Peloton to replace CEO John Foley and cut 2,800 jobs

Co-founder John Foley stepped down after investors lost confidence in home fitness company

Home exercise company Peloton announced it would eliminate 2,800 jobs in a cost-cutting drive as founder John Foley stepped down as chief executive. AFP

Peloton will replace its chief executive and cut about 2,800 jobs, the company said on Tuesday, as the exercise bike maker looks to revitalise sagging sales and win back investor confidence.

John Foley, the company's co-founder who has led the company for nearly a decade, will step down and become the executive chairman. Barry McCarthy, the former chief financial officer of Spotify and Netflix, will take the helm from Wednesday.

Mr Foley has drawn the ire of activist investor Blackwells Capital in recent months as the company struggled to maintain the breakneck growth that propelled its valuation to $52 billion in early 2021. Shares have since tumbled about 80 per cent.

The investment firm called for his removal and even urged the company to sell itself, blaming the stock's underperformance to “gross mismanagement”, Mr Foley's poor decision-making and a lack of credibility.

Blackwells, however, said Tuesday's moves did not address investors' concerns.

“Mr Foley has proven he is not suited to lead Peloton, whether as CEO or executive chair, and he should not be hand-picking directors, as he appears to have done [on Tuesday]," said Jason Aintabi, Blackwells chief investment officer.

Peloton said it had appointed two new directors, Angel Mendez and Jonathan Mildenhall, to its board. Erik Blachford, who has served as a director since 2015, will step down.

While Peloton has attracted interest from potential buyers including e-commerce company Amazon and Nike, media reports say, analysts have said the company might be a difficult takeover target as it has two classes of stock, effectively allowing insiders to control it.

Shares of the company reversed course from premarket and soared 30 per cent by midday on Tuesday.

Peloton's sales boomed during Covid-19 lockdowns, with many snapping up home fitness equipment. But fortunes began to fade as vaccinations increased, gyms reopened and rivals offered competitive products.

The company last year recalled two models after dozens of reports of small children and a pet being injured under the Peloton Tread+, including the death of a child.

In August, the company brought back the lower-end model, but that did little to mitigate the company's decline.

Peloton will also cut about 2,800 jobs, affecting 20 per cent of its corporate positions, after announcing last month it was reviewing the size of its workforce.

Affected employees will receive a complimentary 12-month Peloton subscription and a “meaningful cash severance” based on title and tenure, the company said in a press release.

“As a team with a culture as close and tight-knit as ours, saying goodbye to teammates at any level is hard,” Mr Foley said.

The reductions will not affect its storied roster of fitness instructors and interactive online content.

The company on Tuesday also slashed its forecast full-year revenue expectations after it reported a bigger-than-expected quarterly loss.

Peloton will wind down the development of its planned factory in Ohio, where it was set to invest about $400 million and add more than 2,000 jobs over the next few years.