Peloton co-founder John Foley resigned as executive chair of the company’s board on Sept. 12, the company announced. His resignation was effective immediately.
Hisao Kushi, who co-founded Peloton with Foley and serves as chief legal officer, will leave the company on Oct. 3, the company also shared.
Last week, the company announced in its delayed annual report filed with the Securities and Exchange Commission (SEC) that it could face fines from the Consumer Product Safety Commission (CPSC) for allegedly violating federal safety laws related to its Tread+ treadmills on which several children were injured and one child was killed. The company recalled its Tread and Tread+ treadmills in May 2021 and now faces several lawsuits related to the accidents.
On Sept. 12, Peloton also shared it was expanding its equipment rental program.
Foley started Peloton in 2012 and is credited with leveraging his tech and business experience to build the company into the largest interactive fitness platform in the world. He served as CEO until February 2022 when the company brought on Barry McCarthy in the CEO role and Foley moved to the role of executive chair of the board.
McCarthy has implemented several measures to right-size the company after demand for Peloton products dropped after the COVID-19 pandemic subsided and people returned to the gym. Those measures included layoffs and moving to third-party manufacturers for its products among other measures.
Peloton reported fourth quarter 2022 revenue of $678.7 million, down 28 percent from fourth quarter 2021, according to financials released by the public company on Aug. 25. (The company’s fiscal year ends June 30.)
For fiscal year 2022, Peloton reported revenue of $3.58 billion, down from $4.02 billion in fiscal year 2021 (ended June 30, 2021).
New Leadership
Foley said he was proud of what the Peloton team had built and the team’s dedication, hard work and creativity.
"We founded the company because we wanted to make fitness and wellness convenient, fun, and effective,” he said in the announcement. “Because of the work of thousands of people, we've done that.”
It is time to start a new professional chapter, he said.
“I have passion for building companies and creating great teams, and I am excited to do that again in a new space,” he said. “I am leaving the company in good hands: The leadership team with the support of the board is going to take Peloton to the next level as a company, and I am happy to know our members are going to continue to be surprised, delighted, engaged, and excited about everything that is in store (looking at you, rower!).”
Karen Boone was elected chairperson of the board upon Foley’s departure. She was first elected to the board as audit committee chair in 2019 and subsequently was named lead independent director in October 2021. She previously served as president, chief financial and administrative officer of Restoration Hardware where she led the company through growth, the transition to its current membership model, as well as through several key financial milestones and transactions.
As co-founder of Peloton, Kushi served as the company's chief legal officer since 2015. Over the course of his tenure, Kushi guided the execution of the company's mergers and acquisitions activities, crafted the novel music license deals and protected the company’s emerging intellectual property.
Tammy Albarrán will replace Kushi as chief legal officer and corporate secretary effective Oct. 3. In this role, Albarrán will manage the legal, compliance and policy functions. Albarrán served most recently as chief deputy general counsel and deputy corporate secretary at Uber Technologies Inc. During her time at Uber, Albarrán oversaw Uber's global legal teams and was a driving force behind the company's cultural transformation. Albarrán was also a key champion of the company's diversity, equity and inclusion efforts. Prior to Uber, Albarrán was a securities litigation and investigations partner at Covington & Burling LLP, working alongside former Attorney General Eric Holder. Together, Albarrán and Holder co-authored the report that resulted in profound changes at Uber.
CPSC Recommendation
In a filing with the SEC on Sept. 7, Peloton shared that the CPSC notified the company in August that its staff had concluded that Peloton failed to meet its statutory obligations under the Consumer Product Safety Act and would recommend civil monetary penalties, although the amount of those penalties was not disclosed.
“While we disagree with the agency staff, we are engaged in ongoing confidential discussions with the CPSC,” Peloton stated in its 2022 annual filing.
Peloton is also under investigation by the Department of Justice and the Department of Homeland Security related to its statutory obligations under the Consumer Product Safety Act.
The SEC also is investigating the company’s public disclosures concerning the Tread+ recall as well as other matters.
“We are cooperating fully with each of these investigations, and at this time, we are unable to predict the eventual scope, duration or final outcome of the investigations,” the company stated in the report.
Expansion of Rental Program
Peloton also shared that it is expanding its rental program nationally after testing it in select markets starting earlier this year. The program allows consumers to rent the Bike or Bike+ for a monthly fee that includes the cost of an All Access Membership.
Renters can return the bikes for free at any time or continue renting the bike indefinitely. They also can choose to buy the Bike or Bike+ at any time during their rental period.
Pricing for the Peloton Bike and All Access Membership is $89 per month with a $150 one-time setup fee. Purchase of the Bike after 12 months would be $895.
For the Peloton Bike+ and All Access Membership, the cost is $119 per month plus a $150 one-time setup fee. To purchase the Bike+ after 12 months, members would pay $1,595.