WSJ News Exclusive | Peloton to Cut 500 More Jobs in Last Bid for Turnaround

The job reductions, announced to staff on Thursday, will leave Peloton with roughly 3,800 employees globally, less than half the number of people the company employed at its peak last year. It also has eliminated about 600 more jobs since June than previously disclosed through retail store closings, attrition and other moves, Peloton said.

Mr. McCarthy said that the latest cuts mark Peloton’s final significant move to reduce its operating footprint and that executives would now focus on increasing revenue. He said the cuts are companywide but would be heaviest in its marketing operation, which he said is too big for a company of Peloton’s size.

“There comes a point in time when we’ve either been successful or we have not,” Mr. McCarthy said in an interview.

“If we don’t grow,” he said, before pausing. “We need to grow to get the business to a sustainable level.”

The company has reported six straight quarterly losses, culminating in a $1.2 billion loss in the most recent quarter. Demand for Peloton’s bikes and treadmills has plunged and the number of people who subscribe to its fitness classes has stagnated as Americans return to pre-Covid routines and, more recently, confront decades-high inflation.

Mr. McCarthy said he sees evidence that Peloton can succeed. 

He said the company has drastically reduced the amount of cash it is burning through by cutting jobs, outsourcing all manufacturing and reducing costly unsold inventory, and isn’t at risk of running low on funds. Peloton went through more than $1.7 billion in cash in the past three quarters combined, ending June with $1.25 billion in cash reserves and a $500 million credit line.

The new management team is clicking, according to Mr. McCarthy, who said he believes Peloton’s near-term growth targets remain acheviable. 

Employers’ total job openings declined 10% in August and layoffs rose, providing the latest signs that the labor market, while still strong, is cooling. More companies, from Facebook owner

Meta Platforms Inc.

to

Snap Inc.

and

Stanley Black & Decker Inc.,

are cutting jobs, while others including

Amazon.com Inc.

and

Alphabet Inc.’s

Google have said they would freeze or pull back on hiring.

Peloton employed about 3,700 people near the start of the pandemic, and grew to more than 8,600 in 2021 as the company scrambled to meet explosive demand, adding employees internally while acquiring equipment manufacturing operations in a bid to quickly expand capacity.

Peloton in February said it would cut 2,800 jobs and replace co-founder

John Foley

as CEO with Mr. McCarthy, who previously was finance chief at

Spotify Technology SA

and

Netflix Inc.

In July, Peloton said it would cut about 500 Taiwan-based manufacturing jobs. A month later, it announced plans to cut 530 employees from its North American delivery workforce and 250 customer-service positions in North America. 

“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,” Mr. McCarthy said in an internal memo to employees provided by the company. 

Separately, Peloton is exploring a sale of its Precor commercial fitness-equipment unit less than two years after acquiring the business, according to people familiar with the matter. 

Peloton acquired Precor in April 2021 for $420 million, part of the company’s effort to add production capacity. The unit employed 791 people as of June 30, according to a company filing. 

The company is working to hire its first chief marketing officer since it went public in 2019. Mr. McCarthy said he wants an executive with experience running a high-profile brand.

Dara Treseder,

the company’s global head of marketing, communications and memberships, announced last month that she was leaving the company and taking over as chief marketing officer of

Autodesk,

a design and manufacturing software business.

Peloton last week said it would begin selling its exercise equipment at

Dick’s Sporting Goods Inc.

stores, expanding the fitness gear company’s reach to bricks-and-mortar stores outside of its own retail locations. On Monday, the company said it would put bikes in all 5,400 Hilton-branded U.S. hotels.

The company also has started selling equipment and clothes through

Amazon.com Inc.’s

e-commerce platform and lets people rent bikes through a subscription.

Mr. McCarthy has said his strategy is to tap new customers and increase the profitability of its subscriptions, while reducing the company’s reliance on bikes and treadmills to deliver profit.

“The perception for a long time publicly has been that the business is failing,” he said. “I think that perception is out of alignment.”

Wall Street has mixed views on Peloton’s growth prospects. 

“We fear growth is in the rearview and attempts to keep expanding will prove profit eroding,” BMO Capital Markets analyst Simeon Siegel said in a research note following the company’s latest results. He noted that subscriber loyalty remains high, but it has begun to flag.

JMP analyst Andrew Boone said moving into retailers could help Peloton boost demand. “We continue to view Peloton as offering a best-in-class connected fitness experience and believe it can sustain growth through a combination of international expansion, domestic share gains, and through its digital app,” he wrote in a research note. 

Peloton shares have fallen nearly 95% since their December 2020 high topping $160. 

“I can see in the numbers the business starting to change course,” Mr. McCarthy said. “Which is part of what gives me confidence when I say that I think this is the last step in the process.”

—Cara Lombardo contributed to this article.

Write to Sharon Terlep at [email protected]