To get out of the financial bind it is in right now, Peloton will execute another round of layoffs. In addition, the corporation is raising the prices of its goods and services.
Barry McCarthy, the CEO of Peloton, claimed the firm would be able to make up for the losses it suffered in the previous fiscal year owing to the cost-cutting drive under his new leadership.
Peloton has eliminated a few positions in recent months; the most recent occurred in August of this year. The fitness center will cut off about 500 workers this time.
“A key aspect of Peloton’s transformation journey is optimizing efficiencies and implementing cost savings to simplify our business and achieve break-even cash flow by the end of our fiscal year,” Peloton stated in a statement.
The company added that the job losses are a part of its restructuring effort, which started this year in February. In addition, McCarthy started working for the corporation as CEO during this time frame.
McCarthy maintained Peloton’s action and told the company’s staff that it was a necessary sacrifice to safeguard Peloton from toppling, particularly in the US economy struggling due to inflation and other obstacles driving up the price of raw materials.
McCarthy said that Peloton’s retail division faced major losses in 2021, reaching $100 million.
“Together, we have dramatically restructured Peloton’s business. You should be incredibly proud of what we have accomplished. This has not been easy,” said the CEO.
Peloton has already laid off nearly 12% of its workforce due to the most recent round of job termination. Less than half of Peloton’s workforce from a year ago, the firm only has about 4,000 employees at the moment.
The choice was “the heaviest in its marketing operation,” according to The Wall Street Journal.
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In August, when the business announced a loss of more than $1.2 billion, personnel reductions were implemented. Compared to what Peloton made last year, the amount shows a 30% decrease in overall income.
To do the business “more efficient, cost-effective, and agile,” Peloton made the decision to let go of roughly 800 staff in August.
“We have to make our revenues stop shrinking and start growing again. Cash is oxygen. Oxygen is life,” said McCarthy.
As part of the company’s cost-cutting approach, Peloton also made the decision to minimize the number of operating stores throughout North America.
Restoring the gym environment as the primary fitness area presents the organization with its biggest challenge. Peloton’s subscription and bike sales, therefore, came to a standstill.
Its natural enemy
Peloton is facing a natural opponent, an analyst noted; therefore, it will be a significant issue for the company.
Since limits have been eased, more individuals attend gyms and other leisure activities in person. The corporation cannot make them stop doing so.
“(The changes are a) continuation of the company trying to right-size itself after grossly overestimating post-pandemic demand for its products,” said the economist.
“While Peloton has already taken some corrective action, its losses are spiraling out of control, and there is a desperate need to course correct to stabilize the balance sheet and restore investor confidence.”
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McCarthy is pulling the strings
McCarthy, the CEO of Peloton, has a background in technology. The business is thus hopeful that he would be capable of supporting them in getting out of their current situation.
Peloton made the increases and layoffs, and the shop shut downs when he assumed charge in February.
For instance, Peloton raised the cost of its Bike+ by $500 to $2,495 and raised the cost of its treadmill by $800 to $3,495 in the same period.
McCarthy decided to procure $750 million from Wall Street to cover its ongoing operations when Peloton reported a drop in sales and revealed that the firm had just $879 million in its reserve.
Photo Credit: Ethan Miller