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Tonal Preps for Possible Recession, Laying Off 35% of Workforce

Tonal Preps for Possible Recession, Laying Off 35% of Workforce

The at-home fitness gym brand is reducing its workforce and advertising spending, but it says it will become profitable as it prepares for an IPO

Tonal, the maker of an internet-connected weight training system, is laying off 35% of its workforce, affecting all levels, according to CNBC.

Just last year, the fitness equipment maker, which boasts notable investors like Serena Williams, Maria Sharapova, and LeBron James, achieved the coveted unicorn status

Tonal CEO Aly Orady confirmed in a recent interview that the fitness company employs approximately 750 people, up from a little more than 110 prior to the pandemic. Orady, according to CNBC, emphasized the importance of profitability, especially as the company prepares for an IPO. Orady stated that Tonal has not been profitable in the past, and while he did not specify how much money will be saved through the layoffs, he claims that the cuts will put Tonal on track to be profitable within months.

“As we head into a recession — and many of us believe we’re headed into a recession — it’s really important that we become a business that’s here for the long term,” Orady remarked in an interview. “What we’re doing is effectively going from a hypergrowth business … to more of a sustained-growth business.”

CNBC also reports that Tonal has not disclosed whether its valuation has been adjusted in the private markets.

“The public markets are no longer rewarding hypergrowth when it comes at the expense of profitability. And as such, private market investors are no longer investing as many dollars or as aggressively to support businesses through hypergrowth. Those dollars just aren’t out there the way they were a year ago,” Orady pointed out.

Aside from the layoffs, Tonal will also focus on lowering customer acquisition costs by reducing advertising spending. Orady said in the interview that any slowdown in sales in the last 90 days is due to Tonal cutting back on marketing, but that overall demand has remained stable.

“Tonal just had a massive layoff. This stinks. I’m not affected luckily. Just not a good sign really,” one poster shared on Twitter.

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“I don’t think people understand what’s happening in the tech industry. It’s not just Tonal, every start up is prepping for a recession. Remember when these companies run out of money they go out of business. Lose 35% to save 65% and the opportunity to continue a business for years to come. Sounds good to me! There’s plenty of content honestly to last for years but if the lights go out for the whole company then it becomes a paper weight,” one poster pointed out on r/TonalGym, a Subreddit for the popular at-home fitness brand.

Tonal employees affected by the cuts will receive a minimum of eight weeks’ pay and health-care benefits until the end of September.

Despite current challenges, the at-home fitness brand recently announced the opening of a New York City content studio where coaches will lead live workouts, as well as the addition of five new NYC-based coaches.

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