Blocking app access warns of layoff of nearly 3,000 at Peloton

On Monday night, some Peloton employees noticed they couldn’t access work productivity apps like Slack and Okta. Employees were told about a scheduled maintenance window that could cause service disruptions, according to one employee, but that didn’t stop others from preparing for the worst.

“I’m freaking out,” he told the CNN Business another former employee of the company who worked in the product department.

He said co-workers frantically texted while speculating about what might happen the next day. Peloton was reporting its earnings on Tuesday, and weeks earlier CEO John Foley said the company was reviewing its costs and that layoffs could occur.

The employee, who like others spoke on condition of anonymity for fear of career repercussions or jeopardizing his severance pay, said he woke up Tuesday with an invitation to a one-on-one video call with a department leader.

The employee was told that he was among the 2,800 people who lost their jobs. The layoffs hit people in a number of areas, including engineering, sales and marketing, as well as those carrying out product deliveries to consumers, according to posts made by former employees.

Workers received a severance package that included cash compensation, extended health coverage, and capital acquisition, plus an unusual solace: an additional year of free All Access membership to Peloton’s subscription services, something workers received as a benefit.

A former employee, who described the termination package as “generous,” said the extension of access seemed a little insensitive, even if the company had good intentions. “I don’t know when I’ll be in a place where I’m going to go enthusiastically like a Peloton again,” she said.

The employee who worked in the product department said his initial reaction was to think it was a joke, but added that he would still take advantage of the package offered by the company.

The sweeping layoffs and news that Peloton founder John Foley would step down as CEO after a decade ended months of turmoil at the popular fitness company. Alongside other stakes during the pandemic like Zoom, Peloton had been a Wall Street darling for much of the previous two years.

For many of those who lost their jobs, the circumstances surrounding the layoffs represented a markedly pandemic end to their time at the company.

rise and fall

As much of the world went through one lockdown after another, Peloton saw unprecedented demand for its bikes and treadmills, combined with a monthly subscription to virtual exercise classes. Brand leadership looked for ways to meet and capitalize on the high demand for their products.

In May 2021, the company said it would commit $400 million to building the first factory in the United States in order to resolve delivery delays. It also invested in launching a private label apparel line, announced in September 2021 and founded by Foley’s wife Jill Foley. She would also be among “other senior-level layoffs in various areas of the company.”

But the company faced other public challenges during the pandemic. Also in May, the company recalled its treadmills over safety incidents, after weeks of bickering with federal regulators, and apologized for not complying with the requirements sooner.

In November, the company acknowledged that the demand for its hardware had diminished. This slowdown has come as more consumers have returned to gyms. In late January, Peloton shares dropped to $25, their lowest since late March 2020, in the early days of the pandemic. At its pandemic-fueled peak in December 2020, the company’s stock topped $162 a share.

This week, Peloton shares jumped on news of organizational changes, closing at $37 on Thursday (10).

In a call with investors on Tuesday, Foley acknowledged “missteps”, including scaling his operations “very quickly”. He continued: “We own this. And we are taking responsibility. It starts today.” In the same call, CFO Jill Woodworth said Peloton planned to sell “both the building and the land” for the future factory by the end of fiscal 2023.

In response to questions, a Peloton spokesperson directed the CNN Business for recent posts on the company blog. In the post about the organizational changes, Foley framed the restructuring as “back to basics”.

In interviews with CNN Businessworkers expressed a mixture of frustration with management for what they saw as a failure to properly anticipate an inevitable drop in demand as the pandemic eased, as well as some relief that reality had set in after months of uncertainty.

An employee who worked on the field operations team doing deliveries and setting up products in homes told CNN Business who has personally seen demand slow down. While he initially worked 40 to 60 hours a week in late 2020 and early 2021, he said his hours have noticeably decreased to 10 to 20 hours a week a few months later.

“You have to think that there are a number of people. In other words, there’s a limit to how many products Long Island can get,” he said, noting that this was his delivery zone. “At one point, something was about to happen. I didn’t know how quickly.”

Perhaps more than anything, employees felt a whiplash in the rapid rise and fall. The workers with whom CNN Business talked joined the company during the pandemic, when the company was at its peak.

“They were developing new things, hiring like crazy, paying well. All the things you look for in a company,” said the employee who panicked the night before. He said his job offer at Peloton was more competitive than some FAANG companies had presented in interviews.

Support Community on Linkedin

Hours after the layoffs, many impacted employees posted on LinkedIn about losing their jobs. The individual posts were quickly met with a wave of admiration and support from Peloton co-workers. A post by former brand manager Colin Burke has apparently gone viral with over 14,000 likes.

“By Tuesday night, the shock of being fired evolved into the shock of seeing so much support. I received hundreds of messages from friends, family, and, in many cases, strangers mobilizing to offer whatever help they could.”

Peloton said it was partnering with outplacement services firm RiseSmart to provide career assistance, including creating an official talent directory for former employees to help connect them with other employers. Meanwhile, recruiters and managers from companies including Amazon, Microsoft, Coinbase and Meta took the opportunity to publicize job opportunities on the platform for affected employees.

While many of those laid off quickly lost access to any remaining company apps and services, some reportedly found a way to tune into Peloton’s network on Wednesday, where Foley and new CEO Barry McCarthy addressed employees.

According to CNBC, some current and former employees made angry comments through the meeting’s chat feature. A company spokesperson declined to comment on the incident.

Former employees told CNN Business that, prior to the layoffs, the company had announced a change to its meeting protocol to ensure entry via a work device, so former employees would not have access.

Regardless, as a former employee told CNN Business: “I’m really glad I wasn’t there. I think trust is broken.”