Peloton Interactive said Chief Executive Officer Barry McCarthy is stepping down after two years in the role as the company plans to shed about 15% of its global workforce in an effort to revive sputtering growth.
The board will conduct a search to name a replacement, the fitness company said in a statement Thursday. Board chair Karen Boone and director Chris Bruzzo will serve as interim co-CEOs.
Peloton shares were up about 9% in early trading.
McCarthy—a veteran of Spotify Technology SA and Netflix Inc.—has spent the past two years overhauling the company. That’s included layoffs, management shake-ups and the outsourcing of business functions. He’s also forged new partnerships, including one this week with Hyatt Hotels Corp. That will bring Peloton bikes to the hotel chain in an attempt to boost sales.
The executive has acknowledged in recent months that the company continued to struggle with growing “at scale” and warned in February that its revenue may not start increasing again until the fourth quarter.
The New York-based company was a highflier during the early days of the pandemic, when lockdowns sent consumers scrambling for its stationary bikes and fitness classes. But the shares tumbled over the past three years, erasing more than 90% from its valuation.
On Thursday, the company announced a new restructuring program to reduce annual expenses by more than $200 million. As part of that plan, the company will continue to reduce its retail showroom footprint and it will eliminate about 400 jobs.
“The objective of the cost reductions is to align our cost structure with the current size of our business and position Peloton to generate sustained and meaningful positive free cash flow,” the company said in a statement. Peloton said it’s working closely with its banks, including JPMorgan Chase & Co. And Goldman Sachs Group on a refinancing strategy.
“We are mindful of the timing of our debt maturities, which consist of convertible notes and a term loan, and we know this is also on the minds of our shareholders,” the company said.
Peloton narrowed its guidance for revenue for this fiscal year, and the new range came in lower than analysts anticipated. The company now predicts sales of $2.68 billion to $2.70 billion for the full year. It also is anticipating 2.96 million to 2.98 million connected fitness subscribers, lower than a previous forecast for as much as 3.01 million. The forecast reflects Peloton’s “updated outlook for hardware sales based on current demand trends and expectations for seasonally lower demand,” the company said.
In the fiscal third quarter, revenue was $717.7 million, coming up short of analysts’ estimates for $719.2 million. Connected fitness subscribers were 3.06 million, less than analysts’ estimated.
Peloton said it plans to continue scaling back its retail-showroom footprint and revamping its approach to international markets to be more “targeted and efficient.” The company said it has no plans to “exit any of our existing international markets, we will leverage global strategies and capabilities where we can.”