Peloton CEO Barry McCarthy Resigns As Company Decides To Downsize By 15%: 'No Other Way To Bring Its Spending In Line With Its Revenue'

Barry McCarthy, CEO of Peloton Interactive, Inc PTON, has stepped down from his position. The company also announced a 15% cut in its global workforce, attributing the decision to a slump in demand for its fitness products in the post-pandemic era.

What Happened: McCarthy’s resignation on Thursday comes at a time when the New York-based fitness company is grappling with significant challenges, Reuters reported. The company also plans to scale back its retail footprint.

In a note shared with employees of Peloton, McCarthy said, “Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue. The company had to do that in order to generate sustainable positive FCF [free cash flow].”

McCarthy, who previously held executive roles at Netflix and Spotify, assumed the CEO position from founder John Foley in 2022. Despite implementing several cost-cutting measures and repositioning Peloton as a software-centric company, demand for Peloton’s products has been lackluster, primarily due to high inflation and increasing borrowing costs.

The company has also revised its full-year forecast for connected fitness subscribers to between 2.96 million and 2.98 million, marking a decrease of 30,000 from its previous estimate.

Following McCarthy’s exit, Peloton chairperson Karen Boone and director Chris Bruzzo will serve as interim co-CEOs, while director Jay Hoag has been appointed as the chairperson of the board. The search for a new CEO is underway.

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Why It Matters: In August, Peloton was struggling with a drop in subscribers and a wider-than-expected loss, largely due to a costly bike recall. The company’s attempts at rebranding and expansion under McCarthy’s leadership have not yielded the desired results.

The announcement of McCarthy’s departure comes on the heels of a recent partnership with Hyatt Hotels in May, which saw Hyatt’s loyalty program members earn points for using Peloton equipment at Hyatt properties.

Price Action: On Wednesday, Peloton stocks closed at $3.220 while it was trading 11.2% higher at $3.580 during Thursday’s pre-market, according to Benzinga Pro.

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