Peloton founder John Foley’s mea culpa, says recent events are

Peloton founder John Foley, who is on the way out the door as CEO, issued a mea culpa on Tuesday for past missteps, as the connected fitness company undergoes a massive restructuring.

“We own it. I own it. And we are holding ourselves accountable,” Foley told analysts on a conference call. “That starts today.”

The company slashed its full-year financial targets, as it continues to lose money. Peloton said it expects to achieve at least $800 million in annual cost savings and it will cut planned capital expenditures by roughly $150 million this year. As part of these efforts, about 20% of its corporate workforce, or about 2,800 people, will lose their jobs.

Chief Financial Officer Jill Woodworth said there will be cuts in real estate and marketing, with no segment of the business off the table for right-sizing. Foley described the entire experience as “humbling.”

As analysts and investors digest all of the announced changes, including the appointment of incoming CEO Barry McCarthy, they now also must reassess what kind of company Peloton is going to be coming out of the Covid pandemic. The potential market for fitness equipment may have been artificially inflated by the health crisis, which forced many people temporarily away from gyms.

Peloton, in turn, has set lofty goals for its total addressable market. But it’s unclear if it will still be able to achieve those targets. Shares are rallying, though, as investors believe Netflix and Spotify veteran Barry McCarthy might be the one to help it inch closer.

The company has previously said that its total addressable market is 67 million households globally, of which 45 million are in the United States. As of Dec. 30, Peloton counted more than 6.6 million members globally, including those people who don’t own any equipment but who only pay for monthly access to the company’s on-demand workout classes.

When asked about this on Tuesday, management said the company doesn’t believe Peloton’s market opportunity has changed in recent months, despite the reported waning sales growth. The cost actions that the company is taking are independent of the company’s longer-term growth prospects, it said.

“We have work to do,” said Woodworth. “But we’re going to study what our post-Covid demand is without going dark on marketing, to better understand the baseline, and we’re going to get back to efficient marketing next year.”

“We’ll go back to the basics over the next several quarters,” she added. “We feel good about that.”