Peloton to cut more jobs and raise price of equipment

The US-based exercise equipment maker Peloton Interactive said it will slash hundreds of jobs and close a number of retail outlets in a bid to cut business costs.

The company will also raise the price of its premium products as it aims to improve cash flow and increase overall sales, the company’s chief executive Barry McCarthy said in a memo sent to employees on Friday.

“We have to make our revenues stop shrinking and start growing again … after re-examining the resources required to provide our members best-in-class support, we have … decided to reduce fixed costs by eliminating a significant number of roles,” Mr McCarthy said in the memo published by Bloomberg.

“These are hard choices because we are impacting people’s lives … these changes are essential if Peloton is ever going to become cash flow positive. Cash is oxygen. Oxygen is life. We simply must become self-sustaining on a cash flow basis,” he added.

Peloton's stock price, which has dropped almost 88 per cent in the past 12 months, jumped almost 14.7 per cent to trade $13.7 a share on Friday.

In its third set of layoffs in 2022, the company will fire 784 employees across its distribution and customer service teams, reports say. It will stop using in-house employees and vans to deliver equipment and close 16 warehouses across North America. The company said it will rely on third-party logistics (3PL) providers to set up exercise equipment at customers' homes.

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

“This has been a challenge. We won’t fix it overnight, but we have no choice but to make it work, so we are leaning into it and proactively managing our 3PL relationships.” Peloton said last month it would cut about 570 jobs in Taiwan as it moved away from in-house equipment manufacturing.

In February, it replaced its chief executive and cut about 2,800 jobs. John Foley, the company's co-founder who led the company for nearly a decade, stepped down and become the executive chairman. Mr McCarthy, former chief financial officer at Spotify and Netflix, replaced him.