For the fourth time this year, Peloton has announced a round of layoffs. The struggling fitness company is cutting another 500 jobs, CEO Barry McCarthy told CNBC. In a memo to employees, McCarthy wrote that the company needed to make the move as part of efforts to reach break-even cash flow by the end of Peloton's 2023 fiscal year (i.e by the end of next June).
"I am acutely aware many of those impacted by these changes aren't just colleagues but are also close friends," McCarthy wrote in the memo, which Bloomberg obtained. "I know many of you will feel angry, frustrated and emotionally drained by today's news, but please know this is a necessary step if we are going to save Peloton, and we are."
The latest cuts make up around 12 percent of Peloton's headcount. In February, just as McCarthy took on the job, the company eliminated around 2,800 positions. In July, Peloton laid off approximately 570 people as part of a move to outsource all manufacturing. Then in August, it cut another 784 jobs to reduce costs.
Given that the latest round of layoffs leaves Peloton with around 3,825 employees, that means the company has reduced its headcount by more than half this year. That said, McCarthy noted that, with these cuts, "the bulk of our restructuring work is complete."
However, Peloton plans to close most of its retail stores in North America starting next year, which will likely lead to further cuts. McCarthy noted that Peloton lost north of $100 million on its retail operations last year, so changes were necessary.
Peloton saw a boom in business following the onset of the COVID-19 pandemic, when people were looking for ways to work out at home. However, as the world has opened back up and people have returned to offices and gyms, Peloton was left with excess inventory and the business has taken a significant hit. It incurred an operating loss of $1.2 billion in the April-June quarter. As Bloomberg notes, McCarthy sees subscriptions to Peloton's suite of fitness classes and services, partnerships and making content more broadly available on third-party devices as the keys to increasing revenue.
The company has started selling its connected fitness gear through Amazon, and products will soon be available at Dick's Sporting Goods. Peloton has also started offering its Bike for rent and announced a smart rowing machine.
"A key aspect of Peloton's transformation journey is optimizing efficiencies and implementing cost savings to simplify our business and achieve break-even cash flow by the end of our fiscal year. With that in mind, we have made the difficult decision to reduce our workforce by approximately 12 percent," a Peloton spokesperson told Engadget in a statement. "This will result in the reduction of approximately 500 global team members. Decisions like this are incredibly difficult and Peloton is doing all we can to help our impacted colleagues. As we pivot to growth, today marks the completion of the vast majority of our restructuring plan we began in February 2022."