Peloton's new CEO has a chance to turn things around. Here's what he needs to do.

• Peloton announced that Ford executive Peter Stern will subordinate nan institution arsenic its caller CEO.
• The fittingness institution is betting Stern tin thief move things around.
• He's expected to attraction connected trimming spending and retaining existent Peloton subscribers.

Peloton is betting that its caller CEO tin present a much-needed turnaround.

On Thursday, Peloton announced Ford executive Peter Stern would beryllium joining arsenic its caller main executive successful January — the latest successful a bid of shake-ups for a institution that has been struggling aft riding a pandemic-era high. After nan announcement, nan company's banal surged astir 28% connected nan time to extremity astatine $8.50 a share.

Stabilizing Peloton will beryllium a gangly order, requiring nan institution to trim spending and, astir importantly, clasp its existent subscribers, analysts told Business Insider.

Even aft Thursday's surge, Peloton's stock value has fallen much than 94% since its highest successful 2020, erstwhile stay-at-home orders kept group retired of gyms and fittingness classes. They flocked to nan at-home stationary motorcycle brand, which quickly gained a cult following.

But by 2021, supply concatenation woes had deed nan company. Recalls of some bikes and treads damaged its reputation, and arsenic nan world opened up again, nan novelty of sweating it retired astatine location unsocial began to deterioration off.

"It was a bubble of euphoria successful pandemic-induced cognition mania," said BMO Capital Markets expert Simeon Siegel, a longtime Peloton carnivore who has much precocious changed his tune connected nan institution fixed its attraction connected profitability. "Peloton's highest marketplace headdress was not steeped successful reality; it was steeped successful hope."

First bid of business

Stern's first bid of business will beryllium a basal one: "Get nan institution into a unchangeable financial state," Neil Saunders, nan managing head astatine GlobalData Retail, told BI complete email.

The institution said Thursday that it wants to make changes to go sustainably profitable.

Retaining subscribers — alternatively than focusing connected increasing nan guidelines — will beryllium key. The monthly fees that users salary for classes — whether aliases not they are owners of Peloton's instrumentality — are nan high-margin portion of nan business, Saunders said.

Siegel told BI that his proposal for Peloton would beryllium to "bear-hug your marque loyalists. Make judge that group don't churn, because they're incredibly valuable." He said existing subscribers unsocial thrust much than $1 cardinal successful gross profit for nan institution each year.

One of his suggestions involves raising subscription prices for caller customers, which would not only summation gross per personnel but besides beryllium a "nod of appreciation" to nan loyal existing subscribers and perchance support them from canceling. The institution presently charges $44 a period positive taxation for its all-access membership, $12.99 a period for its App One membership, and $24 a period for its App+ membership.

Scott Markman, nan laminitis of MonogramGroup, a world branding agency, said that a attraction connected nan Peloton organization will beryllium pivotal.

Cutting costs

The institution will besides person to trim spending.

"Unlike astir turnarounds, nan patient rate travel is already there, we simply propose Peloton extremity spending it," Siegel wrote successful a statement successful May.

The institution has been connected a cost-cutting spree, reducing caput count, spending little connected marketing, closing costly unit showrooms, and lowering investigation and improvement costs.

Peloton announced successful May 2024 that CEO Barry McCarthy would beryllium stepping down. McCarthy's departure came arsenic nan fittingness institution announced it was cutting astir 15% of its workforce.

Stern's background successful Apple's subscription services whitethorn help. He spent six years astatine nan tech giant, starring businesses for illustration Apple TV+, News+, and Fitness+. Stern helped lead nan Apple Fitness+ vertical to millions of members, nan institution said successful a Thursday property release.

Any turnaround whitethorn not mean a return to those 2020-level highs. Siegel says not to expect nan company's marketplace headdress to spell backmost to its peak.

"Peloton is an objectively, wildly successful entrepreneurial startup story," he said. "The problem was it didn't spell from zero to today. It went from zero to Mount Everest down to today. Just arsenic group sewage overly exuberant erstwhile Peloton was going up, they sewage wildly antagonistic erstwhile Peloton went down."