Connected fitness company Peloton, known for its tech-enabled stationary bikes and treadmills, has cycled through another chief executive.
On Thursday, Peloton CEO Barry McCarthy announced that he is stepping down as the company’s CEO, chairman and board director. He will be succeeded by interim co-CEOs Karen Boone and Chris Brusso as members of the Peloton team. Peloton announced it will cut 15% of its workforce, or 400 employees, as it tries to cut costs.
Peloton has cut staff for the fifth time since the company peaked in 2021. As the company struggles to regain its foothold in the fitness industry and among consumers, questions are being raised about what the future holds for the formerly red. – Hot workout craze.
“As cutting back numbers is a difficult decision, Peloton has no choice but to bring costs in line with its revenue,” McCarthy said. said He announced his departure on Thursday. He added that the move was necessary as the company prioritized the “necessary task of successfully refinancing its debt”.
Based in New York, Peloton is one of the companies that has positioned itself well during the Covid-19 pandemic, benefiting greatly from the lockdown policies that have isolated Americans indoors. At its height, it was valued at $50 billion, and had long waiting lists for its equipment.
With the fate of overcrowded gyms and fitness studios uncertain, it seemed during the pandemic that the future of fitness would be at-home equipment.
Peloton’s sales soared, and the company couldn’t keep up with customer demand. That means until 2021, when restrictions are eased and gyms and fitness studios reopen. Peloton, which had piled up cash to meet unprecedented consumer demand, appeared to be caught flat-footed.
Still recovering from covid
Eric Koster, an adjunct professor at Georgetown University’s McDonough School of Business, described Peloton as “a company that’s still trying to find itself after COVID,” and said it could ultimately take one of two courses of action for a new CEO.
“A company that’s hit those heights and come back down to earth now has to decide how to pivot,” Koster told CBS MoneyWatch.
That means developing new home fitness products and attacking the traditional gym business sector or focusing on embracing the existing customer base and capitalizing on their devotion to the brand.
“The company has rabid fans, and while the company may have crossed the divide in the mass market, not everyone is a believer,” Koster said.
On Thursday, interim co-CEO Bruzzo blamed sales flagging as consumers continue to adjust to life post-pandemic. “We’re still dealing with whiplash, post-Covid normalization,” he said on a call with investors.
Faced with cash flow problems, multiple defective product recalls and a shrinking subscriber base, Pelaton appears to have failed to capitalize on the unsolicited boost of the unprecedented global pandemic. How could a company that had recently been a hit with consumers and investors now falter?
A lifetime’s worth of demand
One argument is that while the pandemic boosted demand for Peloton’s fancy fitness machines, the sudden explosion in consumer interest actually hurt the company.
“Some believe the pandemic was the best thing that happened to the peloton, but I believe it was the worst,” BMO Capital Markets analyst Simeon Siegel told CBS MoneyWatch.
Partly because a niche, luxury fitness company with limited appeal suddenly entered the zeitgeist and became a symbol of the lockdown phase.
“It’s a great idea with a really strong following and a great community that’s paid off on a big stage and basically pulled forward a lifetime’s worth of demand,” Siegel said.
In Siegel’s view, the company misunderstood the rapid pandemic-era need for long-standing transformative growth.
“What happened was the pandemic created the perfect environment for people to want to buy a peloton,” Siegel said. Of course, some consumers drawn to Peloton during the pandemic may have abandoned fitness altogether.
Rockstar moment
If Pandemic never happened, Peloton wouldn’t be as well-known as it is today, Siegel said, but it would be “a company with a very steady growth rate and an incredibly loyal fanbase that pays a lucrative monthly fee.” “It’s going to be a small, healthy business that hasn’t reached that rockstar moment.”
BNP Paribas managing editor and senior equity analyst Laurent Vasilescu said the company had plenty of time to turn around post-pandemic, but had failed to do so under McCarthy’s leadership.
“I think he tried to do too many things too fast and didn’t really master the core business. I don’t have an answer for them; I don’t know where they go from here,” Vasilescu said. “But I think one day it will become such a small company that you’re not going to bother.”
