Peloton has announced it will cut 800 jobs, put up prices and close some of its showrooms as it battles a massive revenue drop.
Bloomberg reports the hi-tech exercise equipment saw a huge surge during the Covid-19 pandemic as people bought home exercise equipment to use during the lockdowns.
However, since the lockdowns have ended, the company has struggled and is now having to implement a wide-ranging shake-up of the company to try to turn things around.
The company’s stock has fallen by nearly 90 percent in the last year.
In a memo to staff, Chief Executive Barry McCarthy said: “We have to make our revenues stop shrinking and start growing again. Cash is oxygen. Oxygen is life.”
Third round of layoffs this year
The move is the third round of layoffs in 2022, and 784 employees across the distribution and customer service teams will lose their jobs.
Despite the company offering incentives to improve staff morale, 16 warehouses will also close, and Peloton will stop using in-house employees and vans to deliver its equipment.
Those services will be outsourced to third-party logistics companies to set up the equipment in customers’ homes.
McCarthy’s memo added: “This has been a challenge.
“We won’t fix it overnight, but we have no choice but to make it work, so we’re leaning into it and proactively managing our 3PL relationships.
“We are confident in the plan we’ve put in place and we’re encouraged by the progress we’re making.”
Peloton is also cutting about half of its customer support team, which is mainly located in Tempe, Arizona, and Plano, Texas and will use third-party firms to handle support requests as needed to augment the staff it is keeping.
McCarthy said: “These expanded partnerships mean we can ensure we have the ability to scale up and down as volume fluctuates while still continuing to provide the level of service our members have come to expect.
The winding down of in-house deliveries, distribution, and warehouses will eliminate 532 jobs, while another 252 will be culled from support teams.
The company is also cutting 570 employees in Taiwan.
3,000 workers were also cut in February.
McCarthy said the company will continue to hire in key areas, including its software engineering group.
He added: “I share this so you won’t think we’re driving with our foot on the gas and the brake at the same time.”
$500 price rise
Peloton will also raise the price of its flagship Bike+ by $500 to $2,495 and its Tread treadmill by $800 to $3,495.
The increases are a reversal as the Bike+ was priced at $2,495 prior to cuts in April. The new Tread price is also higher than it was four months ago.
McCarthy conceded the moves were necessary to more quickly move units and generate cash flow.
He said: “I probably wouldn’t have messed with the prices at all if I had been confronted with different inventory states back when we lowered the pricing.
Peloton also said it intends to undergo a “significant and aggressive reduction” of its retail footprint in North America beginning in 2023.
There are currently 86 stores across the US and Canada.
McCarthy said the number of locations closed will be determined by negotiations with landlords.
The money saved will be put towards marketing and selling its products in other ways.
He said: “We need to be where our customers are when they make purchasing decisions.
“Increasingly they do that online,”
He concluded: “I continue to be optimistic about the future of Peloton,” McCarthy said in the memo. “That doesn’t mean there won’t be challenges ahead.
“There will be, and there will be unforeseen setbacks. That’s the nature of turnarounds. But I’m confident we can overcome the challenges because we’ve come so far in just the last four months, which feeds my optimism about our ability to engineer our long-term success.”