Peloton CEO promises company is ‘done’ with layoffs

Peloton CEO Barry McCarthy is an optimist. During the operation Profit Call Q1 2023McCarthy said the company had finished layoffs and was “turning ship,” referring to a colorful metaphor he uttered during Q4 2022 earnings. Wall Street investors may not agree. The stock price of the pack decreased by about 19 percent this morning after the company announced a weaker-than-expected holiday forecast.

On the product side, McCarthy noted that while customer satisfaction with the recently launched Guide was high, most people don’t know it exists. Meanwhile, the CEO highly praised the Peloton Row, claiming that the device “reinvented the category”. He then noted that driving stock would be limited this year, although demand is expected to increase. The company also expects more people to take advantage of Tread Plus refunds, as it recently extended the refund period for another year. Overall, hardware sales were down about 60 percent year over year and 31 percent from the last quarter.

McCarthy also says there are plans to relaunch the digital app in 2023 at a “different price point.” In particular, the app would be relaunched with tiered pricing to match a revamped content strategy. McCarthy has been adamant in recent months about bolstering digital app subscriptions, which have never surpassed 1 million subscribers. Peloton ended this quarter with 875,000 subscribers, down 11 percent from the fourth quarter. The goal is to increase that to 100 million and access connected third-party fitness platforms as most app subscribers use Peloton’s content on other fitness equipment.

Peloton Row in a messy living room

Inventory for the Peloton Row is expected to be tight this holiday season.
Photo by Victoria Song / The Verge

The financial figures paint conflicting stories. On the one hand, Peloton managed to improve its free cash flow to a loss of $246 million in the first quarter from $412 million in the previous quarter. Peloton’s monthly churn rate also improved slightly to 1.1 percent, from 1.4 percent in the fourth quarter. Net loss was also $406 million, compared to $1.2 billion last quarter. McCarthy also noted that the company was on track to beat its 12-month timeline to reverse the company’s financial problems.

On the other hand, the Peloton leadership estimated $700 million to $725 million in revenue for the holiday season. That is significantly lower than the $866 million that analysts had been expecting. Peloton’s own forecast predicted losses of $110 million to $115 million. Analysts had expected $108 million. Not helping matters, Peloton’s leadership recognized that the current economic climate would be challenging to move forward. McCarthy also admitted that Peloton’s focus on restoring cash flow “had come at the expense of growth.”

If there’s one bright spot, McCarthy insisted that no one else at the company lose their job. Kind of.

“We are now done and in my humble opinion no more heads can be taken out of the business.”

“We’re done now and in my humble opinion there’s no need to take any more heads out of the business,” McCarthy said during the Q&A portion of today’s call. Peloton CFO Liz Coddington immediately jumped in to clarify that some store employees are still getting the ax as the company is closing some of its retail spaces once the leases expire. Still, McCarthy was adamant that there was nothing to gain from further layoffs. For context, Peloton recently laid off 500 employees in October in its fourth round of layoffs this year. That was after the cut of 2,800 jobs in February, another 570 in July and 784 in August.

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