Peloton Makes ‘Hard Choices,’ Cutting 800 Jobs, Outsourcing Some Operations

Luxury stationery bicycle- and treadmill-maker Peloton is cutting jobs and prices, and requiring employees to return to working in company offices three days per week, according to a memo from the company’s CEO to employees obtained Friday by media outlets.

The changes are intended “to make Peloton more efficient, cost effective, innovative, and to best position ourselves for the future,” CEO Barry McCarthy wrote.

The job cuts — reports put the figure at 800 — are necessary as part of a plan to make more costs variable, and therefore adjustable in line with the seasonality of the company’s business. McCarthy stated that Peloton will shift at least some delivery operations to third-party companies and close U.S. warehouses.

In addition, McCarthy said, Peloton will outsource significant portions of its customer-support operations.

“These are hard choices because we are impacting people’s lives,” he wrote. “These changes are essential if Peloton is ever going to become cash flow positive. Cash is oxygen. Oxygen is life. We simply must become self-sustaining on a cash flow basis.”

Peloton lowered prices on some products in April to drive case flow when doing so was essential, he wrote, but with $750 million of bank financing in place the company will increase prices on higher-end products. Its Bike+ will increase by $500 to $2,495 and its Tread by $800 to $3,495.

Related: Peloton Puts the Brakes on Bike Production

In January, Peloton halted production for two months to balance inventory levels.

“This pricing change achieves three objectives – we maintain an attractive entry point for new Members; we continue to sell down excess Bike v1 inventory, creating a financial tailwind on investments already made; and we maintain our position as the undisputed premium brand in the Connected Fitness category,” he wrote.

Peloton also will increase spending on technology and marketing, McCarthy wrote.

As for returning to working in company offices, McCarty gave employees until Nov. 14 to start coming in on Tuesdays, Wednesdays and Thursdays, but asked them to try to by Sept. 6.

“There are many successful businesses, like Airbnb and Spotify, who have chosen to operate remotely. There are also many successful companies who have opted to collaborate in the office in person, like Nike and Google. The culture you choose to work in should be compatible with your personal preference. For those of you who don’t want to return to the office, we respect your choice. We hope you choose to stay, but we understand not everyone will.”