NEW YORK – Peloton will replace its CEO and lay off over 2,800 employees, the firm announced on Tuesday, as the workout bike manufacturer seeks to revive declining sales and regain investor trust.
John Foley, the company’s co-founder and CEO for nearly a decade, will step down and be replaced as executive chairman. Barry McCarthy, the former CFO of Spotify and Netflix, will take over as CEO on Wednesday.
In recent months, Mr Foley has drawn the ire of activist investor Blackwells Capital as the company has struggled to maintain the fast growth that catapulted its valuation to $52 billion in early 2021. Since then, the stock has dropped by around 80%.
The investment firm called for his removal and even urged the company to sell itself, blaming the stock’s underperformance to “gross mismanagement”, Mr Foley’s poor decision-making and a lack of credibility.
Blackwells, however, said Tuesday’s moves did not address 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 [on Tuesday],” said Jason Aintabi, Blackwells chief investment officer.
Peloton announced the appointment of two new directors to its board of directors, Angel Mendez and Jonathan Mildenhall. Erik Blachford, who has been a director since 2015, will retire.
According to media reports, Peloton has attracted interest from potential buyers such as e-commerce company Amazon and Nike. However, analysts say the company may be a difficult takeover target because it has two classes of stock, effectively allowing insiders to control it.
The company’s stock reversed direction from premarket and jumped 30% by midday on Tuesday.
During the Covid-19 lockdowns, Peloton’s sales skyrocketed, with many people picking up home workout equipment. However, fortunes began to wane as immunization rates rose, gyms reopened, and competitors introduced competitive offerings.
Last year, the business recalled two models following scores of reports of small children and pets being harmed on the Peloton Tread+, including the death of a kid.
The company reintroduced the lower-end model in August, but this did little to slow the company’s downfall.
Peloton will also reduce roughly 2,800 people, or 20% of its corporate positions, after revealing last month that it was assessing its personnel size.
Affected employees will receive a complimentary 12-month Peloton subscription and a “meaningful cash severance” based on title and tenure, the company said in a press release.
“As a team with a culture as close and tight-knit as ours, saying goodbye to teammates at any level is hard,” Mr Foley said.
The layoffs will have no effect on the company’s illustrious roster of fitness instructors or interactive online content.
After reporting a larger-than-expected quarterly loss, the company cut its full-year revenue projection on Tuesday.
Peloton will halt construction of its proposed facility in Ohio, where it had planned to invest $400 million and create more than 2,000 jobs over the next two years.