Barry McCarthy has stepped down as CEO of Peloton, the company said on Thursday, as it decided to cut 15% of its workforce to tackle a post-pandemic slump in demand for its connected fitness equipment.
In a note, McCarthy said: “Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue.”
McCarthy said Peloton was now “on the right path”. “You have a GREAT lead team, and although the stock market hasn’t recognized this yet, they will. It’s simply a matter of time,” he wrote.
Shares of the beleaguered New York-based company rose as it announced it is also planning to cut back its retail presence, owing to weak demand that has forced Peloton to push back its goal of returning to profit.
Karen Boone, Peloton’s chairperson, and Chris Bruzzo, Peloton’s director, will serve as interim co-CEOs. In addition, the company named director Jay Hoag as the chairperson of the board.
The company’s board has started a search process to identify the next CEO. McCarthy will remain a Peloton adviser through the end of the year.
The company’s sales had boomed during the pandemic as gyms closed and people tried to stay fit from home. Sales collapsed as the world reopened and McCarthy attempted to revamp Peloton as a subscription business and cut thousands of jobs. Once valued at over $50bn, the company is now worth $1.1bn.
McCarthy is a former Netflix and Spotify executive and joined Peloton in February 2022, replacing co-founder John Foley. Under McCarthy, Peloton tried numerous tactics to revamp its business. The company ended its app’s free membership option, expanded into corporate wellness and brokered deals with brands including Lululemon and Hyatt hotels. As well as making big job cuts, Perloton has taken several other cost-cut measures such as changing bike prices, offering its products through third-party retailers and focusing on digital subscription plans.
But the losses have continued to mount. Peloton has not made a net profit since December 2020. On Thursday the company announced that revenues had fallen again in the last quarter, its ninth consecutive quarter of declining revenues.
Peloton said on Thursday it expects connected fitness members for the full year to be between 2.96 million and 2.98 million, lower by 30,000 members from prior forecast.
“Peloton has discovered that fitness trends come and go and staying ahead of the curve is incredibly difficult,” Zak Stambor, senior analyst, retail and ecommerce at research firm Insider Intelligence said.
For the three months ending on 31 March, Peloton lost $167.3m, down from $275.9m for the same quarter last year.
Peloton shares jumped 11% in early trading.
Reuters contributed to the story.