Peloton Asks McKinsey To Review Cost Structure

Peloton has hired consulting firm McKinsey to review its cost structure, shutter unprofitable stores and potentially terminate some jobs.

The job cuts will likely affect the company’s apparel division, as Peloton has been struggling to boost its apparel sales. Additionally, the company is taking several other steps to reduce costs, such as asking store employees to take customer support calls during less busy hours and shuttering nearly 15 stores.

The company’s decision to cut back on costs comes at a time when it is continuing to lose business. Peloton saw its shares tumble by 76% after they rose by more than 440% in 2020, according to CNBC. The decline in stock value has reduced its market cap to $10.2 billion.

Peloton’s struggles began when the company recalled bike pedals of 27,000 bikes in October 2020, following reports of injuries. Fast forward to May 2021, the company issued another recall of about 125,000 treadmills after reports of a child’s death and 70 injuries. The debacle wiped off $4.1 billion from the company’s valuation in a single day.

The decline in the company’s performance is also seemingly impacting its workforce’s morale.

“Morale is at an all-time low,” said one employee, who requested anonymity. “The company is spinning out so fast.”

Other than reducing its workforce and store count, the company is looking to pass on some of the added costs that have come as a result of inflation and supply chain issues to its customers.

“Right now, people are raising prices. Ikea just raised prices. We want to go in the middle of the pack,” said Dara Treseder, Peloton’s chief marketing and communications officer.

By the end of January, Peloton will start charging customers hundreds of dollars in fees for the shipping and assembly of its products. These are expenses that the company believes have weighed heavily on its sales. Still, the company does not expect to become profitable until fiscal 2023.

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