Peloton says it’s slashing 780 jobs, closing stores and hiking prices

Peloton told employees Friday that it is slashing roughly 780 jobs, closing a significant number of its retail stores and hiking the prices of some of its equipment in a bid to cut costs and become profitable. 

The company didn’t specify how many its 86 retail locations it plans to shutter, but said it plans for an “aggressive” reduction beginning in 2023. 

Peloton said it will be entirely exiting last-mile logistics by closing its remaining warehouses and shifting delivery work to third-party providers like XPO Logistics, resulting in a portion of the job cuts. Peloton also is cutting a number of positions in its in-house support team and instead will rely on third parties. 

“The shift of our final mile delivery to 3PLs will reduce our per-product delivery costs by up to 50% and will enable us to meet our delivery commitments in the most cost-efficient way possible,” McCarthy wrote in a memo to employees. 

“These expanded partnerships mean we can ensure we have the ability to scale up and down as volume fluctuates,” he added. 

Peloton shares jumped more than 7% on the news.

Under Chief Executive Officer Barry McCarthy, who took the reins from Peloton founder John Foley in February, the business has increasingly focused on ways to grow subscription revenue over hardware sales. 

In July, Peloton announced it would stop all its in-house manufacturing and instead expand its relationship with Taiwanese manufacturer Rexon Industrial. The company also suspended operations at its Tonic Fitness facility, which it acquired in 2019, through the remainder of the year.

When McCarthy became CEO, Peloton announced it was slashing roughly $800 million in annual costs. That included cutting 2,800 jobs, or about 20% of corporate positions. The company also said it would be walking away from plans to build a sprawling production facility in Ohio.

CNBC reported in January, ahead of Foley stepping down, that Peloton planned to temporarily halt production of its equipment, according to internal documents detailing those plans, as a way to control costs with demand dropping. 

Foley’s missteps included making long-term bets on Peloton’s supply chain during the peak of the Coronavirus pandemic that would later prove to be a drag on its business as sales of its Bikes and Tread machines slowed. 

Peloton’s losses in the three-month period ended March 31 widened to $757.1 million from $8.6 million a year earlier. Revenue dropped to $964.3 million from $1.26 billion. 

The company ended the quarter with 2.96 million connected fitness subscribers, which are people who own one of the company’s products and pay for a membership to its live and on-demand workout classes. 

Read the full memo that Peloton CEO Barry McCarthy sent to employees on Friday: 

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