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Peloton hires McKinsey to review cost structure as equipment sales slow

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Peloton is working with the management consulting group McKinsey & Co. to review its cost structure and potentially eliminate some jobs, CNBC has learned.

According to CNBC, job cuts were the topic of a call that Peloton’s management team had with them recently. CNBC obtained a recording of a call with Peloton’s management team. It was suggested that the apparel division could be targeted, as it has experienced particularly poor sales. It doesn’t reveal its apparel sales.

According to Peloton, employees in its retail stores may be asked to answer customer service inquiries during slower times. Peloton executives on the call stated that fifteen stores are currently “on the cutline.” Peloton owned 123 showrooms across the U.S. as of June 30, 2010, in Canada, the U.K, Germany, and the U.S.

CNBC also looked at more than twelve messages that were sent from an app to employees and Slack messages. Workers have discussed the likely job cuts as well as Peloton’s declining stock price.

According to one employee who asked anonymity in order to talk freely to CNBC, “Morale is at an absolute low.” “The company is going so fast.”

CNBC reached out to Peloton for clarification but they didn’t respond immediately. McKinsey spokesperson declined to comment.

Peloton market cap fell to $10.2 million after shares plunged 76% in the last year. However, they rose more than 4440% in 2020. Peloton shares hit a 52 week low of $30.35 Friday, continuing the decline.

Jill Woodworth, chief financial officer of Jill Woodworth stated in November that she was searching for lower prices because the rate of new revenue growth has slowed significantly since the Covid pandemic’s early days when customers were seeking alternatives to gyms.

“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,” Woodworth said at the time.

Peloton was investing more to keep up with consumer demand. But, the company has been unable to compete in the market as consumers choose other options for fitness at home and return to the gym.

Peloton had 161,000 subscribers connected to their fitness service in September 30, the lowest number of new customers in eight quarters. Year-over-year revenue increased 6%, as opposed to the 250% growth in the same quarter of 2020.

Peloton is back in November implemented a hiring freeze. According to the annual filings, it employed 6743 Americans as of June 30, a more than twice the 3,281 workers it had a year ago.

Peloton begins at the month’s end tacking on hundreds of dollars in fees for delivery and assembly of its Bike and Tread productsThey cited historic inflation levels and increased supply chain cost as reasons. These fees used to be included in the cost of the Tread and Bike. This will increase the price of the products by $1,745 or $2,845, respective.

People are increasing prices right now. Ikea has just increased prices. In a recorded meeting, Dara Treseder from Peloton, chief marketing officer and communications officer said that they want to “go in the middle” of the pack.

Peloton can save money by asking customers in the future to pay shipping and set-up costs. This will allow them to make more profit, as they have been a significant drag on sales.

The company is currently posting losses, and it has stated that it does not expect to become profitable before interest, taxes and depreciation until fiscal 2023.

Early November the fitness company slashed its fiscal 2022 outlookThey project revenue in the range of $4.4 billion-$4.8 billion. That’s down from their previous estimate of $5.4 trillion. It also cut expectations for subscribers to a range of 3.35 million to 3.45 million, down from 3.63 million. 

Peloton is working with the management consulting group McKinsey & Co. to review its cost structure and potentially eliminate jobs, CNBC has learned.

Analysts have stated that they expect the company to experience a lower holiday in recent weeks. This could be a problem. prompt another cut to its annual guidance.

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