Peloton’s new CEO will debut at ‘All Hands Meeting’ Wednesday
Peloton shares surged more than 25% during Tuesday's trading session
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Peloton's new CEO Barry McCarthy will address employees Wednesday at a previously scheduled "All Hands Meeting" on what is the first day of his new job after the board jettisoned CEO John Foley.
The company's stock jumped more than 25%, the largest one-day percentage increase ever, as tracked by Dow Jones Market Data Group, after the company on Tuesday announced a massive restructuring plan and big layoffs. Still, shares have fallen more than 70% during the past 12 months.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PTON | PELOTON INTERACTIVE INC. | 7.75 | -0.25 | -3.12% |
FOX Business takes a look at the changes and what McCarthy is inheriting.
PELOTON REMOVES CEO JOHN FOLEY, SLASHES SALES OUTLOOK, JOB CUTS PLANNED
New CEO
McCarthy, a seasoned tech player, will take over as president and CEO effective Wednesday. He has previously served as chief financial officer of Spotify and Netflix. He also held various leadership positions in management consulting, investment banking, and media and entertainment.
Peloton's new CEO Barry McCarthy. (Reuters / Reuters Photos)
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SPOT | SPOTIFY TECHNOLOGY SA | 458.39 | -19.20 | -4.02% |
| NFLX | NETFLIX INC. | 823.96 | -13.30 | -1.59% |
McCarthy has served on the board of directors of Spotify and Instacart since January 2020 and January 2021, respectively. He also has served on the boards of Chegg, Eventbrite, MSD Acquisition Corp, Pandora and Rent the Runway. In addition, he has also served as a consultant at Technology Crossover Ventures (TCV), one of the largest growth equity firms that has invested more than $10 billion in public and private technology companies.
PELOTON'S POTENTIAL SUITORS: AMAZON, NIKE, APPLE, DISNEY OR SONY?
2,800 job cuts – but instructors not affected
Peloton plans to cut approximately 2,800 global positions, including a 20% reduction to its corporate workforce, which began Tuesday. Among the usual severance package inclusions such as health care and financial continuations, a monthly Peloton membership will be complimentary for an additional 12 months, the company speculated.
Instructors will not be impacted.
PELOTON INSTRUCTORS SPARED IN 2,800 JOB SLASH
A woman uses one of Peloton's exercise products. (Getty Images / Getty Images)
Peloton also anticipates $60 million in restructuring capital expenditures from winding down the development of a $400 million manufacturing facility in Troy Township, Ohio, dubbed the "Peloton Output Park." In addition, the company will reduce its owned and operated warehousing and delivery footprint while expanding its commercial agreements with third-party logistics providers.
A close look at one of Peloton's exercise bikes. (Reuters / Reuters Photos)
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Takeover candidate?
A wildcard remains, say investors. Prior to the shakeup, Peloton investor Blackwells Capital sent a letter to the company's board of directors, urging it to consider a sale. The firm's list of potential Peloton suitors included Nike, Apple, Disney and Sony. Reports later circulated that both Nike and Amazon were considering bids.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AMZN | AMAZON.COM INC. | 202.61 | -8.87 | -4.19% |
| NKE | NIKE INC. | 76.66 | +0.99 | +1.31% |
| AAPL | APPLE INC. | 225.00 | -3.22 | -1.41% |
| DIS | THE WALT DISNEY CO. | 115.07 | +5.94 | +5.44% |
| SONY | SONY GROUP CORP. | 18.46 | -0.04 | -0.22% |
The Wall Street Journal was first to report the takeover speculation.
Bad PR
Peloton, once the darling of Wall Street and the savior of the pandemic-crippled world for exercise feigns, found itself the butt of bad jokes and a PR crisis.
The "Sex and the City" reboot show "And Just Like That" featured the Mr. Big character (Chris Noth, left) dying after using a Peloton device. At right is series star Sarah Jessica Parker. (Getty Images / Getty Images)
First, the "Sex and the City" reboot had lead character Mr. Big [Chris Noth] die after using a Peloton. As the company shifted into crisis mode and recast Noth in a damage-control commercial, it backfired. Noth was accused by multiple women of sexual misconduct and the ad was immediately pulled.
Then, hit show "Billions" used the same storyline for one of its main characters, but he survived.
Cost savings
Once its changes are fully implemented, Peloton expects to achieve annual run-rate cost savings of at least $800 million through "operating expense efficiencies and significant margin improvement in its Connected Fitness category" and reduce its planned capital expenditures in 2022 by approximately $150 million. The restructuring is expected to result in $130 million in cash charges related to severance and other exit and restructuring activities and $80 million in non-cash charges. The majority of the charges will be recorded in fiscal year 2022.
Outlook
Peloton has slashed its full-year outlook, with the company now forecasting approximately 3 million connected fitness subscriptions by the end of 2022, down from as many as 3.45 million. Full-year revenue will be as much as $3.8 billion, less than the initial target of $4.8 billion. As for the third quarter, the company is expecting 2.93 million connected fitness subscriptions and quarterly revenue between $950 million and $1 billion.