Peloton will give almost 3,000 employees it is firing a one-year subscription to its fitness service as part of their severance support package.
Chief Executive Officer John Foley simultaneously announced he will step down after a tumultuous financial year largely impacted by the coronavirus pandemic.
The fitness company saw unprecedented growth during 2020, as many people in lockdown canceled gym memberships in favor of the at-home option. The company was at one point valued at $50 billion and was struggling to keep up with orders for its popular stationary bike.
As COVID-19 restrictions waned over the summer of 2021, the company had to repeatedly warn its investors its annual sales income was likely to come in under previous predictions.
In November, the company cut its yearly sales forecast by approximately $1 billion after shares declined by 35%.
The company ultimately waned to a $15 billion company. In the final quarter of 2021, Peloton reported a loss of $439.4 million.
Pelton implemented a hiring freeze but the losses continued to compound. In a letter to shareholders, the company said it expected its 2022 revenue to fall between #3.7 billion to $3.8 billion — down from a previous estimation of a range of $4.4 billion to $4.8 billion.
The company also reported that its total number of fitness subscribers is likely to be 3 million, rather than a previous prediction of 3.35 million to 3.45 million.
On Feb. 8, Peloton announced it would let go of 20% of its workforce.
The company released a letter from Foley to the staff announcing the lay-offs.
Foley said Peleton was “making changes at every level of the organization” and that he was stepping down from his position as CEO.
“I recently shared that we have been in the process of re-evaluating our costs across the entire organization to ensure we are appropriately structured for the post-COVID landscape,” Foley wrote. “After careful review, we’ll be driving strategic initiatives across our global team that will help us focus on areas that are in need of adjustment, including implementing a comprehensive restructuring program.”
Foley’s wife, Jill Foley, “will be transitioning from her role as VP of Apparel in the coming months” according to the statement.
Peloton employees fired during the downsizing will be given “meaningful cash severance allotment … based on job level and tenure.” They will also be provided access to career services offered by RiseSmart, a third-party transition service.
Lastly, terminated employees will receive a “complimentary” monthly Peloton membership for 12 months.
Addressing employees facing termination, Foley said “I want you to know this is not a reflection of your very important contribution to Peloton. … I hope your experience while working here was a meaningful one, and will help you succeed in your next chapter.”
Other changes include reducing its North American warehouses as well as decreasing its delivery operations and “third party relationships.”
“The choices we’ve made today, some of which were very difficult, will help us get closer to creating a more focused, stronger Peloton for tomorrow,” Foley wrote.
Foley will now serve as the Executive Chair of Peleton. Barry McCarthy, who previously held senior executive roles with Netflix and Spotify, will take over as CEO and President.