• by Sarah Mahoney  @mahoney_sarah, May 2, 2024

After two tumultuous years leading Peloton, chief executive officer Barry McCarthy is stepping down. The shift in leadership comes as the connected fitness company’s losses continue. It also announced a further job reduction, laying off 15% of the workforce.

When McCarthy took the reins from Peloton founder John Foley in 2022, many believed his Silicon Valley financial smarts could rescue the company from its post-COVID crash. He had been chief financial officer at Spotify and Netflix.  

But despite many shifts in tactics, including massive layoffs, expanding to wholesale, outsourcing manufacturing, offering used Peloton equipment, ingenious partnerships with universities and hospitality companies and vigorous marketing, the company is still losing money.

The shift in leadership comes as the company posts more disappointing results. Its loss was $167.3 million, an improvement from $275.9 million in the year-ago period. Sales continue to slide, down to $717.7 million, compared to $748.9 million. Analysts had expected the company to take in $721 million.

The New York-based company is laying off 15% of its staff, about 400 people, which it believes will generate $200 million in savings by the end of fiscal 2025.

The company says McCarthy, who is also stepping down from the board, will continue as a strategic advisor through this year.

Karen Boone and Chris Bruzzo, both board members, will act as interim co-CEOs.

“Barry joined Peloton during an incredibly challenging time for the business,” Boone says in the company’s release. “During his tenure, he laid the foundation for scalable growth by steadily rearchitecting the cost structure of the business to create stability and to reach the important milestone of achieving positive free cash flow.”

She adds that a search for a new CEO is underway.

Sales of the company’s connected fitness machines declined 14% in the third quarter, with revenue slipping to $279.2 million from $324.1 million in the year-ago quarter. Subscription revenue climbed 3% to $437.8 million.

Bike rentals rose 10% above expectations, and used bike sales also increased.

Peloton also announced a new deal with Hyatt Hotels, outfitting more than 800 properties with Peloton equipment and providing access to Peloton classes on guestroom TVs at nearly 400 properties.

“Despite various restructuring efforts over the past couple of years, Peloton is still deeply loss-making, and its business model is still broken,” writes Neil Saunders, managing director of GlobalData, in his comment.

Yet there are signs that the brand is still sturdy. “Peloton’s content is well regarded, and this means there isn’t too much churn in subscriber numbers,” he adds.

But finding new customers keeps getting more challenging. “A lot of people who want Peloton equipment already have it and are not likely to upgrade anytime soon,” he says. “The balance of the market is either not interested or needs a lot of persuasion to buy into Peloton."