Peloton co-founder steps down after rough ride

Michelle Chapman
Associated Press

The co-founder of Peloton is stepping down as chief executive after an extended streak of tumult at the exercise and treadmill company, which is also cutting almost 3,000 jobs.

John Foley first pitched the idea of an interactive exercise bike in 2011, hoping to disrupt the industry. He will give up the CEO position and become executive chair at Peloton Interactive Inc.

Peloton CEO John Foley celebrates at the Nasdaq MarketSite before the opening bell and his company's IPO, Sept. 26, 2019 in New York.

Barry McCarthy, who served as CFO at Spotify as well as at Netflix, will take over the CEO position.

Peloton had been the subject in media reports this week of a potential takeover target by either Amazon and Nike. The developments Tuesday deflated hopes for such a deep-pocketed buyer and shares of Peloton slipped before the opening bell.

The company’s shares have been on a roller-coaster ride since the pandemic began. They surged more than 400% in 2020 as COVID-19 forced lockdowns and shifted the workout trend from the gym to the home.

Nearly all of those gains were wiped out in 2021 as the distribution of vaccines sent many people out of there homes, and back into gyms. The stock fell further this year amid reports the company would cut back production as sales tumbled.

There was also a demand late last month from activist investor Blackwells Capital that Peloton remove Foley as CEO and that it consider selling the company amid waning consumer demand.

In addition to the leadership shakeup, Peloton announced Tuesday that it was cutting 2,800 jobs, including approximately 20% of corporate jobs at the New York City company. The instructors who lead interactive classes for Peloton will not be included in cuts, nor will the content that the company relies on to lure users.

Peloton said its winding down the development of its Peloton Output Park in Ohio. It will also reduce its owned and operated warehousing and delivery locations and will instead ramp up its third-party relationships.

Peloton is looking to reduce its planned capital expenditures for this year by about $150 million. The restructuring program is expected to result in approximately $130 million in cash charges related to severance and other exit and restructuring activities and $80 million in non-cash charges. The majority of the charges will be recorded in fiscal 2022.

“Peloton is at an important juncture, and we are taking decisive steps. Our focus is on building on the already amazing Peloton member experience, while optimizing our organization to deliver profitable growth,” Foley said in a prepared statement.

The company anticipates at least $800 million in annual cost savings once its actions are fully implemented.

Wall Street took the shakeup Tuesday as a pivotal moment for Peloton.

“We believe Foley leaving makes it more likely that Peloton ultimately sells the company and the board clearly has major decisions to make in the days/weeks/months ahead,” wrote Wedbush analysts Daniel Ives and John Katsingris.