In 2022, Peloton CEO Barry McCarthy was tapped to replace co-founder John Foley as the upscale fitness company faced a post-pandemic slump and struggled to navigate after the tragic death of a child involving one of its treadmills, but that never happened. He was replaced this week.
At the time, then Lead Independent Director Karen Boone said in a statement that the "leadership transition will best position Peloton for sustainable growth, profitability, and long-term success." She cited McCarthy's "financial acumen and record of driving transformative change at iconic companies including Netflix and Spotify," where he had held senior roles.
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However, over the past two years, the company has battled to remain relevant as people have returned to traditional gym workouts. To combat the declining sales, it deployed various efforts to cut costs and expand its customer base. Still, the company posted a loss last quarter.
Initially, Wall Street celebrated Foley's ouster in favor of McCarthy. However, the stock has lost 90% of its value, going from $37.20 to $3.00 per share, under his watch, despite strings of partnerships, efforts to revive the brand and revolving layoffs.
In early 2022, the company began outsourcing its manufacturing to Taiwanese manufacturer Rexon Industrial Corp. to optimize its cost structure.
By April, it had boosted the cost of its all-access membership across North America while simultaneously lowering equipment costs in every market. In August 2022, it expanded distribution channels by making its products readily accessible at Amazon stores, so it could reach a broader audience and boost sales.
In short order, it also launched products in Dick's Sporting Goods in a bid to become more profitable ahead of the holiday season.
Prior to that, Peloton's new products and accessories had been sold, exclusively, through the brand's e-commerce site, inside sales channels and global showrooms.
By October, McCarthy had cut 500 global team member positions to ensure "long-term health." At the time, McCarthy said in a statement that he had "joined Peloton for the comeback story, not to sell the business."
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He continued touting that the "business is fundamentally more sound than ever and on the right path, so to be clear, there is no timeclock nipping at our heels."
The company tried to increase its subscriber base by expanding access to the content on its app with more membership tiers. It also started offering classes for free.
However, McCarthy said in a letter to shareholders in August 2023 that the company had experienced a decline of 29,000 subscribers, compared with the prior quarter "due to the seasonal slowdown in hardware sales" as well as "higher than anticipated subscription churn," which is the rate at which the company lost its subscribers.
To continue his turnaround efforts, he forged partnerships with major names in sports, apparel and the travel industry.
Peloton became an official fitness partner of the NBA and WNBA. It also, just this week, struck a deal with Hyatt to make the fitness company’s equipment and classes available at hundreds of hotels worldwide.
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The company recently finalized a "multi-dimensional agreement" with Lululemon through which Peloton will supply all of Lululemon's digital fitness content and, in turn, Lululemon will become the primary apparel provider to Peloton.
Still, the company had to cut costs to ensure viability.
On the same day Peloton announced McCarthy's departure, the company said it was planning to shed another 400 jobs to try and better align costs with the current size of its business.
Peloton Director Chris Bruzzo, who will serve as interm co-CEO alongside Boone, still commended McCarthy for his contributions during "an incredibly challenging time for the business." He credited McCarthy for helping the company achieve positive free cash flow and getting it "on solid footing."
FOX Business' reached out to Peloton for comment.
FOX Business' Breck Dumas and Aislinn Murphy contributed to this report.
