Peloton CEO John Foley: From fitness star to crisis manager

John Foley

The head of the fitness bike manufacturer has recently had to practice crisis communication.

(Photo: Bloomberg)

new York In recent years, the 51-year-old founder and CEO of Peloton has really only known growth. John Foley has been able to more than double the sales of the luxury fitness equipment manufacturer in New York in the last three fiscal years – most recently to more than four billion dollars.

But this week, crisis communication was the order of the day: After the television station CNBC reported that Peloton intends to put its production of stationary bikes and treadmills on hold for several weeks, the share price fell by almost 24 percent – well below the listing price of 27 dollars.

Foley responded with a public note to his employees: “The rumors that we are stopping all production of bicycles and treadmills are false,” he wrote Friday night.

The information is “incomplete, taken out of context” and does not reflect Peloton’s strategy. Foley said it was known who leaked the confidential information and the person was facing legal action.

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The share price reacted to the reconciliation on Friday with a gain of almost twelve percent.

The market environment is becoming more difficult

But even if the individual details are not correct, or production is not completely paused, one thing is certain: With the end of the pandemic, the market environment for corona winner Foley will become more difficult.

When people all over the world had to spend their time in their own four walls and the gyms closed their doors, the Peloton model boomed: After all, the expensive, elegant exercise bikes not only allow physical training in lockdown, the associated subscription also allows you to cycle live with real coaches and with other home athletes to compete.

Training in the living room, company incl. Many people were willing to pay $ 2,000 for the bike and $ 39 a month for a subscription.

But the gyms are now open again, and Omikron is hardly deterring their customers. It marks the Peloton in terms of declining demand. At the same time, the company’s costs have risen sharply – partly due to rising material prices, also driven by the unexpectedly rapid growth.

According to media reports, Foley has commissioned McKinsey’s management consultants to look for ways to reduce costs. For there is one thing the Peloton has failed to do in record years: to make a profit.

Fatal accident and the “Sex & The City” scandal

For Foley, dealing with the bad news is the third test in twelve months: In April last year, a six-year-old child died from his parents’ unit because he had been pulled under the belt. The Consumer Agency requested a recall, but the Peloton founder and CEO initially declined before admitting his mistake.

In December, the new edition of the successful American TV series “Sex & The City” Mr. Big, one of the main characters, to die of a heart attack right at the beginning of the new season after hard training on his peloton bike. It also caused the stock price to fall by eleven percent.

Foley then got the internal chief cardiologist to explain that Mr. Big’s heart attack was due to his lifestyle – cigars, cocktails, steaks. The peloton even filmed his own commercial with Mr. Big actor Chris Noth, who sat alive and kicking on his Peloton bike. But the place did not last long: Two women accuse the 67-year-old actress of previous sexual assaults, which is why the Peloton no longer broadcasts the place.

Foley, an avid cyclist himself, founded the Peloton in early 2012. He brought with him many years of management experience: The New Yorker with an MBA from Harvard Business School has already worked as CEO of the online invitation platform Evite and as head of online sales at the bookstore chain Barnes & Noble. The peloton is one of the most famous fitness brands in the world today, with fans including singer Jennifer Lopez, actor Hugh Jackman, US President Joe Biden and athletes Usain Bolt and David Beckham. Some of the coaches have real fans.

According to a report in the Wall Street Journal, activist investor Blackwells Capital is now preparing a push to replace Foley. In addition, a sale of Peloton to a major technology or fitness group is to be investigated, according to the report. Neither the Peloton nor Blackwells commented on the report.

The cost has exploded

However, Foley acknowledges that the pandemic has made planning extremely difficult and the company needs to adjust production. “With the Covid-19 pandemic, we suddenly found ourselves in a situation that occurs every hundred years,” he explained. “And what we expected within the next three years happened within months of 2020 and early 2021.” He did not directly comment on reports of thousands of fitness bikes and treadmills waiting to be sold in department stores and cargo ships. It is also unclear what will become of the Ohio plant, which the Peloton plans to launch in 2025. Observers are hoping for more detailed information when the Peloton presents quarterly figures on February 8th.

Baird analyst Jonathan Komp writes to customers that Peloton has “built up an inflated belly of corporate costs” after years of aggressive growth. He estimates the company added an additional $ 500 million to $ 600 million in annual costs that could well be cut. This applies to both stores and staff.

More: Kettler as growth driver: Trisports CEO Melanie Lauer is dependent on the German fitness brand

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