Peloton CEO Barry McCarthy wrote in a letter to employees Friday that the interactive fitness company is “making the hard choices” that will lead to the elimination of 784 jobs, a major reduction of its retail locations, and price increases for its most expensive products.
The changes detailed in the letter obtained by Front Office Sports were the most dramatic since McCarthy, a former Spotify CFO, replaced embattled CEO John Foley in February.
“Today’s news reminds us it was never more important that we be successful in managing our turnaround,” McCarthy wrote. “That’s the reason we’re making the hard choices to shift our cost structure from fixed to variable and to right size our spending in retail stores
“As we face economic uncertainty in the global macroeconomic outlook, we will continue to analyze our workforce and expenditures. Change is constant, and we need to embrace it and make it one of our super powers.”
A hit early in the pandemic, Peloton lost nearly $757 million in the first three months of this year and its valuation — once at about $45 billion — has dipped 90% in less than two years.
Bloomberg was the first outlet to report the letter.
Peloton will raise the price of the Bike+ by $500 (now $2,495) and the Tread by $800 ($3,495). McCarthy said the price hikes of its premium products keeps its $1,445 Bike V1 — which Peloton still has an excess inventory of — attractive.
The restructuring plan already included closing warehouse and retail locations as demand slowed from earlier in the pandemic.
- Peloton currently has 88 stores in the U.S. and Canada. The letter stated that the company “will reduce [its] retail presence across North America,” although the closures may not occur this year.
- The delivery of its interactive products, which had been handled by employees, will be outsourced, a move that the letter said will cut delivery costs in half. Peloton will also outsource its customer service teams.
- The company will eliminate its North American field operations warehouses, which will result in a “significant reduction in our delivery workforce teams.”
Peloton will announce its full-year fiscal 2022 results on Aug. 25.
“Any decision we make that impacts team members is not taken lightly, but these moves enable Peloton to become more efficient, cost effective, and agile as we continue to define and lead the global Connected Fitness category,” the company said in a statement.
