Peloton to Lay Off Nearly 800, Close Physical Stores and Raise Prices

After a turgid year facing cash flow problems that saw fitness equipment manufacturer Peloton’s stock crater by 90 percent, Peloton CEO Barry McCarthy released more bad news last week: The company will lay off nearly 800 employees and close stores as part of a restructuring effort.

The grim announcement not only extends to Peloton staff, but to customers of the premium-branded bicycle and treadmill maker. The company will raise prices on some of its top products, and its customer support team will be cut as the company begins shuttering showrooms starting next year, The Verge reports.

A new retail model, based on a hybrid of e-commerce and “limited” physical locations, will result in a “significant and aggressive reduction” of Peloton’s store fleet, according to an internal memo published by Business Insider.

“These are hard choices because we are impacting people’s lives,” McCarthy says in the memo. “These changes are essential if Peloton is ever going to become cash flow positive. Cash is oxygen. Oxygen is life. We simply must become self-sustaining on a cash flow basis.”

Additionally, the company is closing its North American warehouses, which will result in a “significant reduction in our delivery workforce teams.” Peloton instead plans to use third-party logistic providers for is final-mile deliveries.

Peloton is also turning to third-party providers for its manufacturing. Last year, 600 in-house workers lost their jobs with the closing of Peloton’s manufacturing facility in Taiwan. Earlier this year, the New York-based company scuttled the plans for constructing a $400 million factory in Ohio, The New York Post reported in February. 

A price hike of Peloton’s Bike+ by $500 dollars to $2495 and its Tread raise by $800 to $3,496, is part of a “nuanced pricing strategy” says McCarthy. The increase on its advanced Bike+ and Tread models are intended to retain Peloton premium status in the fitness market. Prices will remain the same on its lower-end Bike v1 and Guide models, allowing Peloton to sell down an excess Bike v1 inventory and maintain entry-level products, says McCarthy.