Peloton slashes jobs and prices to regain footing

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It’s been another crazy 24 hours on the seemingly endless roller coaster that is Peloton’s downfall from its pandemic peak. On Friday, the indoor cycling brand’s new CEO, Barry McCarthy, announced he was cutting 780 jobs. At the same time, Peloton will increase its prices. This all comes the day after the brand lost a bid to take legal action against the brand over the music offered in its online fitness classes.

Jobs cut

McCarthy, who was recently hired to help revive Peloton after its post-pandemic crash, announced the layoffs in a memo to staff. Like most bad news, the announcement landed on Friday. In the memo, obtained by Bloomberg, the CEO said the move was aimed at reducing costs and increasing cash flow for the fitness brand.

“We have a clear strategy to secure the long-term, sustainable future of this business,” McCarthy’s memo reads. “The first job is to generate free cash flow by properly sizing our inventory commitments and converting many of our fixed costs to variable costs, as this cost structure better aligns with the seasonal revenues of the business. .”

Translated from the buzzwords plainly, this means that Peloton will close many of its retail stores, reduce support staff in North America and, after outsourcing its production and closing factories earlier this year, move the most of its warehousing and delivery in North America to a third-party model.

The plan includes a “significant and aggressive reduction in Peloton’s business footprint”, as well as a significant reduction in its North American warehouse, delivery and support staff. A total of 780 employees will be made redundant.

It is not yet known whether this round of layoffs will also come with free Peloton membership.

The prices were raised

At the same time, Peloton is raising the price of its gear just months after lowering it. In April, Peloton cut prices to help eliminate excess inventory. And perhaps to distract from his attempt to secretly sell rusty hardware, codenamed “Project Tinman.”

Now, four months later, those prices are going up. The Bike+ and Tread prizes will increase by $500 and $800 respectively. After securing a sizable bank on its own, according to the memo, Peloton has the “opportunity to adopt a more nuanced pricing strategy targeting both ‘value’ and Premium members.” The price hike is an effort to maintain “premium brand positioning”.

Prices for Bike V1 and Guide gear will remain the same.

Consumer lawsuit gets green light

The day before the memo was written, Peloton suffered another setback. A lawsuit against the company resisted Peloton’s attempt to have it thrown out.

The lawsuit claims consumers overpaid for their Peloton subscriptions after nearly half of the fitness class soundtrack on the service was removed. The music was removed suddenly in 2019 when Peloton was sued by over a dozen music publishers for using the music without a proper license. The publisher’s lawsuit was settled in 2020. Peloton is still fighting the consumer lawsuit and after this decision will have to continue to do so.

As usual, somehow

If all of that, layoffs and lawsuits, sounds like a lot for a brand in a 24-hour period, it’s not news for Peloton. The pandemic darling shot to fame as homebound consumers flocked to his subscription-based online fitness classes. When that boom came to an end, a series of celebrity controversies, cover-up conspiracies, controversial stock sales and just plain rude layoffs followed.

Peloton ousted its founding CEO, John Foley, in February in a bid to right the ship.

It’s a shame because apart from the rust the bikes are pretty good.

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