Peloton’s Change Superpower

By Douglas A. McIntyre Published Aug 16, 8:30AM EDT

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Peloton’s Change Superpower — © Andrei Stanescu / iStock Editorial via Getty Images

New Peloton Interactive Inc. (NASDAQ: PTON) CEO Barry McCarthy sent a long-winded letter to his staff to explain his plans to repair the broken company. He said Peloton would increase prices for some of its products. The approach is hard to explain since so few people want these products compared to a year ago. McCarthy wants customers to pay more for unpopular exercise machines.
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McCarthy also apologized to the people he fired. As he said goodbye, he pointed out that change is not easy.

McCarthy said the change has to become one of Peloton’s “superpowers.” It would be better to have said his own superpower management will pull Peloton out of a flat spin.
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The stock market has dumped on McCarthy’s plan and has been dumping on his plans since he joined the Peloton in February. The stock is off 62% this year. After a brief rally in the past several days, the stock has flattened. McCarthy’s complex plans have not drawn outside support.
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The company’s most severe problem was not mentioned in the letter. The demand for Peloton products has collapsed. Management will release new quarterly results soon. They are unlikely to be much different from the most recently released report, when revenue dropped by 24% year over year to $964 million. Peloton lost $757 million. In his recent employee letter, McCarthy said the company was in a cash crunch but probably would secure a loan for $750 million. It is a safe bet the loan will carry a very high interest rate, which will put more pressure on the turnaround.
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McCarthy has said Peloton cannot cut its way to profitability. In the meantime, his cuts have been tremendous. His repositioning of Peloton’s products has not been. It is hard to find evidence that any decision will increase product demand. People have gotten tired of Peloton equipment. Moreover, people who wanted one of its machines probably already have one.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.