Platoon told employees on Friday it was cutting about 780 jobs, closing a significant number of its retail stores and raising prices for some equipment in a bid to cut costs and become profitable.
The company did not say how many of its 86 outlets it plans to close, but said an “aggressive” reduction will begin in 2023. The pace of closures will depend on how quickly Peloton can negotiate the termination of leases.
Peloton said it would exit last-mile logistics by closing its remaining warehouses and shifting delivery work to third-party vendors, resulting in some of the job cuts. It is also cutting a number of positions in its internal support team, which are primarily located in Tempe, Arizona, and Plano, Texas, and will instead rely on third parties.
The sweeping changes are part of recently installed CEO Barry McCarthy’s plan to steer the connected fitness equipment maker in a new direction. Peloton’s business reached unthinkable heights after the start of the covid pandemicsending stocks soaring alongside other so-called focus stocks like Zoom. But under John Foley, then CEO and founder of Peloton, demand began to slow almost as quickly as it grew, as people started to come out again.
McCarthy’s most important tasks now are to get rid of fixed costs and find other ways to cash in on his loyal customer base.
“Shifting from our last-mile delivery to 3PLs will reduce our delivery costs per product by up to 50% and allow us to meet our delivery commitments in the most cost-effective way possible,” McCarthy wrote in a memo to employees seen. . by CNBC.
“These expanded partnerships mean we can ensure we have the ability to scale volumes up and down as fluctuations change,” he added.
Peloton, which had just lowered the prices of its products at the start of the year, is increasing the price of its Bike+ by $500 to $2,495 in the United States. The price of his Tread machine increases by $800 to $3,495. The price of Peloton’s original bike and its strength product known as the Guide will remain unchanged.
McCarthy acknowledged the flip-flop on pricing, saying equipment price cuts made sense for the company in April as Peloton tried to quickly shed inventory.
Investors sent shares of Peloton up 13.6% on Friday.
The stock has fallen more than 60% so far this year, with the company’s share price hitting an all-time low of $8.22 in mid-July. The shares had traded as high as $120.62 apiece about a year ago.
Under McCarthy, who took over the reins from Foley in February, the company has focused on ways to increase subscription revenue over hardware sales. Earlier this year, for example, Peloton raised the price of its all-access subscription plan in the US to $44 per month from $39.
In July, Peloton also announced that it would stop all in-house manufacturing and instead expand its relationship with Taiwanese manufacturer Rexon Industrial. This resulted in approximately 570 job cuts. The company also suspended operations at its Tonic Fitness facility, which it acquired in 2019, until the end of the year.
When McCarthy became CEO, Peloton announced that it was cutting approximately $800 million in annual costs. This included the loss of 2,800 jobs, or about 20% of positions in the company. The company also said it would walk away from plans to build a sprawling production plant in Ohio.
CNBC reported in Januarybefore Foley resignsthat Peloton planned to temporarily halt production of its equipment, according to internal documents detailing those plans, in order to control costs with falling demand.
Foley’s missteps included long-term bets on Peloton’s supply chain during the height of the coronavirus pandemic that would later prove to be a drag on his business as sales of his Bikes and Tread machines slowed.
Peloton’s losses in the three months ended March 31 widened to $757.1 million from $8.6 million a year earlier. Revenue fell to $964.3 million from $1.26 billion.
The company ended the quarter with 2.96 million fitness-connected subscribers, that is, people who own one of the company’s products and pay to enroll in its online workout classes. live and on demand.
McCarthy said the company continues to hire in certain areas, including software and engineering. “I’m sharing this so you don’t think we’re driving with our foot on the accelerator and the brake at the same time,” he said.
McCarthy is also asking all Peloton office workers to return to the office three days a week starting September 6. From November 14, this will be considered mandatory, he said.
Peloton is expected to report its fiscal fourth quarter results on August 25.