It’s been another wild 24 hours in the seemingly never-ending roller-coaster that is Peloton’s fall from it’s pandemic peak. On Friday, the indoor exercise bike brand’s new CEO Barry McCarthy announced he was cutting 780 jobs. At the same time, Peloton will be raising its prices. All of this comes the day after the brand lost a bid to throw out a consumer lawsuit against the brand over the music offered in its online fitness classes.
McCarthy, who was recently brought on to help revive Peloton from its post-pandemic crash, announced the lay-offs in a memo to staff. Like most bad news, the announcement landed on Friday. In the memo, obtained by Bloomberg, the CEO said the move is intended to cut costs and increase cash flow at the fitness brand.
“We have a clear strategy to drive the long-term, sustainable future of this company,” McCarthy’s memo reads. “Job one is generating free cash flow by right-sizing our inventory commitments and converting many of our fixed costs to variable costs because that cost structure better aligns with the seasonal revenue of the business.”
Translated from buzzwords to plain that means Peloton will be closing many of its retail stores, reducing support staff in North America and, after outsourcing its production and shuttering factories earlier this year, moving most of its warehousing and delivery in North America to a third-party model.
The plan includes a “significant and aggressive reduction of Peloton’s retail footprint,” as well as significantly cutting its North American warehouse, delivery and support staff. All in, 780 employees will be let go.
There’s no word yet on whether this round of lay-offs will also come with a free Peloton membership.
At the same time, Peloton is increasing the price of it’s equipment just months after lowering them. In April, Peloton reduced prices to help clear excess inventory. And possibly to distract from its attempt to secretly sell rusting equipment, codenamed “Project Tinman.”
Now, fourth months later, those prices are going back up. Bike+ and Tread prices will go up by USD500 and USD800, respectively. After securing a significant bank lone, according to the memo, Peloton has the “opportunity to adopt a more nuanced pricing strategy targeting “value” and Premium Members alike.” The price hike is an effort to maintain “premium brand positioning.”
Bike V1 and Guide equipment pricing will remain consistent.
Consumer lawsuit gets go-ahead
The day before the memo was set out, Peloton recieved another setback. A consumer lawsuit against the company withstood Peloton’s attempt to have it thrown-out.
The lawsuit claims consumers over-paid for their Peloton subscriptions after nearly half of the music soundtracking the fiteness classes on the service was removed. The music was removed suddenly in 2019 when Peloton was sued by over a dozen music publishers for using the music without proper licensing. The publisher’s suit was settled in 2020. Peloton is still fighting the consumer suit and, after this decision, will have to continue to do so.
Business as usual, sort of
If all of this, lay-offs and lawsuits, seems like a lot for one brand in one 24-hour period, it’s harldy news for Peloton. The pandemic darling skyrocketted to fame as house-bound consumers flocked to its online subscription-based fitness classes. When that boom ended, a series of celebrity controversies, cover-up conspiracies, controversial stock sell-offs and just plain rude lay-offs followed.
Peloton ousted its founding CEO, John Foley, in February in an attempt to right the ship.
It’s a pity because, other than the rust, the bikes are actually pretty good.