(Bloomberg) — Peloton Interactive Inc. has announced that CEO Barry McCarthy is stepping down. Shares fell to record lows and the struggling fitness company embarked on a major restructuring that cut its global workforce by 15%.
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The board will conduct a search to name a replacement, Peloton said in a statement Thursday. Board Chair Karen Boone and Director Chris Brusso will serve as interim co-CEOs.
Shares fell as much as 16% to $2.71 in New York on Thursday, marking the worst intraday decline since February. Before the decline, the stock was down 47% this year.
McCarthy — Spotify Technology SA and Netflix Inc. ’s senior — took over from co-founder John Foley in early 2022 and began overhauling the company. This includes thousands of previous layoffs, management shakeups and outsourcing of business operations. He also tried to transform Peloton into a service company — with a mobile app at the heart of the business — rather than a seller of expensive bikes and treadmills.
Peloton this week formed a new partnership with Hyatt Hotels Corp. to bring bikes to the hotel chain in an effort to boost sales.
But McCarthy admitted the company had continued to struggle with “scale” growth in recent months and warned in February that revenue might not start to pick up again until the fourth quarter.
The New York-based company said in the early days of the pandemic that lockdowns drove consumers to its stationary bikes and fitness classes. But as people returned to gyms, paying subscribers dwindled, leaving the company with a glut of inventory. A series of product recalls related to safety issues added to the company’s image problem and led to lower sales and profits. The stock has tumbled over the past three years, wiping more than 90% off its valuation.
On Thursday, the company announced a new restructuring plan to cut more than $200 million in annual costs. As part of that plan, the company will continue to restructure its retail showroom footprint and cut about 400 jobs.
“The purpose of the cost reductions is to align our cost structure with the current scale of our business and position Peloton to generate consistent and meaningfully positive free cash flow, which is a priority for us,” the company said in a statement. JPMorgan Chase & Co. on Refinancing Strategy and Goldman Sachs Group Inc. Peloton said it works closely with its banks, including
“We are mindful of the timing of our debt maturities, which include the convertible notes and the term loan, and we know this is on the minds of our shareholders,” the company said in a letter to shareholders.
Achieving positive sustainable free cash flow would make Peloton “a very attractive investment for debt holders,” the company said.
Peloton narrowed its revenue guidance for this fiscal year, and the new range came in below analysts’ expectations. The company now forecasts full-year sales of $2.68 billion to $2.70 billion. It expects 2.96 million to 2.98 million connected fitness subscribers, down from a previous forecast of 3.01 million. The forecast reflects Peloton’s “improved outlook for hardware sales based on current demand trends and expectations for seasonally lower demand,” the company said.
For the fiscal third quarter, revenue was $717.7 million, which came in short of analysts’ estimates of $719.2 million. Connected Fitness subscribers were 3.06 million, lower than estimated and virtually unchanged from a year ago.
Peloton said it is changing its approach to international markets to be more “targeted and efficient”. “We have no plans to exit existing international markets and will use global strategies and capabilities to the best of our ability,” the company said.
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