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Peloton Announces To Backpedal Its Headcount, Reduce Retail Footprint, and Increase Prices

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The shakeup is real

CEO Barry McCarthy, in a memo, announced that the at-home fitness company is cutting 784 jobs in areas including delivery and customer support. Apart from this, McCarthy is reducing the number of warehouses it owns and operates that will itself save $800 million
in annual costs. Finally, the CEO in charge will raise the price of the Bike+ by 25% to $2,495 and its treadmill by 30% to $3,495.

Peloton Announces To Backpedal Its Headcount, Reduce Retail Footprint, and Increase Prices

The news penetrated during Quarter 3 earnings in May. McCarthy has also been planning to explore third-party retailer partnerships to remove the need for white-glove delivery for its treads and bikes.

The company said that the restructuring and shakeups are the result of planning and improving on key areas of the business and aligning the operations to execute the plans effectively.

Meanwhile, the CEO said that

the company will be recruiting software engineers and also expand on Peleton’s e-commerce presence as a reason. And the affected employees will receive a one-year digital subscription to Peloton as part of their severance.

Peloton Announces To Backpedal Its Headcount, Reduce Retail Footprint, and Increase Prices

The CEO admits that the price hikes are a part of the company’s strategy to boost the image of Bike Plus and Treads as premium. The company has also secured a $750 million bank loan and the price hikes are an effort to restore Pelonton’s cash flow.

Furthermore, the layoffs and price increases are an ongoing effort to strengthen the thinly capitalized balance sheet and restore its position as a fitness company. McCarthy wrote in the memo,

These changes are essential if Peloton is ever going to become cash
flow positive”. Cash is oxygen. Oxygen is life. We simply must become self-sustaining on a cash flow basis”.

Peloton’s board of directors also witnessed restructuring. It has welcomed two new directors: Angel Mendez, a former executive at Cisco, and Jonathan Mildenhall, a former chief marketing officer at Airbnb, as reported by CNN.

CNN also reports that Peloton is now exerting itself to reduce the cost to right-size the business and put the company on a much more secure footing. The new CEO, McCarthy proposes that the money we save will be put into further research and development as
well as marketing.

As per The Verge, McCarthy will be reframing Peloton as a connected fitness brand and not as a standalone Bike company. The company has also focused on an ad promoting the Peloton app featuring actor Christopher Meloni.

The proposed plan also includes an overhaul of the company’s subscription model and building an app store. McCarthy recently launched a pilot program (lease the company’s bike) which was part of his strategy to get the struggling company back on the trail.

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