By Alice Seeley
On Feb. 8, Peloton Interactive Inc. announced it will replace its CEO and co-founder John Foley with Barry McCarthy. McCarthy previously served as the chief financial officer for both Spotify and Netflix.
Foley will stay on as an executive chairman after leading Peloton for its entire ten-year existence.
Peloton agreed to pay McCarthy an annual base salary of $1 million and a maximum of $150,000 for relocation expenses. McCarthy also has the option to purchase 8 million shares of Peloton’s Class A common stock.
The company moved to change CEOs after a slowdown in demand caused its value to plummet. Peloton stocks have lost over 80% of their value in the past year, and the exercise equipment maker is pausing production of bikes and treadmills.
As gyms started fully reopening, Peloton’s business decreased dramatically. The company’s market value has dropped from $50 billion last year to $9.8 billion last month. Peloton expects further sales to decrease in coming quarters as the at-home fitness market declines.
In the last quarter, the company lost $439 million, and sales only grew by 6% from a year ago. Foley stated that Peloton saw “unprecedented demand” during the pandemic, but the company’s “post-COVID demand picture looks different than anticipated.”
In addition, the company cut revenue guidance to as much as $3.8 billion, down from $4.8 billion amid a major restructuring plan. Peloton will also cut 2,800 jobs, 20% of its workforce. The severance package includes a one-year membership to Peloton.
“It’s a classic case of Covid bump and Covid reality. The question from here is going to be, ‘Is this the appropriate valuation for a slower-growth company that still loses money?'” Equities analyst Randal Konik said.
After Peloton’s announcement on Tuesday, the company’s stock price went up 25%, a positive sign that investors may be willing to give Peloton the benefit of the doubt.
