Peloton’s co-founder is ceding the top job at the fitness bike maker in a shake-up that will cost 2,800 jobs, after a collapse in its market value drew pressure from activist investors and potential bidders.
The company announced on Tuesday that Barry McCarthy, the former chief financial officer of Spotify and Netflix, will replace John Foley as chief executive.
Mr Foley said that his wife, Jill, would step down from running Peloton's apparel business "in the coming months", tacitly addressing one of investors' complaints. William Lynch, a long-term Foley ally, will step back from his role as president to be a non-executive director, while another director with whom Mr Foley worked before Peloton will leave the board.
Mr Foley, who has led the company since its foundation a decade ago, will become executive chairman and retain the supervoting stock with which he and other executives control the company.
On a call with investors on Tuesday, Mr Foley acknowledged that he had made “missteps”. “To meet market demand we scaled our operations too rapidly and we overinvested in some areas of our business,” he said. “We own this. I own this and we’re holding ourselves accountable,” he added.
Shares in the company jumped 27 per cent to $37.84 by early afternoon, as analysts said the board shake-up made it more likely that Peloton would feel shareholder pressure to sell the company.
In a memo, Mr Foley told staff who were being laid off that they could keep their Peloton membership for a year.
The company, which went public at a valuation of $7.7 billion (€6.7 billion) in September 2019, shot to a market capitalisation of nearly $50 billion (€43.7 billion) by the end of 2020 as lockdowns at the onset of the coronavirus pandemic drove thousands of new customers to sign up for its signature stationary bikes and video classes.
Slowing demand
But slowing demand, supply chain challenges and reputational crises including a child’s death that led to a recall of its treadmills, hit the group, with its market value collapsing to less than $8 billion (€7 billion) last week.
Over the weekend, the Financial Times reported that Nike and Amazon were separately evaluating bids to buy Peloton. Other candidates are also likely to emerge, potentially including Apple and large private equity buyers, those briefed on the matter said.
Peloton also reported on Tuesday that its revenues grew by 6 per cent to $1.13 billion (€990 million) in the second quarter, but it fell to a net loss of $439 million (€384 million) from net income of $63.6 million (€55.7 million) a year earlier. It cut its guidance for full-year revenues from the range of $4.4 billion (€3.8 billion) to $4.8 billion (€4.2 billion) it gave three months ago to a new target of just $3.7 billion-$3.8 billion (€3.2 billion-€3.3 billion).
Monthly churn – the number of subscribers leaving Peloton each month – was just 0.79 per cent, however, suggesting its 6.6 million members remained engaged. – Copyright The Financial Times Limited 2022
