Peloton is laying off about 800 employees and shuttering stores, Bloomberg reported Friday. A number of employees over the weekend said they learned they were let go when they were shut out of the company’s systems, according to several LinkedIn posts.
The layoffs follow a global workforce reduction of 2,800 employees announced in February, including a corporate staff cut of 20%. Peloton didn’t immediately return a request for comment on the more recent layoffs, what percentage of its workforce is affected at this time, how employees were informed or how many stores will close.
The at-home fitness bike company on Friday also announced price hikes on some models that will affect customers in the U.S., Canada, the U.K., Germany and Australia. The announcement follows subscription price increases that took effect June 1.
Peloton’s pandemic-related boom has fizzled, and the company has been scrambling to check its free-fall since early in the year.
“Peloton’s latest round of cuts is a continuation of the company trying to right-size itself after grossly overestimating post-pandemic demand for its products,” GlobalData Managing Director Neil Saunders said in emailed comments. “While Peloton has already taken some corrective action, its losses are spiraling out of control and there is a desperate need to course correct to stabilize the balance sheet and restore investor confidence.”
The company’s move to raise its prices comes with some risk, according to research from MKM Partners, which found in July that 10% of existing subscribers could cancel their all-access membership due to the June 1 price hike. That could undermine its 2023 subscriber outlook, those analysts said.
Inflation has taken a bite out of discretionary spending and led many U.S. consumers to forego or postpone purchases of big-ticket items, according to a report from Morning Consult earlier this month.
Closing its stores is less fraught. While opening stores has been instrumental in improving some DTC brands’ customer acquisition records, physical locations were probably of minimal value to Peloton, especially as consumers return to gyms and workout classes and spend less, according to Saunders. The company opened showrooms in better malls, and the company can’t afford their steep rent, he said.
“In theory the outlets should have captured a lot of footfall, which was Peloton’s original intent in opening them,” he said. “However, the very niche nature of the offer and the extremely limited range meant that they suffered from a dearth of customers.”
However, closing its locations won’t end its troubles, according to Saunders. “[T]he brand must now double down on its direct selling efforts to generate success,” he said. “However, there are still serious question marks over the demand for its products.”