Peloton is cutting 12% of its workforce in another major shakeup to its business.
Peloton is planning to cut approximately 12% of its workforce in its fourth round of layoffs this year. The move, which will see 500 jobs become redundant, marks the company’s final step of restructuring, which began when Barry McCarthy took over as Chief Executive Officer in February. “The restructuring is done with today’s announcement,” he told CNBC. “Now we’re focused on growth.”
McCarthy added that Peloton now has to prove that its recent spate of strategy changes will help with expansion. This includes its equipment rentals as well as its partnerships with Amazon, Dick’s Sporting Goods, and Hilton hotels. The exercise equipment company has been attempting to adjust its business to the current market after experiencing incredible sales growth during the height of the pandemic.
Sadly, Peloton’s financial outlook has steadily declined over the past year, reporting six quarters of consecutive losses in August. That amounts to $1.2 billion in losses during the last quarter and $2.8 billion over the last year in June, CNET reports. And it’s not only sales of new equipment that are dwindling. The New York-based firm’s subscriber numbers have also dropped in recent months.
As a result, in February Peloton said it would cut approximately 2,800 jobs to revitalize slow sales and win back investor confidence. That was followed by eliminating 570 jobs in its Tonic Fitness Technology unit in July, and 800 positions at the company in August. According to a 10K filing, via Yahoo! Finance, the company had 3,723 employees in the United States and 857 internationally as of June 30th.
Peloton’s job cuts come about eight months after McCarthy, a former Spotify, and Netflix executive, replaced founder John Foley and slashed roughly $800 million in annual costs, amid steady quarterly losses. Now, investors are waiting to see if he can grow sales and win over customers as soaring inflation strains budgets and a competitive labor market makes it harder for companies to hold onto their employees.
So far, he has pushed the company’s business further into subscriptions while broadening the availability of its products beyond Peloton’s direct-to-consumer roots. Reflecting on the changes the company made over the past several months he told CNBC, “I’m feeling about as optimistic as I’ve ever felt.” Speaking about Peloton’s financial standing for the next six months, he said the company, which has slowed the rate of its cash burn, would still be well-capitalized and highly liquid.
And it’s still on track to meet its cash flow goals for the fiscal year. But if it fails to return to growth after these changes, McCarthy said Peloton may not be viable as a stand-alone company. “With today’s announcement, the bulk of our restructuring work is complete,” he said in an internal memo to staffers via The Wall Street Journal.
The CEO added that he knows many employees will feel angry, frustrated, and emotionally drained by the news. But he wants them to know, and hopefully understand, that the jobs cuts are a necessary step to save Peloton. The company’s shares were up 4% in morning trading, while stock has been down about 76% this year.