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The peloton hires McKinsey to review the cost structure, as sales of equipment are slow

The peloton works with the management consulting group McKinsey & Co. to review its cost structure and potentially eliminate some jobs, CNBC has learned.

The potential job cuts were discussed in a recent call with members of Peloton's management team, according to a recording obtained by CNBC. The clothing division, which has experienced particularly weak sales, is an area that could be targeted. The company does not disclose income from its clothing business.

Peloton is also considering asking employees in its physical stores to take customer service calls during less busy times, according to the call. At one point, a Peloton chief said on the call that 15 stores are "at the intersection." Peloton drove 123 showrooms pr. June 30 in the United States, Canada, the United Kingdom and Germany.

CNBC also saw more than a dozen messages from an internal app for employees, as well as Slack messages where workers have discussed the expected cuts and Peloton's plummeting stock price.

"Morale is at an all-time low," an employee requesting anonymity told CNBC. "The company is spinning out so fast."

A Peloton spokesman did not immediately respond to CNBC's request for comment. A McKinsey spokesman declined to comment.

Peloton's market capitalization fell to $ 10.2 billion as shares fell 76% last year, after rising more than 440% in 2020. The decline has continued into this year, with Peloton shares reaching a low of 52 weeks on Tuesday at $ 29.84.

CFO Jill Woodworth had said in early November that the company was seeking to cut costs. This is because the pace of revenue growth and new subscriptions has dropped dramatically from the early days of the Covid pandemic.

"Some of these identified areas of savings include making significant adjustments to our cross-company hiring plans, optimizing marketing spending, and limiting showroom development," Woodworth said at the time.

The peloton had increased investment to meet the fierce consumer demand. But demand has since weakened as shoppers choose from other workout options at home or choose to return to the gym.

During the three-month period ending September 30, the Peloton occupied about 161,000 connected fitness subscribers, the lowest net growth in eight quarters. Revenue grew 6% year over year compared to a 250% increase in the same quarter in 2020.

In November, the Peloton completed a layoff. It employed 6,743 people in the United States per. June 30, more than double the roughly 3,281 employees it counted a year earlier, according to annual applications.

At the end of this month, Peloton will start spending hundreds of dollars in fees for the delivery and assembly of its Bike and Tread products, citing historical levels of inflation and rising supply chain costs. Previously, these fees were included in the price of the bike and tread. This will bring the price of the products up to $ 1,745 and $ 2,845 respectively.

"Right now people are raising prices. Ikea has just raised prices. We want to go in the middle of the herd," said Dara Treseder, Peloton's chief marketing and communications officer, in a separately recorded meeting.

By asking future customers to incur shipping and setup costs, Peloton will save on these expenses, which have likely weighed even heavier on profits as Peloton's sales are slow.

The company has had a loss and has said that it does not expect to be profitable - before interest, tax, depreciation and amortization - before the financial year 2023.

In early November, the fitness firm lowered its fiscal 2022 outlook, expecting revenue of between $ 4.4 billion and $ 4.8 billion, down from its previous estimates of $ 5.4 billion. It also reduced subscriber expectations to a range of 3.35 million to 3.45 million, down from 3.63 million.

In recent weeks, a number of analysts said they expect the company to have a weaker holiday, which could lead to another cut in its annual guidance.

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