• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Peloton CEO Barry McCarthy to step down, company to lay off 15% of staff as it looks to refinance debt
Editor's Pick

Peloton CEO Barry McCarthy to step down, company to lay off 15% of staff as it looks to refinance debt

by May 3, 2024
by May 3, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

Peloton announced Thursday that CEO Barry McCarthy will be stepping down and the company will lay off 15% of its staff because it “simply had no other way to bring its spending in line with its revenue.”

McCarthy, a former Spotify and Netflix executive, will become a strategic advisor to Peloton through the end of the year while Karen Boone, the company’s chairperson, and director Chris Bruzzo will serve as interim co-CEOs. Jay Hoag, another Peloton director, has been named the new chairperson of the board. Peloton is seeking a permanent CEO.

The company also announced a broad restructuring plan that will see its global headcount cut by 15%, or about 400 employees. It plans to continue to close retail showrooms and make changes to its international sales plan.

The moves are designed to realign Peloton’s cost structure with the current size of its business, it said in a news release. It’s expected to reduce annual run-rate expenses by more than $200 million by the end of fiscal 2025.

“This restructuring will position Peloton for sustained, positive free cash flow, while enabling the company to continue to invest in software, hardware and content innovation, improvements to its member support experience, and optimizations to marketing efforts to scale the business,” the company said.

Shares were up about 9% in premarket trading.

McCarthy took the helm of Peloton in February 2022 from founder John Foley and has spent the last two years restructuring the business and working to get it back to growth.

As soon as he took over, he began implementing mass layoffs to right size Peloton’s cost structure, closing the company’s splashy showrooms and enacting new strategies designed to grow membership. Contrary to Peloton’s founder, McCarthy redirected Peloton’s attention to its app as a means to capture members who may not be able to afford the company’s pricey bikes or treadmills but could be interested in taking its digital classes.

In a letter to staff, McCarthy said the company needed to implement layoffs because it wouldn’t be able to generate sustainable free cash flow with its current cost structure. Peloton hasn’t turned a profit since December 2020 and it can only burn cash for so long when it has more than $1 billion in debt on its balance sheet.

“Achieving positive [free cash flow] makes Peloton a more attractive borrower, which is important as the company turns its attention to the necessary task of successfully refinancing its debt,” McCarthy said in the memo.

In a letter to shareholders, the company said it is “mindful” of the timing of its debt maturities, which include convertible notes and a term loan. It said it is working closely with its lenders at JPMorgan and Goldman Sachs on a “refinancing strategy.”

“Overall, our refinancing goals are to deleverage and extend maturities at a reasonable blended cost of capital,” the company said. “We are encouraged by the support and inbound interest from our existing lenders and investors and we look forward to sharing more about this topic.”

In a news release, Boone thanked McCarthy for his contributions.

“Barry joined Peloton during an incredibly challenging time for the business. During his tenure, he laid the foundation for scalable growth by steadily rearchitecting the cost structure of the business to create stability and to reach the important milestone of achieving positive free cash flow,” Boone said.

“With a strong leadership team in place and the Company now on solid footing, the Board has decided that now is an appropriate time to search for the next CEO of Peloton.”

In a joint statement, Boone and Bruzzo said they are looking forward to “working in lockstep” with the company’s leadership to ensure it “doesn’t miss a beat while the CEO search is underway.”

Also on Thursday, Peloton announced its fiscal third-quarter results and fell short of Wall Street’s expectations on the top and bottom line. Here’s how the connected fitness company did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Loss per share: 45 cents vs. a loss of 37 cents expected

Revenue: $718 million vs. $723 million expected

The company’s reported net loss for the three-month period that ended March 31 was $167.3 million, or 45 cents per share, compared with a loss of $275.9 million, or 79 cents per share, a year earlier. 

Sales dropped to $718 million, down about 4% from $748.9 million a year earlier. 

Peloton has tried a little bit of everything to get the company back to sales growth. It removed the free membership option from its fitness app, expanded its corporate wellness offerings and partnered with mega-brands like Lululemon to grow membership, but none of the initiatives have been enough to grow sales.

For the ninth quarter in a row, Peloton’s revenue fell during its fiscal third quarter, when compared to the year-ago period. It hasn’t seen sales grow compared to the year ago quarter since December 2021, when the company’s stationary bikes were still in high demand and many hadn’t yet returned to gyms amid the Covid-19 pandemic.

The business is continuing to bleed money and hasn’t turned a net profit since December 2020. 

Last February, McCarthy set a goal of returning the company to revenue growth within a year. When it failed to reach that milestone, McCarthy pushed it back and said he now expects the company to be back to growth in June, at the end of the current fiscal year. 

McCarthy had also expected Peloton to reach positive free cash flow by June — a goal the company said it reached early during its third quarter. It’s the first time Peloton has hit that mark in 13 quarters. In a letter to shareholders, Peloton said it generated $8.6 million in free cash flow but it’s unclear how sustainable that number is.

Last month, CNBC reported that Peloton hadn’t been paying its vendors on time, which could temporarily pad its balance sheet. Data from business intelligence firm Creditsafe showed that Peloton’s late payments to vendors spiked in December and again in February after improving in January.

Part of the reason why Peloton had failed to reach positive free cash flow is because it’s simply not selling enough of its hardware, which is costly to make and has become less popular since the Covid-19 pandemic ended and people returned to gyms.

Shortly after McCarthy replaced Foley, he implemented numerous rounds of layoffs that impacted thousands of employees. The last round of cuts, affecting 500 employees, were announced in October 2022. He later said the company’s restructuring was “complete” and it was instead pivoting to “growth.” 

“We are done now,” McCarthy had said in November 2022 of the layoffs. “There are no more heads to be taken out of the business.”

This post appeared first on NBC NEWS
You Might Also Like
  • GM reveals redesigned GMC Terrain as brand’s entry-level model
  • Alaska Airlines to buy Hawaiian Airlines in $1.9 billion deal
  • Peloton shares fall after posting wider-than-expected loss, falling sales due to Bike recall, seasonality
  • ‘The Great Stay’: Layoffs, unemployment remain low as job market shows other signs of weakness
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Home prices soar even higher in February, despite higher mortgage rates, says S&P Case-Shiller
next post
Johnson & Johnson to pay $6.5 billion to resolve nearly all talc ovarian cancer lawsuits in U.S.

You may also like

EchoStar Begins Construction of Global S-band Network

February 3, 2023

How to get more money out of a savings account...

April 21, 2023

How Vuori reached a $5.5 billion valuation by taking share...

December 19, 2024

Americans grow more confident about the economy, even as the...

January 11, 2024

Consumers await key inflation data as hopes for ‘soft landing’...

February 13, 2024

Gov. Gavin Newsom says he will provide residents rebates if...

November 25, 2024

Google’s second antitrust trial could help shape the future of...

September 6, 2024

Higher tax filing costs could take a bite out of...

February 3, 2024

Hims & Hers Health says it will offer compounded GLP-1...

May 21, 2024

Google’s antitrust ruling has experts looking to 25-year-old Microsoft case...

August 8, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Dick’s Sporting Goods stands by full-year guidance — even with tariffs looming

      May 28, 2025
    • Top Sectors to Watch + The 18 SMA Setup Every Trader Should Know

      May 28, 2025
    • Macy’s CEO says retailer will hike some prices as tariffs cut into profits

      May 28, 2025
    • 23andMe to delist from Nasdaq, deregister with SEC

      May 28, 2025
    • Walmart fined for shipping realistic toy guns to New York, violating state law

      May 28, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,763 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,470 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,449 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,427 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,305 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,101)
    • Investing (538)
    • Stock (2,576)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Dick’s Sporting Goods stands by full-year guidance — even with...

      May 28, 2025
    • Top Sectors to Watch + The 18 SMA Setup Every...

      May 28, 2025
    • Macy’s CEO says retailer will hike some prices as tariffs...

      May 28, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,101)
    • Investing (538)
    • Stock (2,576)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Tesla reports 336,000 vehicle deliveries in...

    April 2, 2025

    Cash App owner Block pays $40...

    April 11, 2025

    Two plead guilty to insider trading...

    April 4, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here