Peloton's Rise and Fall: A Cautionary Tale of Poor Leadership

At its height, exercise brand Peloton was valued at $50 billion, but is now said to be worth less than a fifth of that amount. With its chief executive John Foley, who co-founded the company more than a decade ago, having stepped down and sold much of his stock, as well as 2,800 Peloton employees expected to be let go, the firm’s future is uncertain.

Pandemic rise and reopening fall

Unlike many businesses, Peloton flourished during the coronavirus pandemic, with at-home exercise bikes a popular alternative to closed gyms. But Jill Woodworth, Chief Financial Officer at Peloton, has admitted the company underestimated the impact reopening would have on its sales.

As a result, annual sales predictions have been reevaluated to between $4.4 billion and $4.8 billion, as opposed to the $5.4 billion that had previously been forecast. Peloton stock has lost a lot of its value and some investors are suggesting the business should be sold.

What went wrong at Peloton?

Of course, nobody could predict the pandemic and its fallout is unprecedented, making it difficult to anticipate, but Peloton’s issues are more endemic. Accusations of poor leadership, large-scale firings and former staff hijacking meetings suggest it may be circumstances within Peloton and not without that are having the biggest impact.

Foley has admitted the company’s mistakes, even taking some of the responsibility himself. He said: "We've made missteps along the way. To meet market demand, we scaled our operations too rapidly. And we overinvested in certain areas of our business.”

"We own this. I own this. And we're holding ourselves accountable," he added.

Barry McCarthy, former Chief Financial Officer at Spotify and Netflix, has now stepped in to oversee what he has described as a “comeback” for Peloton. Things didn’t begin well, however, as the meeting scheduled to introduce him as new CEO saw its chat function overrun with angry comments from former employees about mismanagement.

In a move that has been described as “tone deaf”, staff that have been let go have been offered 12-month Peloton memberships to try to soften the blow. Others reported selling off their Peloton apparel to pay their bills.

What lessons can be learned from Peloton?

One of the biggest lessons that can be learned from Peloton about running a business is the importance of building plans for uncertainty and volatility into your processes. In the face of a huge surge in demand and complaints over delivery delays, Peloton spent $100 million to speed up shipments from overseas. This led to a massive surplus of products building up in its warehouses as the business failed to predict sales would fall as restrictions were eased in the wake of the pandemic.

When it comes to transparency and communication, Peloton’s leadership has fallen short and the ways in which those who were laid off found out has eroded the company culture further. Not being able to log into work-related apps was the first sign they received, followed by rumors of restructuring and calls from managers that sounded scripted. These factors have contributed to dissatisfaction and seen morale within the company drop further.