Peloton Interactive has announced that Barry McCarthy is stepping down as chief executive, accompanied by a reduction of 15% in its global workforce, roughly equating to 400 employees.
Barry McCarthy, a former executive at Netflix and Spotify, joined the fitness equipment company two years ago with the aim of transforming it into a subscription-based business.
Despite his efforts, which included significant job cuts to curb losses, Peloton continues to face financial challenges. The company is still operating at a loss, struggling to attract new subscribers, and grappling with a substantial debt burden.
Reflecting on his tenure, Barry McCarthy described the past two years as intellectually challenging, emotionally draining, physically exhausting, and all-consuming in a memo to staff.
His departure leaves Peloton in search of a new leader amidst another round of restructuring. The company has issued warnings about cash flow problems and ongoing losses, exacerbated by a decline in paying subscribers and a product recall that impacted profits.
Peloton is also facing upcoming debt maturities, including $1 billion in convertible notes and a $700 million term loan, which require immediate attention. The company has stated that it is actively working with financial advisors to devise a refinancing strategy.
Karen Boone, the chair of the board, along with Chris Bruzzo, another director, will jointly assume the roles of interim co-CEOs. Jay Hoag, founder of venture capital firm TCV and a significant investor in Peloton, has been selected as the board’s upcoming chair.
Barry McCarthy, aged 70, will continue to advise the company until the end of the year.
Peloton announced further measures to streamline its operations, including reducing its retail footprint as part of a program aimed at cutting annual expenses by over $200 million.
The company’s stock fell approximately 2% to $3.15 in early Thursday trading. Peloton’s shares, which reached a peak above $160 in late 2020, have declined as the pandemic-induced surge in at-home workouts waned and people returned to gyms.
Barry McCarthy took over from Peloton co-founder John Foley in 2022 amidst significant losses for shareholders. He implemented changes such as divesting manufacturing units and expanding sales channels, including partnerships with Amazon and retailers like Dick’s Sporting Goods.
Barry McCarthy’s strategy focused on transitioning Peloton to a subscription-driven business model, reducing dependence on equipment sales. However, the company announced in February that it expected minimal growth in paying connected fitness subscribers for the fiscal year ending in June.
Foley’s departure occurred as activist investor Blackwells Capital urged the board to dismiss him and explore a sale of the company. Although talks with potential buyers, including Amazon, took place, no deal materialized. Foley’s control of 17% of the shareholder vote through special class shares complicated any potential sale.
In September, Blackwells Capital privately criticized Peloton’s leadership, and in February, they called for McCarthy’s removal and advocated for the company’s sale to a strategic buyer.
Peloton has undergone multiple rounds of layoffs in response to declining demand for its products. The company, which employed over 8,000 people in 2021, had approximately 3,500 global employees by June 2023.
Barry McCarthy acknowledged the difficulty of making further job cuts but stated that it was necessary to align spending with revenue.
Peloton revised its full-year revenue and paid fitness subscription outlook downward by about 1% due to weakening hardware demand, describing the current quarter as its “most challenging” for growth as warmer weather approaches.
In its most recent quarter, Peloton’s revenue declined by 4% to $717.7 million, with membership dropping by approximately 1% to 3.06 million paid subscribers at the end of the first three months of the year.
