Barry McCarthy Steps Down as Peloton CEO Amid New Layoffs

Key leadership changes and strategic adjustments at Peloton unfold

by Nouman Rasool
Barry McCarthy Steps Down as Peloton CEO Amid New Layoffs
© Kevin Dietsch/Getty Images

In a significant shakeup at Peloton Interactive, CEO Barry McCarthy is stepping down, marking another tumultuous chapter for the beleaguered fitness equipment maker. Alongside McCarthy's departure, Peloton announced a reduction of its global workforce by 15%, approximately 400 employees, in a bid to stabilize its financial position.

McCarthy, who took the helm at Peloton two years ago after stints at Netflix and Spotify, initially aimed to transform the company into a subscription-centric business. Despite his efforts, which included cutting thousands of jobs and attempting to innovate Peloton's business model, the company has continued to face substantial financial challenges.

Peloton is battling ongoing losses, a struggle to attract new subscribers, and a significant debt burden. In a heartfelt memo to his staff, McCarthy described his tenure as intensely challenging. "Turnarounds are a full contact sport; intellectually challenging, emotionally draining, physically exhausting, and all consuming," he wrote.

His exit not only leaves a leadership vacuum but also casts uncertainty on Peloton's future as it navigates another restructuring phase amidst declining subscriber numbers and an equipment recall that has impacted profits.

Financially, Peloton is under pressure with looming debt maturities that include $1 billion in convertible notes and a $700 million term loan due shortly. The company confirmed that it is actively working on refinancing these obligations with the help of financial advisers.

Despite these efforts, Peloton's cash reserves stood at around $800 million as of March, which poses a significant challenge given the scale of its financial obligations.

Leadership and Strategy Shift

In the interim, Karen Boone, current board chair, and Chris Bruzzo, a fellow director, will serve as co-CEOs.

Furthermore, Jay Hoag, the founder of venture-capital firm TCV and a major investor in Peloton, will take over as the next chair of the board. McCarthy, 70, will remain involved as an advisor to the company through the end of the year.

The announcement also highlighted a strategic shift in Peloton’s operations, including a continued reduction in its retail showroom footprint aimed at cutting annual expenses by over $200 million. This news, however, did little to reassure investors, with Peloton shares dropping about 2% to $3.15 in early trading on Thursday.

The company's stock has suffered a stark decline from its late 2020 high of over $160, following a post-pandemic dip in demand for at-home fitness equipment as people returned to gyms. McCarthy's strategy focused on shifting Peloton towards a subscription-driven model, less dependent on equipment sales.

However, this shift has yet to bear fruit, with the company projecting minimal growth in connected-fitness subscribers for the fiscal year ending in June. Peloton's struggles have attracted significant attention from activist investors like Blackwells Capital, which has repeatedly criticized the company's leadership and urged strategic sales.

Despite potential interest from companies like Amazon, no deals have materialized, leaving Peloton's strategic direction uncertain. As Peloton trims its forecasts for revenue and paid fitness subscriptions, citing a challenging quarter ahead, the company's trajectory remains precarious.

The latest financial results show a 4% decline in revenue and a slight drop in membership, underscoring the daunting path ahead as Peloton continues to redefine its strategy and stabilize its operations amidst ongoing internal and market challenges.