Peloton announced on Thursday that its CEO, Barry McCarthy, will step down, and the company will lay off 15% of its staff to align its spending with revenue. McCarthy, a former executive at Spotify and Netflix, will serve as a strategic advisor to Peloton until the end of the year. Karen Boone, the company’s chairperson, and director Chris Bruzzo will act as interim co-CEOs, while Jay Hoag, another Peloton director, will take over as the new board chairperson. The company is actively searching for a permanent CEO.
Peloton also unveiled a comprehensive restructuring plan, including a 15% global workforce reduction affecting around 400 employees. It will continue to close retail showrooms and make adjustments to its international sales strategy. Peloton aims to reduce annual expenses by over $200 million by the end of fiscal 2025.
These actions are deemed necessary by Peloton to bring its cost structure in line with its current business scale, with the goal of achieving sustained positive free cash flow. Since taking the helm in February 2022, McCarthy has been reorganizing the business to drive growth, with a focus on expanding digital offerings to increase membership.
Peloton reported its fiscal third-quarter results, falling short of Wall Street’s expectations. The company reported a loss per share of 45 cents, worse than the expected loss of 37 cents, with revenue at $718 million compared to an expected $723 million. Sales dropped about 4% from the previous year.
Despite various efforts to boost sales, such as removing free app memberships and expanding corporate wellness programs, Peloton has not seen sales growth for nine consecutive quarters. It continues to incur losses, having not turned a profit since December 2020.
Peloton aims to return to revenue growth by June, the end of the current fiscal year. It achieved positive free cash flow early in the third quarter, a first in 13 quarters, generating $8.6 million. However, questions remain about the sustainability of this improvement, especially considering reports of delayed vendor payments, which could temporarily improve its balance sheet. The company's hardware sales have also declined as people have returned to gyms post-pandemic.
McCarthy, who succeeded founder John Foley, implemented several rounds of layoffs to restructure the business. He declared the restructuring complete in November 2022, signaling a shift to a growth-focused strategy.