Peloton Job Cuts & Store Closings on Horizon?
Peloton brings on McKinsey to review cost structure
Peloton is working with McKinsey & Company to review its cost structure, according to CNBC. The news comes after Google search trends revealed that demand for Peloton has declined.
Potential job cuts were mentioned in a recent call with Peloton’s management team, reports CNBC, who obtained a recording of the meeting. Peloton’s apparel division is one possible area that could be impacted. Business Insider reports that the team discussed plans to lay off 41% of the sales and marketing teams.
Peloton, once the golden stay-at-home stock of the pandemic, is now expected to be removed from the Nasdaq 100 index and replaced by Old Dominion Freight Line. Peloton’s stock price fell 81% from its record high. According to SmartInsider, citing SEC filings, Peloton executives sold nearly $500 million worth of stock before the decline. CEO and co-founder John Foley reportedly sold $119 million worth of stock starting in November 2020.
CNBC reports that one Peloton executive on the call said that 15 Peloton stores are “on the cut line.”
Employees at brick-and-mortar retail locations may be expected to handle customer service calls during downtime. CNBC viewed an internal messaging app and Slack messages where Peloton employees have been discussing Peloton’s troubles and possible job cuts. One employee shared that morale is at an all-time low and noted that Peloton is “spinning out so fast.”
Employee dissatisfaction has been reported for months, as the company enacted a hiring freeze and Peloton’s atmosphere turned “gloomy.” A December report from Pelo Buddy said that sources revealed that Peloton changed the pay structure of showroom employees, causing a large pay cut, ranging from 30-60%. Employees were told that they could make up the difference through sales of apparel and warranties, but with softening demand and equipment sales declining, selling warranties was viewed as a challenging (if not impossible) task.
Peloton employees were also left out from a lavish holiday party last month after the company canceled its annual celebration citing Covid and budgeting concerns. CEO Foley sent an email to Peloton employees after the swanky NYC party and maintained that it was intended just for his vaccinated family and friends and was not officially affiliated with Peloton, although Peloton instructors were in attendance.
Peloton recently announced it will increase the delivery and setup cost of its popular stationary bike and Tread starting January 31, citing ongoing supply chain issues and inflation for the rising fees. The additional fees will now raise a Peloton Bike to $1,745 and a Tread to $2,845.
Peloton’s chief marketing and communications officer, Dara Treseder, mentioned the increase in a meeting. “Right now, people are raising prices. Ikea just raised prices. We want to go in the middle of the pack,” Treseder is quoted as saying in a recording of the meeting, which was obtained by CNBC.
In an e-mailed statement to CNBC, a Peloton spokesperson wrote, “Like many other businesses, Peloton is being impacted by global economic and supply chain challenges that are affecting the majority, if not all, businesses worldwide. Even with these increases, we believe we still offer the best value in connected fitness, and offer consumers various financing options that make Peloton accessible to a wide audience.”
