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(Reuters) -Peloton Interactive Inc will replace its chief executive and cut about 2,800 jobs, the company said on Tuesday, as the exercise bike maker looks to revitalize sagging sales and win back investor confidence.
John Foley, the company’s co-founder who has led the company for nearly a decade, will step down and will become the executive chair. Barry McCarthy, the former chief financial officer of Spotify Technology SA (NYSE:SPOT) and Netflix Inc (NASDAQ:NFLX), will take the helm from Wednesday.
Foley has drawn the ire of activist investor Blackwells Capital in recent months as the company struggled to maintain the breakneck growth that propelled its valuation to $52 billion in early 2021. Shares have since tumbled nearly 80%.
The investment firm called for his removal and even urged the company to sell itself, blaming the stock’s underperformance to “gross mismanagement”, Foley’s poor decision making and a lack of credibility.
Blackwells, however, said Tuesday’s moves did not address investors’ concerns.
“Foley has proven he is not suited to lead Peloton (NASDAQ:PTON), whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done (on Tuesday),” Jason Aintabi, Blackwells’ chief investment officer, said.
Peloton said it appointed two new directors, Angel Mendez and Jonathan Mildenhall, to its board. Erik Blachford, who has served as a director since 2015, will step down.
While Peloton has attracted interest from potential buyers including e-commerce giant Amazon.com Inc (NASDAQ:AMZN) and Nike Inc (NYSE:NKE), according to media reports, analysts have said the company might be a difficult takeover target as it has two classes of stock, effectively allowing insiders to control it.
“There will be hopes Peloton will turn a corner with a new CEO in the hot-seat, and plans for a dramatic slimming down,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown (LON:HRGV).
Shares of the company reversed course from premarket and rose 10% in early trading on Tuesday. They had gained about 21% on Monday following reports of the buyout interest.
DOWNHILL
Peloton’s sales boomed during COVID-19 lockdowns, with many snapping up home fitness equipment. But fortunes began to fade as vaccinations increased, gyms reopened and rivals offered competitive products.
The company responded by slashing prices to make its bikes more affordable but that did little to stem the slide.
Peloton will also cut roughly 2,800 jobs, affecting 20% of its corporate positions, after announcing last month it was reviewing the size of its workforce.
The reductions will not impact its storied roster of fitness instructors and interactive online content.
The company on Tuesday also slashed its forecast full-year revenue expectations after it reported a bigger-than-expected quarterly loss.
“They came out this morning with lower guidance, CEO is leaving but obviously there is still a potential that we could see a deal… that is why it is not getting as hit,” said Dennis Dick, head of markets structure, proprietary trader at Bright Trading LLC.
Peloton will wind down the development of its planned factory in Ohio, where it was set to invest about $400 million and add more than 2,000 jobs over the next few years.
