Peloton is cutting about 400 jobs worldwide as part of a restructuring effort and its CEO Barry McCarthy is stepping down after two years as the company continues to work on turning around its business.

Shares slid 12%, to $2.81.

Peloton has been working on a significant rebranding since last year, shifting its identity as a seller of luxury exercise bikes and equipment to health technology for all.

Impact of the Pandemic on Peloton

The New York company experienced incredible sales growth during the height of the coronavirus pandemic. Its share price multiplied by more than five times in 2020 amid lockdowns that made its pricey bikes and treadmills popular among customers who pay a monthly fee to participate in interactive workouts.

But sales began to slow in 2021 as vaccines allowed people to roam more freely from their homes, including visits to the gym.

Financial Struggles and Job Cuts

The company lost $1.26 billion in the fiscal year ended in June and an additional $350 million in the six months ended in December. Free cash flow, or the money left over after paying the costs of running the business, was a negative $470 million in fiscal 2023.

The losses continue. Peloton reported Thursday that for the third quarter it lost $167.3 million, or 45 cents per share, While that’s better than the loss of $275.9 million, or 79 cents per share, that it reported a year earlier, the performance fell short of the loss of 39 cents per share that analysts polled by Zacks Investment Research expected. Revenue totaled $717.7 million, below Wall Street’s estimate of $719.9 million.

It lowered its full-year revenue guidance by $25 million to a range of $2.675 billion to $2.7 billion, a dip from last year’s $2.8 billion in revenue.

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Restructuring Efforts and Leadership Changes

Peloton Interactive Inc. said Thursday that the job reductions amount to approximately 15% of its global headcount. The restructuring efforts, which are expected to lower its annual run-rate expenses by more than $200 million by fiscal 2025’s end, also include continuing to close retail showrooms.

The job cuts are just the latest round for the company, which announced in October 2022 that it was cutting about 500 jobs on top of the nearly 800 layoffs it made in August of that year.

McCarthy, who is also stepping down from his president and board member posts, will remain with Peloton as a strategic adviser through the end of the year.

McCarthy had taken over the CEO post from founder John Foley to right a business that had suffered from numerous stumbles, from marketing missteps to recalls. During his tenure, he made a hard push to shift Peloton’s focus from high-priced hardware, to software and a fee-based app.

In a note sent to Peloton’s team this morning, McCarthy said that the newly announced job cuts were a moment of “dealing with the world as it is and not as we want it to be.”

“Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue,” he wrote.

Peloton said that Chairperson Karen Boone and director Chris Bruzzo will serve as interim co-CEOs while a search is conducted for its next CEO. Board member Jay Hoag will become the new chairperson.