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Home Business

New Peloton CEO Describes What Went Wrong At The Company: 'They Spent Money On Things That They Shouldn't Have'

by NewsReporter
February 19, 2022
in Business
Reading Time: 3 mins read
new-peloton-ceo-describes-what-went-wrong-at-the-company:-'they-spent-money-on-things-that-they-shouldn't-have'
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  • Barry McCarthy became Peloton’s CEO this month, replacing John Foley amid months of company turmoil.
  • In a New York Times interview on Saturday, McCarthy explained what went wrong at Peloton.
  • “They spent money on things that they shouldn’t have,” he said. “They got caught up in the vision thing at the expense of getting real.”

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Barry McCarthy has a lot on his plate as Peloton’s new CEO.

Peloton, a pandemic-era darling with a cult following, once boasted a valuation of nearly $50 billion. In recent months, however, the fitness company saw its biggest one-day drop in market value, laid off 20% of its corporate workforce, and reportedly paused bike and treadmill production amid plummeting demand.

In an interview with The New York Times’ DealBook on Saturday, McCarthy broke down exactly what Peloton got wrong.

“The cost structure got out of whack with revenues, and they spent money on things that they shouldn’t have,” he told DealBook.

Peloton poured hundreds of millions of dollars into its logistics network in recent years to keep pace with demand for its products. It opened new warehouses, bought a manufacturer in Taiwan in 2019, and spent $420 million to acquire fitness equipment maker Precor in 2020.

But when demand fell as the company’s pandemic popularity faded, Peloton fell prey to the bullwhip effect, with some employees previously telling Insider that warehouses grew so stuffed with bikes that it became like a jigsaw puzzle to try to find room to fit more.

Earlier this month, Peloton announced it was scrapping plans to build its own $400 million factory in Ohio and would scale back its number of warehouses and delivery centers in favor of third-party distribution as part of cost-saving measures expected to deliver roughly $800 million in savings per year.

In the DealBook interview, McCarthy also described another area where he believes Peloton fell short.

“They got caught up in the vision thing at the expense of getting real and dealing with the world as it is,” he said. “I mean, really, who thought that Covid was going to be the forever thing?”

Are you a customer or employee of Peloton? Contact this reporter at [email protected] using a non-work device.

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