Peloton is replacing its CEO and cutting 2,800 jobs

Originally Published: 08 FEB 22 06:59 ET
Updated: 08 FEB 22 07:34 ET

    (CNN) -- Peloton is replacing embattled CEO John Foley and cutting about 20% of its corporate workforce to help reinvigorate the flailing fitness company.

Barry McCarthy, the former chief financial officer of Spotify and Netflix, will become its CEO and president of Peloton's board, effective Tuesday. Foley will become the company's executive chair, and wrote in a public note that the appointment is the "culmination of a months-long succession plan" he's been working on with the board. The Wall Street Journal first reported the news.

Peloton also announced it will lay off about 2,800 employees in corporate positions, a move that Foley hinted at a few weeks ago. The company is also reducing the number of it warehouses it owns and operates and expanding delivery agreements with third-party providers, that will help it save the company $800 million in annual costs.

"This restructuring program is the result of diligent planning to address key areas of the business and realign our operations so that we can execute against our growth opportunity with efficiency and discipline," the company said in a press release. Layoffs also begin Tuesday.

Peloton also noted that it's "winding down the development" of its first US factory in Ohio, which the company announced in May 2021, helping save $60 million.

It noted that on-camera instructors and content "will not be impacted by the initiatives announced today."

Peloton's board of directors is also getting shakeup, including two new directors: Angel Mendez, a former executive at Cisco, and Jonathan Mildenhall, a former chief marketing officer at Airbnb. Erik Blachford, who has served as a director since 2015, is stepping down from his role on the board.

These changes indicate that Peloton wants to remain independent, rather than selling itself to a suitor — at least for now. Shares had gained 20% Monday following reports that Apple, Amazon and Nike were exploring bids for the company.

Peloton's shares have plunged more than 80% from their high in January 2021. They've come under renewed pressure in recent weeks following a report that the company had stopped manufacturing new bikes and treadmills.

Blackwells Capital, an activist investor that owns less than 5% of Peloton, recently said it has "grave concerns" about Peloton's performance and is calling on its board of directors to fire Foley and explore a sale.

In an note to investors Tuesday, Neil Saunders, managing director of GlobalData, said that Peloton is "now a business in crisis mode." The changes is the "latest in a long string of maneuvers as it scrambles to get the business back on the rails."

"Peloton has spent vast amounts of money on stores, factories, warehouses and other facilities to service demand that is now unlikely to materialize. The first step of the new CEO, Barry McCarthy, should be to slash costs to right-size the business," Saunders said, adding that a sale would "put Peloton on a much more secure footing."

Peloton will report its quarterly finances Tuesday morning. Shares were down about 6% in premarket trading.

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