New York (AFP) - Slumping home-exercise company Peloton announced Tuesday a leadership shift and layoff plan as it scales back expansion plans due to weakening demand in the shifting pandemic.
Founder John Foley will step down as chief executive but remain as executive chairman.Under a cost-cutting plan, the company will eliminate 2,800 jobs in an acknowledgement that it expanded too quickly.
"This has been a humbling time for Peloton, but we remain confident in the fundamentals of our business, the strength of our platform, and the significant growth potential for Connected Fitness and our leadership position within it," Foley said.
Foley will be replaced by Barry McCarthy, former chief financial officer at Spotify and Netflix.
The company, which has seen growth slow with the end of widespread Covid-19 lockdowns, said it will trim its planned 2022 capital expenditures by about $150 million.
Annual costs are expected to fall "at least" $800 million as the company cuts corporate positions by 20 percent, Peloton said.
The company has reportedly been looked at as an acquisition target by Amazon, among other companies.
Executives Tuesday depicted the overhaul as intended to capitalize on long-term growth, even if the short-term is bumpier.
"We don't think the opportunity has changed," Chief Financial Officer Jill Woodworth said on a conference call with analysts.
Woodworth said the company had miscalculated growth due to the unpredictability of the pandemic, which has more recently led to many consumers returning to gyms.
But "connected fitness" will remain a growth category in light of the trend of more employees working from home or in hybrid formats, she said, adding that Peloton was well positioned as a leader in this segment.
Slower growth seen
The shakeup came as the company reported a quarterly loss of $439.4 million as revenues grew 6.5 percent to $1.1 billion.
The company also trimmed its full-year revenue forecast and its estimate for connected fitness subscriptions.
Foley, a former Barnes & Noble executive, acknowledged missteps at the outset of a conference call outlining the changes.
"We scaled too quickly," Foley said."We own this.I own this and we are holding ourselves accountable.That starts today."
Besides appointing a new CEO, the company named to the board Angel Mendez and Jonathan Mildenhall, as well as McCarthy.
The announcements did not allay criticism from Blackwells Capital, which has called for Foley's ouster and a potential sale of the company.
"Peloton CEO John Foley naming himself Executive Chairman and hiring a new CFO does not address any of Peloton investors’ concerns.Mr. Foley has proven he is not suited to lead Peloton, whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done today," said Jason Aintabi, chief financial officer of Blackwells.
Neil Saunders, managing director of GlobalData, said new CEO McCarthy should first cut costs and then look for a merger partner if a suitable buyer steps up.
"Peloton incorrectly assumed that the demand created by the pandemic –- as people switched away from gyms to home fitness –- would continue to curve upward," Saunders wrote."As society has returned to some semblance of normality, this has proven to be false -– with subscriber numbers coming in well below forecast."
Shares surged 25.3 percent to $37.27.
