Peloton CEO Barry McCarthy to Step Down Amid Fresh Layoffs Fitness-equipment company to cut 15% of staff, war

It hasn’t been enough. The company is still losing money, straining to find new subscribers and staring up at a hefty pile of debt.

“I once described turnarounds as a full contact sport; intellectually challenging, emotionally draining, physically exhausting, and all consuming,” McCarthy wrote in a memo to staff. “From where I sit today, that pretty much summarizes my experience these last two years.”

His exit leaves the company searching for a new leader as it undergoes another restructuring. The company has warned of cash-flow issues and continued losses amid a decline in paying subscribers and an equipment recall that dented profits.

Peloton is up against looming debt maturities, including $1 billion in convertible notes and a $700 million term loan, which the company must address in the near term. Peloton said Thursday it is actively working with its financial advisers on a refinancing strategy.

The company had about $800 million of cash reserves as of March.

The board’s chair, Karen Boone, and fellow director Chris Bruzzo will take over as interim co-CEOs. Another director, Jay Hoag, the founder of venture-capital firm TCV, one of Peloton’s biggest investors, has been named the board’s next chair.

McCarthy, 70 years old, will remain an adviser to the company through the end of the year.

The company said Thursday that it would continue to reduce its retail-showroom footprint as part of its restructuring program aimed at reducing annual expenses by more than $200 million.

Shares fell about 2% to $3.15 in early Thursday trading. The stock, which hit a high above $160 in late 2020, has tumbled after the pandemic boom in at-home workouts faded and as people returned to gyms.

McCarthy replaced Peloton co-founder John Foley in 2022 as Peloton’s boom and bust left shareholders with deep losses. He sold off manufacturing units and started selling its bikes on Amazon and at retailers like Dick’s Sporting Goods.

McCarthy aimed to create a business model driven by subscriptions that was less reliant on equipment sales. But the company in February said it would gain few paying connected-fitness subscribers this fiscal year, which ends in June.

Foley’s departure came as activist Blackwells Capital was pushing the board in early 2022 to fire the co-founder and pursue a sale. Suitors including Amazon circled the company around the time, but the talks never resulted in a deal. Foley owned a special class of shares that gave him control of 17% of the shareholder vote, according to the latest proxy filing.

Blackwells in September wrote privately to Peloton’s board again—saying that it believed top leadership had taken the company to “astonishing new lows,” according to a letter reviewed by The Wall Street Journal that hasn’t previously been reported. Then, in February, Blackwells sent another letter to the board calling for McCarthy’s ouster and for the company to sell itself to a strategic acquirer.

“We question why this Board continues to allow him to run Peloton into the ground,” Blackwells’s letter to Peloton’s board, dated Feb. 1, says.

Peloton didn’t immediately respond to requests for comment about Blackwells’s letters.

Peloton has had several rounds of layoffs as the company tried to adjust to falling demand for its equipment. The company, which had more than 8,000 employees in 2021, had around 3,500 global employees as of June 2023.

“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,” McCarthy wrote in his memo.

On Thursday, Peloton said it was trimming its full-year outlook for both revenue and paid fitness subscriptions by about 1% based on flagging hardware demand, calling the current quarter its “most challenging quarter to grow” as the weather warms.

In its latest completed quarter, Peloton’s revenue slid 4% to $717.7 million.

Membership declined by about 1% during the March quarter. Peloton ended the first three months of the year with 3.06 million paid subscribers.

Write to Lauren Thomas at lauren.thomas@wsj.com and Dean Seal at dean.seal@wsj.com