William Simpson
Connected fitness company Peloton, known for its tech-savvy exercise bikes and treadmills, has hired yet another chief executive.
On Thursday, the beleaguered company announced that Peloton CEO Barry McCarthy is stepping down from his roles as the company’s CEO, president and board director. He will be succeeded by interim co-CEOs Karen Boone and Chris Bruzzo, both Peloton board members. Peloton also announced that it is cutting 15% of its headcount – or 400 employees – as it tries to cut costs.
The job cuts mark the fifth time Peloton has reduced its headcount since the company peaked in 2021. As the company struggles to regain its footing in the fitness industry and among consumers, questions are emerging about what the future holds. reserve for the former red. – hot fitness fashion.
“As difficult as the decision to make additional headcount cuts was, Peloton simply had no other way to align its spending with its revenue,” McCarthy said. he said in a statement announcing his departure on Thursday. He added that the move was necessary because the company prioritizes “the necessary task of successfully refinancing its debt.”
Headquartered in New York, Peloton was among the well-positioned companies during the Covid-19 pandemic, benefiting greatly from lockdown policies that kept Americans isolated indoors. At its peak, it was valued at $50 billion and had long waiting lists for its equipment.
With the fate of crowded gyms and fitness studios uncertain at best, during the pandemic it seemed like the future of fitness would be home equipment.
Peloton’s sales soared and the company was unable to meet customer demand. That is until 2021, when restrictions will be eased and gyms and fitness studios will reopen. Peloton, which funneled money to meet the mountain of unprecedented consumer demand, appeared to be caught off guard.
Still recovering from COVID
Eric Koester, an adjunct professor at Georgetown University’s McDonough School of Business, described Peloton as a “company that is still trying to find its way post-COVID,” adding that its eventual new CEO will likely take one of two approaches.
“A company that has reached these heights and come back down to earth now has to decide how to pivot,” Koester told CBS MoneyWatch.
This could mean focusing on developing new at-home fitness products and attacking the traditional gym industry, or focusing on embracing your existing customer base and capitalizing on their devotion to the brand.
“The company has rabid fans and maybe it crossed the chasm into the mass market too hard and not everyone believed it,” Koester said.
On Thursday, interim co-CEO Bruzzo blamed the drop in sales on consumers continuing to adjust to post-pandemic life. “We’re still dealing with the whiplash, the normalization that occurred post-COVID,” he said on a conference call with investors.
Faced with cash flow issues, numerous recalls of defective products, and a dwindling subscriber base, it appears that Pelaton has failed to capitalize on the unsolicited boost that the unprecedented event of a global pandemic has provided it. How is it that a company that was recently extremely popular with consumers and investors is now struggling?
The quest of a lifetime
One argument is that while the pandemic has sent demand for Peloton’s sophisticated fitness devices soaring, the sudden explosion in consumer interest has actually hurt the company.
“Some people believe the pandemic was the best thing to happen to Peloton, but I believe it was the worst,” BMO Capital Markets analyst Simeon Siegel told CBS MoneyWatch.
That’s because what was something of a niche, luxury fitness company with limited appeal has suddenly entered the zeitgeist and become a symbol of the lockdown phase.
“It was a really great idea, with a really strong following and a great community, that was propelled onto the big stage and basically fueled a lifetime of demand,” Siegel said.
In Siegel’s view, the company mistook fleeting pandemic-era demand for transformative growth that would last.
“What happened was the pandemic created the perfect environment for people to want to buy a Peloton,” Siegel said. To be sure, some consumers who were drawn to Peloton during the pandemic may have given up on fitness altogether.
Rock star moment
If the pandemic had never occurred, Peloton might not be as well-known as it is today, but it would likely be a company “with a pretty steady growth rate and an incredibly loyal fan base that pays a lucrative monthly fee,” Siegel said. “It would be a smaller, healthier business that never reached that rock star moment.”
BNB Paribas editor-in-chief and senior equity analyst Laurent Vasilescu said the company had plenty of time to reposition itself after the pandemic but was unable to do so under McCarthy’s leadership.
“I think he tried to do too many things too quickly and didn’t just focus on the core business. I don’t have an answer to them; I don’t know where they go from here,” Vasilescu said. “But I think it’s going to become a smaller company, to the point where one day you won’t care anymore.”
