This morning, CNBC began reporting that Peloton has hired the McKinsey consulting group to “review its cost structure and potentially eliminate some jobs”
Update – Business Insider has provided some additional details as well, which we cover later on.
According to CNBC report, Peloton has been discussing the potential job cuts on recent calls with their management team. Additionally, the Peloton is examining around 15 of their 123 showrooms for potential closure.
From CNBC’s report:
The potential job cuts were discussed in a recent call with members of Peloton’s management team, according to a recording obtained by CNBC. The apparel division, which has seen particularly weak sales, is one area that could be targeted. The company doesn’t disclose revenue from its apparel business.
Peloton is also considering asking employees at its brick-and-mortar retail stores to take customer service calls during less busy times, according to the call. At one point, a Peloton executive on the call said that 15 stores are “on the cut line.” Peloton operated 123 showrooms as of June 30, in the U.S., Canada, the U.K. and Germany.
Neither Peloton nor McKinsey replied to CNBCs request for comments on their report.
Since publishing, it appears Business Insider also acquired the same recording CNBC did – and are sharing some more details in a new report (which is behind a paywall).
The recording indicates Peloton has created a “Project Fuel” as the internal team looking into how to make the cuts. On the call, Business Insider reports the team discussed “plans to lay off 41% of the sales and marketing teams, with more minor cuts coming to the e-commerce and retail teams”. Some of the cuts might be made through cutting people who had low performance reviews recently, while others might be through removing redundancies. Another topic discussed was whether the team should make less custom merchandise, and go back to more co-branded partnerships with other companies.
All of this news comes just days after Peloton also announced they would be increasing the total effective cost of their Bike & Tread. In some countries, this will be done by beginning to charge for delivery & setup again after years of having it included in the price. In other markets, the total retail price is being raised.
We previously reported that Peloton had changed the pay & bonus structure of their showroom employees in an effort to cut costs. For some employees these changes had resulted in pay cuts of around 30-60%.
This cut came following Peloton’s Q1 2022 earnings call, where the company announced they were revising their forecasts for the year due to lower than expected demand – a move that sent the stock price down 30% overnight.
During that call, Peloton was already discussing the potential for optimizations & efficiencies – it would appear that bringing on a consulting group is the next phase of this process:
In response to our revised sales and margin outlook for fiscal 2022, we have identified material savings across our operating expenses. So, some of these actions may take a quarter or two to show improvement. Some of these identified areas of savings include making significant adjustments to our hiring plans across the company, optimizing marketing spend and limiting showroom development, identifying areas of efficiency, improvement in member support and streamlining our product development teams, while maintaining a focus on new products and expanding software features.
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