Peloton is cutting another 500 jobs in a move that CEO Barry McCarthy said should position the struggling fitness equipment maker to return to growth.
The cuts, which amount to about 12% of Peloton’s workforce, mark a pivot point for the company, McCarthy told CNBC on Thursday. Peloton already has had multiple rounds of layoffs this year.
“The restructuring is done with today’s announcement,” he said. “Now we’re focused on growth.”
Shares of Peloton closed 4% higher Thursday. The stock is down about 75% so far this year.
The CEO offered his thanks to the employees who were laid off in a statement issued late Thursday afternoon: “Restructuring a business requires difficult decisions that affect people’s lives. I’m grateful for the many contributions of those who have been impacted.”
Peloton’s recent strategic changes have sparked speculation that it could be looking to sell itself. But in the late afternoon statement, McCarthy said: “I joined Peloton for the comeback story, not to sell the business.”
McCarthy told CNBC the company now has to prove its moves, including equipment rentals and partnerships with Amazon and Hilton, can help it grow.
McCarthy took over as CEO of Peloton earlier this year from co-founder John Foley, and has overseen drastic changes to its business model as the company struggled after a sales boom earlier in the Covid pandemic. A former Spotify and Netflix executive, he has pushed the company’s business further into subscriptions while broadening the availability of its products beyond Peloton’s direct-to-consumer roots.
Earlier this week, the company said it would put its bikes in every Hilton-branded hotel in the United States. It recently announced partnerships to sell equipment in Dick’s Sporting Goods stores and on Amazon.
McCarthy talked to CNBC after The Wall Street Journal reported on remarks he made about where the company could stand in six months.
“We need to grow to get the business to a sustainable level,” McCarthy told the Journal, which first reported on the layoffs.
Later Thursday, McCarthy released a memo to employees regarding his remarks to the media about the company’s turnaround plan. (Read the memo at the bottom of this article.)
“That’s on me and I apologize,” he said, referring to the impression created by the six-month timeframe mentioned in the Journal article.
McCarthy told CNBC that Peloton, which has slowed the rate of its cash burn, would still be “extremely well capitalized” and “highly liquid.” And it’s still on track to meet its cash flow goals for the fiscal year.
“I’m feeling about as optimistic as I’ve ever felt,” he said, reflecting on the changes the company made over the past several months.
Read McCarthy’s memo from Thursday afternoon:
Team,
I’m sure you all have seen or heard about today’s Wall Street Journal story. We were expecting a story about redemption and the successful turnaround of Peloton, which is why we invested time on background briefing them on the state of our turnaround. The headline should have been that recent strong execution and today’s restructuring have positioned us to meet our fiscal year-end goal of break-even cash flow, with a renewed focus on accelerating our growth, which is why I’ve never felt more optimistic about our future. Would I say this if it weren’t true? Not a chance……
Instead, the article creates the impression we have six months to live, which is at odds with the story we told and the state of the business. That’s on me and I apologize.
I was asked the question: “How much time do you think you have to show success?” My response was 12 months from the time I joined Peloton, knowing that we’re already showing significant progress and in record time. Seemed like a no-brainer at the time.
In the past you’ve heard me say we’re all held accountable for our performance. Me included. But to be unequivocally clear, there is no ticking clock on our performance and even if there was, the business is performing well and making steady progress toward our year-end goal of break-even cash flow. Our immediate focus is on ensuring that our most important stakeholders – beginning with you – understand this to be the case.
Most importantly, I don’t want this news cycle to overshadow the difficult reality that 500 of our colleagues have been impacted today, or the gratitude I have for all they and you have done for the company.
-Barry