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Peloton, once hailed as the future of fitness, is now sucking wind. Here’s why.
Connected fitness company Peloton, known for its tech-enabled stationary bikes and treadmills, has cycled through yet another chief executive.
On Thursday, the beleaguered company announced Peloton CEO Barry McCarthy is stepping down from his roles as company CEO, president and board director. He will be succeeded by interim co-CEOs Karen Boone and Chris Bruzzo, both Peloton board members. Peloton also announced it is cutting 15% of its staff — or 400 employees — as it tries to trim costs.
The job cuts mark the fifth time Peloton has reduced its headcount since the company peaked in 2021. As the company struggles to regain its stronghold in the fitness industry and among consumers, questions are being raised about what the future has in store for the formerly red-hot fitness fad.
“Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue,” McCarthy said in a statement announcing his departure Thursday. He added that the move was necessary as the company prioritizes “the necessary task of successfully refinancing its debt.”
Based in New York, Peloton was among the companies that were well-positioned during the COVID-19 pandemic, benefitting tremendously from lockdown policies that kept Americans isolated indoors. At its height, it was valued at $50 billion, and had long waitlists for its equipment.
With the fate of crowded gyms and fitness studios uncertain at best, it appeared during the pandemic that the future of fitness would be in-home equipment.
Peloton’s sales surged, and the company couldn’t keep up with customer demand. That is until 2021, when restrictions eased and gyms and fitness studios reopened. Peloton, which had funneled money into meeting the mountain of unprecedented consumer demand, appeared to be caught flat-footed.
Still recovering from COVID
Eric Koester, adjunct professor at Georgetown University’s McDonough School of Business, described Peloton as a “company that is still trying to find itself post-COVID,” adding that it’s eventual new CEO will likely take one of two tacks.
“A company that hit those heights and came back to earth now has to decide how to pivot,” Koester told CBS MoneyWatch.
That could mean either focusing on developing new in-home fitness products and attacking the traditional gym business industry, or focusing on embracing its existing customer base and capitalizing on their devotion to the brand.
“The company has rabid fans, and maybe the company crossed the chasm into the mass market too hard and not everyone was a believer,” Koester said.
On Thursday, interim co-CEO Bruzzo blamed flagging sales on consumers continuing to adjust to post-pandemic life.”We are still dealing with the whiplash, the normalizing that occurred post-COVID,” he said on a call with investors.
Faced with cash-flow issues, numerous defective product recalls, and a dwindling subscriber base, it seems Pelaton has failed to capitalize on the unsolicited boost the unprecedented event of a global pandemic, provided it with. How is a company that was recently hugely popular among both consumers and investors now floundering?
A lifetime’s worth of demand
One argument is that while the pandemic caused demand for Peloton’s fancy fitness machines to skyrocket, the sudden explosion in consumer interest actually hurt the company.
“Some people believe the pandemic was the best thing to happen to Peloton, but I believe it was the worst,” BMO Capital Markets analyst Simeon Siegel told CBS MoneyWatch.
That’s because what was somewhat of a niche, luxury fitness company with limited appeal, quite suddenly, entered the zeitgeist and became a symbol of the lockdown phase.
“It was a really great idea with a very strong following and a great community, that was propelled onto the big stage and basically pulled forward a lifetime’s worth of demand,” Siegel said.
In Siegel’s view, the company mistook the fleeting pandemic-era demand for transformative growth that would be long-lasting.
“What happened was the pandemic created the perfect environment for people to want to buy a Peloton,” Siegel said. To be sure, some consumers who were drawn to Peloton during the pandemic may have since given up on fitness altogether.
Rockstar moment
Had the pandemic never occurred, Peloton might not be as well-known as it is today, but it would likely be a company “with a fairly steady growth rate and incredibly loyal fanbase that pays a profitable monthly fee,” Siegel said. “It would be a smaller, healthier business that never reached that rockstar moment.”
BNB Paribas managing editor and senior equity analyst Laurent Vasilescu said the company has had plenty of time to reposition itself post-pandemic, but failed to do so under McCarthy’s leadership.
“I think he tried to do too many things too fast and didn’t really hone in on just the core business. I don’t have an answer for them; I don’t know where they go from here,” Vasilescu said. “But I think it’s just going to become a smaller company to the point that one day you’re not going to care.”
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LeBron James re-signs with Lakers to make him and Bronny first father-son duo on same NBA team. But they aren’t the only family members to play together.
LeBron James and his son, Bronny, are making history as the first father-son duo to not only play in the NBA simultaneously but also on the same team. The elder James re-signed with the Los Angeles Lakers on Saturday, CBS Sports reports. This comes after the younger James was drafted to the team as the 2nd round, 55th overall pick.
LeBron, who made his NBA debut in 2003 at age 19, has played on the Lakers since 2018 after two long stints with his hometown Cleveland Cavaliers and a stint on the Miami Heat in between. The four-time NBA champion and four-time NBA MVP reportedly re-signed with the Lakers for about $101.35 million, ESPN’s Bobby Marks first reported. This is a pay cut considering his max salary is around $104 million.
Bronny, 19, was drafted by the Lakers last month after playing one season at the University of Southern California.
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Ahead of the draft, LeBron, 39, said he was hoping to play alongside his son.
“I need to be on the floor with my boy, I got to be on the floor with Bronny,” he said.
The pair may be the first of their kind, but several other family members have played in the NBA together, even on the same team. Here are some of the other famous duos of the league.
NBA father-son duos
Dell Curry, father of Golden State Warriors star Steph Curry and Charlotte Hornets member Seth Curry, played in the NBA from 1986 to 2002. His oldest son, Steph entered the league in 2009, just seven years after his father’s retirement.
Athletics runs deep in that family. Seth married Callie Rivers, the daughter of his former head coach, Doc Rivers. Callie is a professional volleyball player.
Doc’s son, Austin Rivers, also played in the NBA, making them another father-son duo of the league. Austin became the first person in the NBA to be coached by his father, who was coaching the Los Angeles Clippers.
Several other NBA players have seen their sons enter the league: Mychal Thompson’s sons, Klay and Mychal, played, as did Rick Barry’s three sons Jon, Brent and Drew.
Some other duos include Arvydas and Domantas Sabonis, Bill and Luke Walton, Tim Hardaway and Tim Jr., Larry Nance and Larry Jr. and Gary Payton and Gary II.
Late Lakers great Kobe Bryant’s father, Joe “Jellybean” Bryant, also played in the NBA for several years.
Stephen Dunn / Getty Images
NBA brothers
In 2024, there are fourteen sets of brothers playing in the NBA, including the Currys and Giannis and Thanasis Antetokounmpo, who play on the Milwaukee Bucks together.
The Bucks roster includes another set of brothers, twins Brook and Robin Lopez. Evan and Isaiah Mobley play together on the Cavaliers and Franz and Moritz Wagner play on the Orlando Magic.
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Justin, Jrue and Aaron Holiday all play in the league – Justin and Aaron played together on the Atlanta Hawks and Indiana Pacers during their careers.
There are also several sets of twins in the NBA: Caleb and Cody Martin, who both played on the Charlotte Hornets at the same time; Amen and Ausar Thompson, who were both drafted in 2023; and Keegan and Kris Murray and Marcus Morris Sr. and Markieff Morris, who were both drafted in 2011.
Other brothers currently in the league include Tre and Tyus Jones, Jalen and Jaden McDaniels, LaMelo and Lonzo Ball and Jaden and Cody Williams.
There have been more than 70 sets of brothers who have played in the NBA over the years, according to FanSided.
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Inflation has been cooling in recent months, and if it continues on that path, it could mean lower interest rates are upcoming. Once inflation gets closer to the Federal Reserve’s 2% goal, it’s likely to reduce its federal funds rate, which would lower rates for American borrowers, too.
The timing of that rate cut is unclear, but according to the CME Group Fed Watch tool, it could be as early as September. What would that rate mean for home equity borrowers, though? And when would those changes hit? We asked some experts for their thoughts on how a Fed rate cut could affect home equity loans.
See what home equity loan rate you could secure here now.
How a 2024 Fed rate cut will affect home equity loans
Here’s what the experts we spoke to predicted for home equity loans, should the Federal Reserve proceed with a cut to the federal funds rate.
The Fed will only cut rates slightly
In its June Summary of Economic Projections, the Fed indicated it will likely only reduce rates by about 0.25% this year. And the experts we spoke to agree that this is probably where the Fed will land by year’s end.
“The Federal Reserve has made it clear that it needs to see more data supporting an inflation trend towards its long-term goal of 2% before making any meaningful changes to monetary policy,” says Kelly Miskunas, senior director of capital markets at online mortgage lender Better.com.
The CME Group Fed Watch tool shows the possibility of further rate cuts this year, but the numbers change often. If inflation drops at a faster clip than it has in recent months, there’s a chance those extra cuts could happen. The Fed meets next at the end of July.
See how much home equity you could access online today.
Home equity interest rates will drop, too
Experts say if the Fed drops its rate, home equity rates will fall, too. They’ll fall quickest on home equity lines of credit (HELOCs), as these have variable interest rates that are directly tied to the prime rate. When the Fed rate declines, the prime rate does, too, so HELOC rates fall in step.
That means new HELOC will see the impact immediately, and borrowers who already have HELOCs will see it shortly after.
“Outstanding HELOCS typically are set monthly,” says Kevin Leibowitz, a mortgage broker at Grayton Mortgage in New York. “It will take 30 to 45 days for those mortgages to reset.”
For home equity loans, though, the story is a little different. Most borrowers with existing home equity loans won’t see their rate change at all (those are usually fixed-rate loans, so the rate stays constant the entire term unless refinanced). New home equity loan borrowers, though, will see lower rates when they take out their loans. It likely won’t be a huge decline, though.
“The Federal Reserve tries to be overly transparent with their intentions for future policy decisions to not spook broader markets,” Miskunas says. “For this reason, the market will typically have priced in the Fed’s next action before it occurs.”
Should you act now or wait?
With rates poised to fall, you might be tempted to wait before taking out a home equity loan or HELOC. Whether that’s smart or not depends on your goals (do you need the money for something important right now?), as well as what type of product you’re considering.
“Waiting for a lower rate for most HELOCs is not necessary because they are floating, so when the rates drop, your loan rate will automatically fall,” says Mason Whitehead, branch manager at Churchill Mortgage in Dallas. “Just ensure that your loan does not have a floor rate, which means it will never go below a certain rate, typically the start rate.”
For home equity loans, waiting might work — but there’s really no guarantee. And if you need the cash for something now, acting sooner may be necessary.
“Since it is impossible to predict the future path of interest rates, customers who are looking to tap into their home equity today should act, instead of trying to time the market,” Miskunas says. “Borrowers can always look to refinance high-cost debt if interest rates decline in the future.”
How to get a lower rate
If you’re applying for a home equity loan or HELOC soon, there are steps you can take to minimize your interest rate. To start, improve your credit score. The higher your score, the lower your rate will likely be. You can also reduce your debts or increase your income, as this lowers your debt-to-income ratio (DTI) and the risk you pose to a lender. A lower DTI can also get you a lower rate.
Finally, talk to a loan officer or mortgage broker early in the process. They can help you prepare for your application and guide you on how to get the best rates.
Find out more about your home equity borrowing options here today.
