Bike manufacturer Peleton Interactive Inc is set on a massive sweeping overhaul that would involve laying off around 800 employees. Along with it, it would increase the prices of some of its products such as the Tread machines and Bike+, and outsource external functions like article delivery and customer services.
The firm announced this move in a memo sent to the staff on August 12, which additionally involves the slow closure of a range of its retail stores. Notably, this would come across as an extensive change under CEO Barry McCarthy, who took charge earlier this year. Peleton is mainly aiming to get back the business which went through a slump after the pandemic.
The CEO stated how the company has to stop the shrinkage of its earnings, and facilitate adequate growth, mentioning the need to get its cash-flow back to positive. This lead to share rising by 14% to $13.53 signifying the largest one day rise in over 3 weeks.
This round of job cuts would come as Peleton’s third one, where it will let go of about 784 workers mainly in its customer service and distribution sectors. It would suspend the use of its in-house workers and vans for the delivery of articles, and shut 16 warehouses in the continent. From now on, it would depend on partners of third party logistics of equipment, which it already makes use of.
Issues with 3PL and other concerns:
Findings showed how most of the buyers did not find the idea of third party logistics appealing, mostly for not being a match to Peleton’s own services. The CEO stated how though they may not be able to fix this shortcoming, they would find a way to make it work through necessary managements.
Additionally, the company is letting go of 50% of its customer support sector focused in Arizona and Texas, for which it will also use third party companies. The impact on warehouse and deliveries would lead to the elimination of about 532 jobs, with an additional 252 through the impact on support teams.
The firm is increasing the prices of its products Bike+ to $2,495 from $1,995, with its Tread treadmill to $3,495 from $2,695. These hikes are mainly aimed at generating sales. It went on to address its intentions of going through an essential lessening of its retail footprint from the starting of next year. Significantly, these decisions come in six months following the appointment of the new CEO.