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 it that a company that was only 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.”