Thursday, March 28

Peloton chief executive steps down as company cuts 2,800 jobs


Peloton is replacing its chief executive, cutting jobs and reining in ambitious expansion plans after badly misjudging the staying power of the exercise-at-home trend that propelled its sales early in the COVID-19 pandemic.

John Foley first pitched the idea for Peloton in 2011, hoping to disrupt the industry.

He will give up the chief executive position and become executive chair at Peloton Interactive.

The company will also cut 2,800 jobs.

Barry McCarthy, who has served as chief financial officer of Spotify and Netflix, will take over as chief executive, Peloton said on Tuesday.

Peloton’s shares surged about 25 per cent on Tuesday, despite the company reducing its annual outlook for sales and subscriptions and reporting a big loss for its fiscal second quarter.

Peloton has been on a wild ride for the past two years during the pandemic.

Company shares surged more than 400 per cent in 2020 amid COVID-19 lockdowns that made its bikes and treadmills popular among customers who pay a fee to participate in Peloton’s interactive workouts.

But nearly all of those gains were wiped out last year as the distribution of vaccines sent many people out of their homes and back into gyms.

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Peloton’s initial success also created competition, with companies peeling away customers by selling cheaper bicycles and exercise equipment.

High-end gyms also jumped into the game, offering virtual classes that once were Peloton’s biggest draws.

Peloton also misjudged the slowing demand and kept churning out its products.

“The problem for Peloton isn’t that it has a bad product. Nor is it that there is no demand for what it sells,” Neil Saunders, managing director of GlobalData Retail, said in a note published Tuesday.

“The central problem is one of hubris and bad judgement.

In a conference call with analysts on Tuesday, Mr Foley acknowledged the company expanded its operations too quickly and overinvested in certain areas of the business.

“We own it. I own it, and we are holding ourselves accountable,” he said.

Previous missteps have helped Peloton’s downfall

Peloton has had to address major issues in recent times.

In May, it halted production of its Tread+ treadmills, after recalling about 125,000 of them less than a month after denying they were dangerous.

One was linked to the death of a child, while others were linked to 29 injuries.

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