Peloton announced on Thursday, May 2, that a change in leadership is underway. CEO Barry McCarthy will be stepping down after just over two years in the role. Alongside this transition, the company also revealed plans to lay off 15% of its staff, approximately 400 employees, as part of its effort to align expenses with revenue.

During this transition period, McCarthy, a former executive at Spotify and Netflix, will be providing his strategic insights in a temporary advisory role with Peloton until the end of the year. In the interim, Karen Boone, the company's chairperson, and director Chris Bruzzo will serve as co-CEOs, ensuring a smooth operation while they search for a permanent CEO.

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Peloton Layoffs

The restructuring plan includes a reduction in Peloton's global headcount by 15%, with intended adjustments in retail showrooms and international sales strategies. This strategic move is expected to streamline operations and improve cost efficiency. However, it will also particularly impact departments such as research and development, marketing, and international teams, which might lead to a temporary slowdown in these areas.

According to CNBC, these measures aim to align Peloton's cost structure with its current business size, with anticipated annual expense reductions exceeding $200 million by the end of fiscal 2025. 

Peloton's decision comes amid disappointing fiscal third-quarter results that fell short of Wall Street's expectations. The company reported a net loss for the quarter, with revenue dropping to $718 million, down approximately 4% from the previous year. 

Peloton has revised its outlook for paid connected fitness subscriptions and app subscriptions for the current fiscal year. 

While revenue expectations have been lowered, the company has raised its outlook for gross margin and adjusted EBITDA. 

These adjustments aim to achieve positive free cash flow and address challenges in its hardware sales, which have declined amid shifting consumer preferences post-pandemic.

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