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Peloton to cut 500 jobs amid turnaround effort

Yahoo Finance Live anchors discuss Peloton’s efforts to reverse mounting losses as the company looks to make its fourth round of job cuts.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: From food to working it all off, and shares of Peloton, ticker symbol PTON, in focus this morning, after the company says, more layoffs are on the way in what will be their fourth round of job cuts this year. The fitness company plans to let go of roughly 12% of its remaining workforce, or about 500 employees, in an effort to reverse mounting losses.

And I'm looking at the interview that Peloton CEO Barry McCarthy gave to "The Wall Street Journal." Now, Barry is a very blunt guy. This is not someone who's going to sugarcoat anything. He's going to give it to you straight, even if it could seem absolutely alarming. You know, he tells the "Journal" this.

Right off the top of the story, he says, it might be unprofitable for the next six months. And if they can't turn themselves around, via these job cuts, and if that fails, he just flat out says, Peloton likely isn't viable as a stand-alone company.

I can't think of another time when the C-- when a CEO a public company told a publication this. I was just blown away. And then, you know, as you-- luck would have it, you have a picture of Barry sitting on a couch, smiling. So it's tough. You know, it's tough day for Peloton.

JULIE HYMAN: I mean, he did say also, apparently, that this is sort of the-- the latest round of layoffs-- means the bulk of our restructuring work is coming to an end. Now, for now, is sort of implicit there, because of what he said, if it doesn't work they're gonna keep on doing what they need to do. So you know, maybe this is the end of the beginning of the turnaround of Peloton, is what they're hoping for.

BRAD SMITH: But then you have-- and kind of presenting both sides of this on the Street from an analyst perspective, you've got some of the biggest bears in Peloton that would say, who would want to buy them? This was the subject of our bull-bear debate last week. David Trainer, CEO of New Constructs, said, who would buy them?

I mean, do you think anyone who's using Peloton doesn't already have an Amazon subscription or buys Nike stuff? I really don't know where the value add is. There are so many partnerships that Peloton has looked to, to try and drum up-- not just wholesale partners, but also where they're going to take on new subscriber growth.

However, that new subscriber growth is gonna need to come with spending. Why? Because you need to continue to put more content on the platform. Content, as we know from many of these streaming companies out there, costs a ton of money.

And then just briefly, on the bearish side. During the higher growth phase that they-- or the bull side. Even during the high growth phase, Peloton saw gross margins top 40%. And that was for eight consecutive quarters after going public. But some of the bulls aren't expecting that to reach that type of margin growth, or at least half that at 20%, until the midpoint of 2024 fiscal year.

BRIAN SOZZI: Well, I encourage, you know, David Trainer to pop a squat on a Peloton bike to see some of that value. I loved that segment. I in no way agree with anything that he said. That has a recurring revenue stream at Peloton.

Yes, we're going back to gyms. But there's a lot of value, a lot of value in that content. And there's a whole ecosystem of people that really like Peloton, for whatever reason. Now, do they need more people on this platform? Sure. But I do not agree in any way with David Trainer. In fact, he should come back on and debate me.

BRAD SMITH: All right, done deal.