The ride is opposite John Foley. Peloton’s co-founder is stepping down as chief executive of a lossmaking fitness bike maker that briefly captured the zeitgeist. Foley will stay on as executive chair and retain his supervoting stock. But his departure from the top job, and the appointment of former Spotify and Netflix finance chief Barry McCarthy as his replacement, raises the odds of a sale.
Both Nike and Amazon may bid. The cloud and ecommerce giant is better placed than the sportswear brand to revive this lockdown darling. Think beyond those sweaty adverts where trainers yell “Let’s go Peloton!”. This is a streaming business dependent on an initial delivery of bulky equipment. The slipstream of Amazon Prime could drag it back to cruising speed.
The case is strong for Peloton to get a new workout coach. The business has overexpanded and overinvested. Slowing sales growth shows how bloated costs have become. The at-home exercise company lost $ 439mn in its most recent quarter and slashed its outlook for the year. Peloton is cutting about a fifth of its workforce and winding down a planned $ 400mn investment in a new factory in Ohio.
Peloton classes boast 6.6mn subscribers. It is a small but loyal following. Monthly churn is less than 1 per cent. If Amazon could get just a fraction of its 200mn Prime members to pay subscriptions at $ 12.99 a month, sales would soar.
Nike has none of that potential. Yoga-wear maker Lululemon’s acquisition of Peloton rival Mirror offers a cautionary tale. The company cut its sales forecast for Mirror – which it bought in 2020 for $ 500mn – in December.
Activist investor Blackwells Capital, which has a stake of nearly 5 per cent, thinks Peloton is worth at least $ 65 a share. That is optimistic. The shares have roughly doubled to around $ 40 on news of takeover interest, for an equity value of some $ 13bn according to Bloomberg. This looks like a more realistic takeout price. If that is too much for deep-pocketed Amazon, setting up a rival workout bike business could give executives an amusing vanity project.