Peloton CEO Barry McCarthy took over in February after the company laid off 2,800 employees. Now, nearly six months later, McCarthy has sent a memo to employees detailing the company’s plan to eliminate an additional 784 jobs in its third round of layoffs. bloomberg, Peloton will also increase the prices of the Bike Plus and Tread, closing retail showrooms starting 2023.
Peloton spokesman Ben Boyd confirmed the news in a statement. ledgeWriting:
“Peloton today, took several steps to advance our transformation strategy, better positioning the company for long-term success as the largest, global connected fitness company. Steps we took include, more strategic pricing implementation of; the elimination of our North America last mile distribution network and the expansion of our third-party logistics (3PL) partnerships; the reduction of our North America member support team; and an indication of our intention to reduce our North America retail footprint Unfortunately, these workforce shifts resulted in the loss of 784 employees from the company. Any decisions affecting team members are not taken lightly, but these moves enable Peloton to become more efficient, cost-effective and agile. as we continue to define and lead the global connected fitness category.
The plan to cut staff and close retail showrooms is an extension of Peloton’s dire restructuring plans after a disastrous year. Last month, Peloton cut nearly 600 jobs in Taiwan as part of a move to reduce in-house manufacturing. In February, it also announced that it was ending plans for a $400 million factory in Ohio. Meanwhile, McCarthy noted that although the company is cutting jobs on its delivery and customer support teams, it is actively looking to fill roles in its software engineering team. McCarthy also cited plans to expand Peloton’s e-commerce presence as the company shrinks its retail footprint from next year.
Today’s news was foreshadowed during Peloton’s third-quarter earnings call in May. At the time, McCarthy also floated the idea of exploring third-party retailer partnerships, as well as eliminating the need for white glove distribution for his bikes and treadmills.
However, consumers will be most directly affected by the planned price hike. To address the excess inventory, Peloton in April reduced prices on the original bike, the Bike Plus and the Tread, to $1,445, $1,995 and $2,695, respectively. Now, the Bike Plus will return to its original price of $2,495, while the Tread price will increase by $800 to $3,495. This is higher than the trade’s initial launch price of $2,495 (which was later raised to $2,845). The Tread was initially viewed as the more “affordable” of Peloton’s two treadmills. However, Trade Plus was recalled and closed following multiple injuries and in one instance, the death of a young child. However, the price of the original bike and the recently launched Peloton Guide will remain unchanged.
McCarthy acknowledged in the memo that there is a sudden reversal in the price hike strategy. That’s because, according to McCarthy, the company has seen success in managing its inventory and supply chain woes. It has also secured a $750 million bank loan, and the increase is meant to promote Bike Plus and Tread’s “premium” image.
Layoffs and price increases are also part of Peloton’s ongoing efforts to restore cash flow. In a shareholder letter last quarter, McCarthy noted that Peloton’s woes had left it “thinly capitalized” for its needs and that the company needed to strengthen its balance sheet. “These changes are necessary if Peloton is ever going to become cash flow positive,” McCarthy wrote in the memo. “Cash is oxygen. Oxygen is life. We should become self-sufficient on the basis of cash flow only.”
According to the memorandum, the money saved in today’s measures will be invested in further research and development as well as marketing. McCarthy tracked this with plans he proposed last quarter. At the time, for example, he revealed that Peloton had spent barely any money marketing its standalone app subscriptions. The company has since improved that a . with Advertisement promoting a standalone app, in which actor Christopher Meloni is exercising in the buff. Cheeky (literally) ads aside, McCarthy is adamant about reimagining Peloton as a connected fitness brand, as opposed to “that bike company.” The proposed plans thus far include tweaking the company’s subscription model and building out an App Store. McCarthy also recently implemented a pilot program for leasing the company’s bikes.
McCarthy ended the memo bullish on Peloton’s prospects — however, in its first six months, investors weren’t too convinced by Peloton’s restructuring plans. Peloton’s stock has fallen nearly 90 percent in the past year. That said, investors seemed sensitive to today’s news, with shares rising 8.2 percent. Later this month, Peloton is expected to release its fourth-quarter earnings, which could offer a clearer picture of how McCarthy’s restructuring strategies have fared.