The board will conduct a search to name a replacement, Peloton said in a statement Thursday. Board Chair Karen Boone and director Chris Bruzzo will serve as interim co-CEOs.

The shares fell as much as 16% to $2.71 in New York on Thursday, marking the worst intraday drop since February. Even before the decline, the stock was down 47% this year.

McCarthy — a veteran of Spotify Technology SA and Netflix Inc. — took over from co-founder John Foley in early 2022 and set about overhauling the company. That’s included thousands of previous layoffs, management shake-ups and outsourcing business functions. He’s also tried to make Peloton more of a services company — with its mobile app at the heart of the business — rather than just a seller of expensive bikes and treadmills. 

The executive also forged new partnerships, including one this week with Hyatt Hotels Corp. to bring Peloton bikes to the hotel chain in an attempt to boost sales. 

But McCarthy acknowledged in recent months that the company continued to struggle with growing “at scale” and warned in February that revenue may not start increasing again until the fourth quarter. 

The New York-based company was a highflier during the early days of the pandemic, when lockdowns sent consumers scrambling for its stationary bikes and fitness classes. But as people returned to gyms, paying subscribers declined, leaving the company with a glut of inventory. A series of product recalls over safety issues only added to the company’s image problem and led to lower sales and profits. The shares have tumbled over the past three years, erasing more than 90% from its valuation. 

On Thursday, the company announced a new restructuring program to reduce annual expenses by more than $200 million. As part of that plan, the company will continue to pare its retail showroom footprint and eliminate about 400 jobs. 

“The objective of the cost reductions is to align our cost structure with the current size of our business and position Peloton to generate sustained and meaningful positive free cash flow, which is a top priority for us” the company said in a statement. Peloton said it’s working closely with its banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc. on a refinancing strategy. 

“We are mindful of the timing of our debt maturities, which consist of convertible notes and a term loan, and we know this is also on the minds of our shareholders,” the company said in a letter to shareholders.

Achieving positive sustained free cash flow will make Peloton “a more attractive investment for debt holders,” the company said.

Peloton narrowed its guidance for revenue for this fiscal year, and the new range came in lower than analysts anticipated. The company now predicts sales of $2.68 billion to $2.70 billion for the full year. It also is anticipating 2.96 million to 2.98 million connected fitness subscribers, lower than a previous forecast for as much as 3.01 million. The forecast reflects Peloton’s “updated outlook for hardware sales based on current demand trends and expectations for seasonally lower demand,” the company said. 

In the fiscal third quarter, revenue was $717.7 million, coming up short of analysts’ estimates for $719.2 million. Connected fitness subscribers were 3.06 million, less than estimated and virtually unchanged from a year earlier.

Peloton said it’s revamping its approach to international markets to be more “targeted and efficient.” The company said it has no plans to “exit any of our existing international markets, we will leverage global strategies and capabilities where we can.”

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