Earlier this week, On the day of the release of fiscal second-quarter earnings, John Foley, CEO and co-founder of Peloton, announced that he would be stepping down. Foley has run the pioneering fitness technology company since its earliest days, but the pressure from activist investors proved overwhelming. Barry McCarthy, the former chief financial officer of Spotify, will take Foley’s place.
Foley’s resignation was the inevitable culmination of a series of unfortunate events. Peloton is best known for its expensive, internet-connected stationary bikes and treadmills, as well as for its enthusiastic instructors who lead its video classes. But it mishandled a product recall last year after a child was killed in a Peloton treadmill accident. Then Peloton’s big-screen pedal machines hit the small screen badly: Two popular TV shows featuring characters heart attack while cycling.
More concern for investors is Peloton shares down 76% in 2021 as people started to emerge after the lockdown pandemic and the demand for new bikes dwindled. According to this week’s earnings report, the company is still growing its subscriber base slowly and churning out low. It is still valued at around $12 billion. It didn’t grow as much as Peloton had hoped. Foley has always appeared confident the company will be fine, like the internet personality instructors he hires. Of course people will continue to buy $2,000 worth of bikes and pay an extra $39 per month. Thinking that could be the result of Covid’s complacency.
Now the bigger players are kicking Peloton tires, according to a recent report in The Wall Street Journal. Amazon has been seen as an acquirer company. The Financial Times report that Nike and Apple Also included in the mix. But just as some investors want to sell, many customers may want Peloton, well, keep being Peloton.
Turns out
With just 2.77 million subscribers and a total of 6.6 million members — anyone using Peloton through a connected exercise machine or mobile app — Peloton is by no means a big company. . But it has had a big impact on the fitness industry. Calling it “fitness technology” isn’t just about it; Peloton has eclipsed the NordicTracks of the past, marrying compelling programming with high-end hardware and, yes, taking advantage of the fact that people have been stuck in their homes for two years. Even before the emergence of the p-word, Peloton was already a coveted word: Many software service providers pride themselves on their online “communities,” but Peloton has achieved full-fledged cult status.
So what will happen so that Peloton can fully exist on its own, so as not to become Peloton Prime (Amazon), Peloton + (Apple) or Pelotown (Nike)? It needs to first adjust its cost structure and generate more cash, analysts and entrepreneurs say, to weather the storm. It worked on that, at one point. This week Peloton announced a “restructuring program” (a clever layoff of 2,800 employees, some of whom became aware of their condition when Slack access has been revoked), reduced planned capital expenditures for the year, and said it would ease plans to build and occupy a $400 million manufacturing plant in Ohio. But the company also lost $439 million in its most recent quarter, and both its canceled factory plans and last year’s acquisition of equipment maker Precor were costly.
“When you look at companies like Ring, Eero, Anki, and Fitbit, they’re all big enough to be visible but not big enough to have a cash hoard to get through the tough times,” said John. MacFarlane, co-founder and former CEO of wireless audio company Sonos. “Companies like Sonos and Roku — and Peloton — are large enough that they can survive a crisis. Hardware-software companies just need a lot of cash.”
Eric Min, CEO of virtual cycling platform Zwift, said Peloton mistook a temporary surge in demand for an established trend. “When a company does and grows like that — not just the stock, but like people’s habits — you have to consider how you’re going to sustain a business through changes in people’s behavior. consumption.”
Min said Zwift, which plans to introduce a “major hardware product” within the next 12 months, has set itself apart from competitors by supporting user-generated videos within the app. “If it’s just instructor-led video content, it’s not scalable. It’s just not creative enough. ”
