Topline
Seeking to cut costs and end a flood of red ink, Peloton is planning to raise prices on key products, shutter stores and lay off hundreds of workers, according to a memo from CEO Barry McCarthy.
A Peloton store boarded up in Manhattan in June 2020.
Key Facts
The at-home fitness company will raise the price of the Bike+, its higher-end stationary bike, by 25% to $2,495 and its treadmill by 30% to $3,495, according to the memo seen by Forbes and other outlets.
McCarthy wrote the company plans to pursue a “significant and aggressive reduction of Peloton’s retail footprint,” though he doesn’t expect to close any storefronts by the end of the year.
McCarthy also said Peloton plans to fire delivery and customer service employees, and a Peloton spokesperson told Forbes 784 workers will be affected.
Peloton shares surged on the news first reported by Bloomberg, rising nearly 11% to $13.46 in early Friday afternoon trading.
Big Number
92%. That’s how much Peloton stock is down from its January high of $167.42, despite Friday’s rally.
Key Background
Peloton’s sales soared during the early days of the Covid-19 pandemic, as more people bought home exercise equipment amid lockdowns, sending its stock up nearly 400% in 2020. But sales slumped dramatically following the reopening of gyms, and Peloton shares erased nearly all of its gains in 2021. Long-time CEO John Foley stepped down in February in a corporate overhaul, as the company announced in tandem the firing of 20% of its employees. Peloton’s first-quarter earnings were nothing short of dismal, as it reported its first-ever year over year revenue decline and a quarterly loss of $757 million.
Crucial Quote
McCarthy wrote in the note: “These changes are essential if Peloton is ever going to become cash flow positive. Cash is oxygen. Oxygen is life. We simply must become self-sustaining on a cash flow basis.”
Further Reading
Peloton Shares Plunge As CEO Warns Fitness Company Is ‘Thinly Capitalized’ (Forbes)
Peloton Won’t Make Its Own Bikes Anymore To Cut Costs (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2022/08/12/peloton-unveils-price-hikes-store-closures-and-layoffs/