Peloton CEO John Foley steps down and takes over as CEO as company cuts 2,800 jobs, report says

John Foley, CEO of Peloton.

Adam Jeffrey | CNBC

Peloton plans to replace CEO John Foley and cut 2,800 jobs as it hopes to restructure its business amid falling demand, according to a Wall Street Journal report.

Barry McCarthy, the former chief financial officer of Spotify and Netflix, will become CEO and chairman and join Peloton’s board of directors, according to the report.

The job cuts are expected to impact about 20% of Peloton’s corporate positions, but will not affect Peloton’s roster or instructor content, according to the Journal. The company employed 6,743 people in the United States as of June 30, more than double the roughly 3,281 employees it had a year earlier, according to annual filings.

A spokesperson for Peloton did not immediately respond to CNBC’s request for comment.

Shares of Peloton fell more than 4% in premarket trading on Tuesday, after closing Monday up nearly 21%. On Monday, the stock had fallen about 31% since the start of the year.

The news of Foley’s resignation comes ahead of Peloton’s fiscal second quarter results, which are expected to be released after market close on Tuesday. In January, Peloton released preliminary quarterly revenue and subscriber numbers, but it has yet to address its full-year outlook, which analysts and investors say will be lowered.

Peloton told the Journal it plans to cut about $800 million in annual costs and cut capital expenditures by about $150 million this year.

The company also said in the report that it plans to end development of its Peloton Output Park, the $400 million plant it was building in Ohio. He said he would reduce his delivery teams and the amount of warehouse space he owns and operates.

William Lynch, chairman of Peloton, is also expected to leave his executive position but remain on the board, Foley said in an interview with the Journal.

Erik Blachford, director since 2015, is expected to leave the board. And two new directors will be added, the Journal said: Angel Mendez, who heads a private artificial intelligence company focused on supply chain management, and Jonathan Mildenhall, former chief marketing officer of Airbnb.

About a week ago, activist Blackwells Capital – which owns less than 5% of the company’s equity – sent a letter to Peloton’s board urging Foley to step down as CEO and asking the company to consider selling.

Reports have since circulated that potential suitors could include Amazon or Nike. However, Foley and other Peloton insiders had combined voting control of about 80% as of Sept. 30, which would make it virtually impossible to strike a deal without their approval.

Foley, 51, founded Peloton in 2012. He was previously chairman of Barnes & Noble.

Lynch, a former CEO of Barnes & Noble, was hired by Foley in 2017 to help drive growth.

The duo helped Peloton reach its heights during the Covid pandemic, when the company saw consumer demand surge. Consumers were looking to exercise without going to the gym. But to meet increased demand, Foley overinvested and Peloton found itself with an inflated cost structure that now has to restructure for the business to survive.

Peloton’s market value had soared to around $50 billion about a year ago, but recently hovered around just $8 billion, before news of takeover talks began circulating.

This is breaking news. Please check for updates.

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