A Peloton store in Walnut Creek, California, U.S., on Monday, Feb. 7, 2022.A Peloton store in Walnut Creek, California, U.S., on Monday, Feb. 7, 2022.

In order to cut costs and become profitable, the company is closing a number of stores and raising prices on equipment.

The company didn't say how many of its 86 retail locations would be closing, but it did say that it would be cutting back.

A portion of the job cuts will come from closing its remaining warehouses and moving delivery work to third-party providers. A number of positions in its support team are being cut.

Barry McCarthy wrote in a memo to employees that the shift of final mile delivery to 3PLs will save the company up to 50% in delivery costs.

The ability to scale up and down is ensured by the expanded partnerships.

The price of the bike will be raised by $500 to $2,495 in the US. The price of its machine is going up by a significant amount.

The shares were up more than 8%.

McCarthy took the helm of the business in February and has focused on ways to grow subscription revenue.

In July, the company said it would stop in-house manufacturing and expand its relationship with a Taiwanese company. The Tonic Fitness facility was suspended through the rest of the year.

When McCarthy became CEO, the company said it was cutting costs by over a billion dollars a year. About 20% of corporate positions were cut. The company decided not to build a production facility in Ohio.

According to internal documents, Peloton planned to temporarily stop production of its equipment in order to control costs with demand dropping.

During the peak of the coronaviruses, which affected the bike industry, Foley made long-term bets on the supply chain of Peloton, which eventually proved to be a drag on its business.

The three-month period ended March 31 had a loss of $757 million, compared to a loss of $8.6 million a year earlier. There was a decrease in revenue to $964.3 million from the previous year's $1.26 billion.

The connected fitness subscribers are people who own one of the company's products and pay for a membership to its live and on-demand workout classes.

McCarthy said in Friday's memo that revenues have to stop shrinking and grow again. It's cash that's oxygen. It's life if you have oxygen.

The results of the fourth quarter are expected to be reported on August 25.

On Friday, Barry McCarthy sent a memo to employees.

The team.

I am writing to update you on the progress of the project. We have made a lot of progress on our journey. Even as we work to make Peloton more efficient, cost effective, innovative, and to best position ourselves for the future, we still define and lead the global Connected Fitness category. I would like to thank you for your work.

We have a plan to drive the future of the company. In order to generate free cash flow, we need to right-sizing our inventory commitments and convert many of our fixed costs to variable costs. We are focused on innovation across our hardware and software. We want to expand the ways consumers can experience the magic of Peloton.

Changes are being made to the business to make it better.

Our premium brand positioning is maintained.

We have been maximizing cash flow for several months. In April, we lowered the prices of our bikes to make it easier for new members to get into the club. We were still in the beginning stages of our restructuring plan. We were in the process of securing a $750 million bank loan, but we were not done yet.

Because of our success managing our inventory and supply chain issues, and because of the bank financing, we have the opportunity to adopt a more nuanced pricing strategy targeting "value" and Premium Members alike.

Our new price structure will be in the U.S.

  • Bike+ will increase by $500 to $2,495
  • Tread will increase by $800 to $3,495

The pricing menu for all products can be found here.

We maintain an attractive entry point for new members, we continue to sell down excess Bike v1 inventory, and we maintain our position as the undisputed premium brand in the Connected Fitness category.

Enhancing our workforce.

We are making changes to our operations. We are restructuring our final mile delivery capabilities after exiting owned manufacturing in Taiwan. The elimination of our North American field ops warehouses will result in a reduction in our delivery workforce.

A lot of team members will be leaving the company. Changes of nature are not always easy.

The shift of our final mile delivery to 3PLs will allow us to meet our delivery commitments in a more cost-effective way. We have been working with our 3PLs to improve the Member experience and we are seeing positive results. This has been difficult. We have no choice but to make it work because we won't fix it overnight. We're encouraged by the progress we're making and we're confident in our plan.

A significant number of roles on the in-house North America Member Support Team will be eliminated in order to reduce fixed costs. We are going to expand our work with our third party partners because in-bound Member support volume has been lower than expected. We can continue to provide the level of service our Members have come to expect as a result of our expanded partnerships.

These are difficult decisions because we are making a difference. If these changes are not made, Peloton will never become cash flow positive. There is cash. It's life if you have oxygen. On a cash flow basis, we need to become self-sufficient.

I would like to thank the delivery team and Member Support colleagues who have been affected by this decision.

It is important to invest in talent to grow.

We can't cost cut our way to success, that's what I've said in the past. We have to grow our revenues again. We need to invest in marketing and R&D to drive innovative products.

We continue to fill roles on key teams while we reduce our workforce in certain areas. We will continue to recruit top talent in areas of need, such as our software engineering team. You won't think we're driving at the same time because I share this. Making the right investments to drive growth is what success is all about.

It is important for fast, efficient teamwork and innovation to have hands-on, shoulder-to- shoulder collaboration. All office-based employees will be asked to return to work three days per week in September. We know some of you will need more time to sort out related details, and we are asking that you do so, with a deadline of Monday, November 14th for all of us to be back in the office If you would like to come in more often, you can use the office amenities and gym.

It will be compulsory for office-based workers to return to work on November 14. There are many successful businesses who choose to work from home, likeAirbnb. It's important that the culture you choose to work in is compatible with your preferences. We respect the choice of those who don't want to go back to work. We don't know if you will stay, but we hope you do.

E-Commerce and retail are balanced.

We will reduce our retail presence in North America if we don't balance our e-Commerce and retail mix. The decision will result in a reduction of retail space.

According to data, in the post-COVID economy, consumers want a mix of virtual and in-person engagement with the brands they love, meaning a hybrid model of e- commerce and limited physical retail. We need to meet our new members where they are.

Future updates on which retail operations will be affected by this decision will be provided by us. We don't expect to close retail locations in calendar 2022, but the timing is uncertain as we begin negotiations to exit our store leases.

It is forward focused.

Some of the news is hard to hear as it has a real impact on peoples lives who believe in the mission and our ability to manage the business for success.

It was important that we be successful in managing our turn around. We have to shift our cost structure from fixed to variable because of that. We will keep an eye on our workforce and expenditures as we face economic uncertainty. We need to embrace change and use it to our advantage.

I'm still optimistic about the future of the town. There will be challenges in the future. There will be and there will be unexpected setbacks. Turnarounds are like that. I am positive that we can overcome the challenges because we have come so far in just four months. Most of our competitors won't give it to us. We need to make it happen. There is a future for connected fitness.

I'm going to you. To me, you. To each other. We are all to our members.


The story is getting better. You can check back for the latest news.