NEW YORK (AP) — Peloton is laying off employees and raising the prices of some of its equipment as part of its latest bid to make the business profitable and free up cash.
The changes were disclosed Friday in a memo to employees of the maker of high-end exercise bikes and treadmills from its new CEO Barry McCarthy. In addition to cutting 784 jobs, Peloton will close its distribution network in North America and transfer its delivery work to third-party suppliers.
The New York-based company said it also plans to “significantly” reduce its North American store base, which now stands at 86 stores. But she did not specify how many stores will close.
These changes mark the last changes since McCarthy, who served as Spotify’s chief financial officer, took over as CEO in February. He replaces John Foley, who co-founded the company 10 years ago.
The coronavirus pandemic has put Peloton in a mad rush. Its shares have jumped more than 400% in 2020 amid shutdowns that have made its bikes and treadmills popular among customers who pay a fee to participate in Peloton’s interactive workouts.
But nearly all of those gains were wiped out last year as the distribution of vaccines sent many people out of their homes and into gyms. Now the company, which recorded its only profitable quarters during the pandemic, is stifling its ambitious plans and cutting costs after misjudging the resilience of the exercise-at-home trend.
Peloton said it is raising the price of its flagship Bike+ by $500 to $2,495 and its Tread treadmill by $800 to $3,495. The price increases represent an about-face from April, when it lowered prices in an attempt to get rid of inventory. McCarthy noted in the memo that at the time the company was still in the early days of its $800 million restructuring plan and was under “significant cash pressure.”
Last month, Peloton announced it would stop making its own stationary bikes and interactive treadmills, outsourcing those tasks to a Taiwanese manufacturer. It also said it was also suspending manufacturing operations at the Tonic Fitness Technology factory in Taiwan for the rest of the year.
As of June 30 last year, Peloton employed about 8,600 people worldwide, including about 6,700 in the United States. But in February it said it was cutting 2,800 jobs, including about 20% of its corporate jobs. At the time, he said instructors who lead interactive classes for Peloton would not be included in the discounts.
Peloton also said in February that it was ending development at its Peloton Output Park plant in Ohio.
Friday’s news encouraged investors, who sent shares of Peloton Interactive Inc. up $1.62, or nearly 14%, to $13.53. The stock is still down 88% in the past 12 months.
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