Peloton’s new CEO Barry McCarthy will address employees Wednesday at a previously scheduled “All Hands Meeting” on the first day of his new job after the board dumped CEO John Foley.
Shares of the company jumped more than 25%, the largest single-day percentage increase on record, as tracked by Dow Jones Market Data Group, after the company announced a massive restructuring plan on Tuesday and big layoffs. Yet stocks have fallen more than 70% in the past 12 months.
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FOX Business examines the changes and what McCarthy inherits.
PELOTON REMOVES CEO JOHN FOLEY, REDUCES SALES OUTLOOK, PLANNED JOB CUTS
McCarthy, a seasoned tech player, will take over as chairman and CEO beginning Wednesday. He previously served as CFO of Spotify and Netflix. He has also held various senior positions in management consulting, investment banking, media and entertainment.
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McCarthy has served on the boards of Spotify and Instacart since January 2020 and January 2021, respectively. He has also served on the boards of Chegg, Eventbrite, MSD Acquisition Corp, Pandora and Rent the Runway. Additionally, he was also a consultant at Technology Crossover Ventures (TCV), one of the largest growth capital firms that has invested over $10 billion in public and private technology companies.
PELOTON’S POTENTIAL TAKEHOLDERS: AMAZON, NIKE, APPLE, DISNEY OR SONY?
2,800 job cuts – but instructors not affected
Peloton plans to cut about 2,800 positions globally, including a 20% reduction in its corporate workforce, which began on Tuesday. Among the usual severance package inclusions such as healthcare and financial suites, a monthly Peloton membership will be free for an additional 12 months, the company speculated.
Instructors will not be impacted.
PELOTON INSTRUCTORS SPARE IN 2,800 UNEMPLOYED JOBS
Peloton also plans restructuring capital expenditures of $60 million following the completion of development of a $400 million manufacturing plant in Troy Township, Ohio, dubbed the “Peloton Output Park.” Additionally, the company will reduce its owned-and-operated warehousing and delivery footprint while expanding its commercial agreements with third-party logistics providers.
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Candidate for recovery?
A wildcard remains, investors say. Ahead of the shakeup, Peloton’s investor Blackwells Capital sent a letter to the company’s board urging it to consider a sale. The company’s list of potential Peloton suitors included Nike, Apple, Disney and Sony. Reports then circulated that Nike and Amazon were considering deals.
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The Wall Street Journal was the first to report the takeover speculation.
bad public relations
Peloton, once Wall Street’s darling and pandemic-crippled world savior for exercise feints, has found itself the butt of bad jokes and a public relations crisis.
First, the ‘Sex and the City’ reboot had the main character, Mr. Big [Chris Noth] die after using a Platoon. As the company went into crisis mode and recast Noth in a damage control commercial, it backfired. Noth was accused by several women of sexual misconduct and the ad was immediately taken down.
Then the hit show “Billions” used the same storyline for one of its main characters, but he survived.
Once its changes are fully implemented, Peloton expects to realize annual savings of at least $800 million from “operating expense efficiencies and significantly improved margins in its Connected Fitness category.” and to reduce its planned capital expenditure in 2022 by approximately $150 million. The restructuring is expected to result in cash charges of $130 million related to severance and other exit and restructuring activities and non-cash charges of $80 million. Most of the expenses will be recognized in the 2022 financial year.
Peloton cut its full-year outlook, with the company now forecasting around 3 million connected fitness subscriptions by the end of 2022, down from 3.45 million. Annual revenue will reach up to $3.8 billion, less than the original target of $4.8 billion. As for the third quarter, the company expects 2.93 million connected fitness subscriptions and quarterly revenue of between $950 million and $1 billion.