In November, the New York company had to scrap its sales forecast for the fiscal year running until mid-2022.
(Photo: AP)
new York John Foley, co-founder and CEO of fitness equipment specialist Peloton, is stepping down. The 51-year-old is thus giving in to pressure from investors who, after heavy losses and a slump in demand, had pushed for a change in management. In addition, Peloton wants to cut 2,800 jobs, around a fifth of the jobs, and stop the construction of a new factory, the Wall Street Journal reported.
Barry McCarthy, former chief financial officer at streaming specialists Netflix and Spotify, is to take on the top job. Foley himself is said to remain on board as Executive Chairman.
With its design, Peloton is considered the luxury brand among fitness equipment for home use. Founded in 2012, the company recently struggled with a boom in demand during the pandemic. At the same time, the company’s costs have risen sharply – partly because of the material prices.
Foley had already hired McKinsey management consultants to find a way to keep costs down. Even in its record-breaking years, Peloton failed to do one thing: turn a profit.
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The share price is also only a fraction of the high of a year ago. The stock market price is currently less than ten billion dollars, compared to around 50 billion dollars last year. With Blackwells Capital, activist investors have also recently gotten involved, who, in addition to Foley’s replacement, are also demanding that the company be sold. According to media reports, both Amazon and Nike are interested in Peloton.
The subscription business makes the difference
Peloton built its exercise bike and treadmill business primarily on subscription plans: customers pay more than $2,000 for the machine and an additional $39 a month to train via video with the coaches of their choice. This distinguishes the company significantly from the competition.
This combination of subscriptions and hardware sales is interesting for potential buyers. For example, the investment bank Loop Capital Markets writes to its customers that the subscription business alone is worth significantly more than the current market capitalization of eight billion dollars.
In this respect, it makes sense that Barry McCarthy, as the former CFO of Spotify and Netflix, not only knows the numbers, but also the subscription-based streaming business.
Foley himself had mostly digital experience when he founded the company ten years ago. At that time, the New Yorker with an MBA from Harvard Business School was already working as CEO of the online invitation platform Evite and as head of online sales at the bookstore chain Barnes & Noble.
Recently, the passionate cyclist had to overcome several crises. Last April, a six-year-old child died when his parents’ device pulled him under the belt. This was followed by an official safety warning, a widespread product recall and a 15 percent drop in the share price. Curiously, the share price also reacted with a minus of eleven percent when in December the successful sequel to the cult series Sex and the City saw the character of “Mr. Big” died of a heart attack on a Peloton bike.
More: Amazon apparently interested in Peloton takeover