organisation.
Some Peloton teachers have amassed large followings and have become celebrities. Robin Arzon, the head teacher, has over a million Instagram followers. Meanwhile, Cody Rigsby, a fellow teacher and last year’s second runner-up on “Dancing with the Stars,” has amassed a million Instagram followers. Adidas has teamed up with the two, as well as teacher Ally Love, on a project.
According to Bloomberg, Peloton’s teachers are full-time professionals with a fixed salary and incentive compensation who are recruited by talent brokers. Timesread.com claims, citing people familiar with the firm, that senior teachers get paid more than $500,000 per year.
According to the Bureau of Labor Statistics, this is about 12 times the yearly median wage for fitness trainers and instructors, which is $40,510. On Peloton’s website, there are presently 55 teachers listed. They teach everything from riding to yoga.
Approximately 20% of Peloton’s 14,000-strong corporate personnel will be laid off. According to the company’s news release, the changes are estimated to save at least $800 million every year. It’s also halting construction of a $400 million facility in Ohio, where it intended to make bicycles and treadmills.
According to Peloton, cofounder John Foley will step down as CEO and become executive chair as part of the reorganization. Barry McCarthy, a former chief financial officer of Spotify and Netflix, has been appointed as the company’s new CEO.
Peloton said on Tuesday that Barry McCarthy, the former chief financial officer of Spotify and Netflix, will take over as CEO.
Peloton’s stock soared by over 25% on Tuesday, despite the business lowering its annual revenue and subscribers forecast and revealing a large loss in the fiscal second quarter. During the epidemic, Peloton has been on a roller coaster ride for the previous two years.
During COVID-19 lockdowns in 2020, the company’s bikes and treadmills were increasingly popular among clients who pay a charge to engage in Peloton’s interactive exercises.
Last year, however, virtually all of those improvements were reversed, when vaccination distribution drove many individuals out of their homes and back into gyms.
Peloton’s initial success spawned competition, with businesses luring clients away with lower-cost bicycles and fitness equipment.
High-end gyms have now gotten in on the act, providing virtual lessons that were originally Peloton’s main attraction. Peloton, however, misread the declining demand and continued to produce its goods.
“Peloton’s dilemma isn’t that it has a subpar product. It’s also not as if there’s no demand for what it sells “In a note issued Tuesday, Neil Saunders, managing director of GlobalData Retail, stated.
Mr Foley said on a conference call with analysts on Tuesday that the company developed too rapidly and overinvested in key parts of the business.
“We own it. I own it, and we are holding ourselves accountable,” he said.
Reasons Behind Downfall of Peloton
Peloton has recently had to deal with some big difficulties.
It ceased manufacture of its Tread+ treadmills in May, less than a month after denying that they were unsafe and recalling nearly 125,000 of them. One of them was related to a child’s death, while others were tied to 29 injuries.
Because of slowing sales growth, the firm dropped the price of its flagship stationary bike — the product that was the cornerstone of its original appeal — by $400 in August. In December, Peloton was also embroiled in a marketing disaster.
Its stationary bike was featured in the first episode of And Just Like That, a Sex and the City spin-off, although not in a favorable way. Mr Big, one of the characters, died after riding in a Peloton.
According to reports, the corporation was aware of the product placement but not the narrative line, leaving it scurrying to respond to the negative publicity.
There have recently been rumors that the firm might be sold, with Amazon and Nike being mentioned as potential purchasers.
Peloton also announced the elimination of 2,800 employees, including around 20% of the company’s corporate positions in New York City.
The instructors who conduct Peloton’s interactive lessons, as well as the content that the firm uses to attract consumers, will not be affected by the changes.
Mr Big (played by Chris Noth) had a heart attack and dies after working out on a Peloton exercise bike in the highly anticipated remake of Sex and the City, titled And Just Like That.
Fans were shocked by the scenario, as Mr Big has been a frequent character on the programme since its inception in the late 1990s.
A Peloton representative told BuzzFeed News that the business had cleared instructor Jess King’s involvement on the programme, who portrays Mr Big’s favourite trainer Allegra, but that the firm was unaware of the storyline until after the episode had broadcast.
“HBO did not share the bigger context surrounding the sequence to Peloton in advance due to confidentiality considerations,” Peloton’s Denise Kelly told Timesread.
Mr Big’s “extravagant lifestyle” was blamed for his heart attack, according to the corporation, which released remarks about how biking truly improves cardiovascular health.
Despite the dramatic drop after the death episode aired, the company’s stock had been declining for some time.
As COVID lockdowns finish and people return to the workplace and the gym, companies like Peloton and Zoom have taken a beating on the stock market.