[Editor's Note: This story has been updated with a statement released by Peloton on Oct. 6.]
Peloton will lay off 500 employees, about 12 percent of its workforce, according to a memo that Peloton CEO Barry McCarthy sent to employees on Oct. 5 and was first reported by the Wall Street Journal.
This is the fourth round of layoffs for the public at-home fitness equipment company that saw its revenue climb during the COVID-19 lockdowns but then experienced revenue declines as COVID-19 cases decreased and people returned to gyms. It comes as the company expands its partnerships and settles a lawsuit with Lululemon.
With the layoffs, which will be most felt in its marketing operations, Peloton will have 3,825 employees, down from the 6,700 employees it had at the end of June 2021, according to the New York Times.
“The restructuring is done with today’s announcement,” McCarthy told CNBC. “Now we’re focused on growth.”
The restructuring of Peloton’s business and capital structure to assure its long-term health is complete, and management’s focus is now on growth, the company said in a statement on Oct. 6. In the statement, McCarthy reiterated his belief in the lasting resilience of the Peloton business and thanked departing team members for their contributions to the business.
He said: “I joined Peloton for the comeback story, not to sell the business. And today 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. If my comments to the WSJ suggested otherwise, then I misspoke, as that is simply not true.
“Restructuring a business requires difficult decisions that affect people’s lives. I’m grateful for the many contributions of those who have been impacted. The changes we have made, combined with the performance of the business, are moving us closer to our fiscal year-end goal of break-even cash flow, with a renewed focus on growth. We are in the business of driving performance, and the business is indeed performing. By any measure, we have made remarkable progress in record time.”
McCarthy took on the CEO role in February after co-founder John Foley became executive chair of the board. Foley and co-founder Hisao Kushi then resigned completely from the company in September and Oct., respectively. Since taking on this role, McCarthy has implemented several efforts to improve the company’s balance sheet, including shuttering many of its 86 retail stores in North America and moving to third-party manufacturing of its products as well as layoffs.
In September, the company settled a lawsuit with Lululemon. Lululemon had accused Peloton of infringing on six of its patents related to bras and leggings. In the settlement, Peloton did not admit wrongdoing but agreed to phase out the designs with which Lululemon took issue.
Peloton also entered into multiple partnerships recently. On Oct. 3, Peloton announced that a partnership with Hilton would lead to Peloton Bikes being included in nearly all 5,400 U.S. Hilton-branded hotels by the end of this year.
Other partnerships announced in September include one in which Dick’s Sporting Goods will sell Peloton's hardware products – including the original Bike, Bike+, Tread and Guide – and select accessories via branded fitness shops inside more than 100 Dick’s U.S. retail locations and on its e-commerce platform. The rollout is slated to launch early in the holiday season.
Peloton also renewed and expanded its relationship with UnitedHealthcare, part of UnitedHealth Group, in September. This partnership now allows 10 million UnitedHealthcare commercial members to be eligible for a yearlong subscription to the Peloton App Membership – or receive a three-month waiver toward a Peloton All-Access Membership – at no additional cost as part of their health benefits. In addition, eligible UnitedHealthcare members in most states will receive preferred pricing on select Peloton connected fitness products, including the Peloton Bike, Bike+ and Tread.
Also in September, Peloton released its Peloton Row machine, the first of which should begin delivery for the holidays, and expanded its rental program allowing consumers to rent the Bike/Bike+ for a monthly fee that includes the cost of an All Access Membership.