PThe executive chairman and co-founder of eloton Interactive Inc. John Foley is stepping down from the fitness company as part of a management shake-up, widening the turbulence in a business struggling to emerge from a deep slump.
Foley, who helped launch Peloton in 2012 and served as CEO for 10 years, is resigning effective Monday, the company said in a statement. Foley assumed the role of executive chairman in February when he handed the reins to CEO Barry McCarthy, a veteran of Spotify Technology SA and Netflix Inc.
Chief legal officer Hisao Kushi, another co-founder, is also headed for the exits. He will be replaced in that role by Tammy Albaran, who Peloton hired from Uber Technologies Inc. The role of chairman will be filled in the interim by Karen Boone, former CEO of Restoration Hardware, who currently serves as lead independent director.
Peloton investors initially cheered the changes, sending shares up 5.3% to $11.64 in extended trading on Monday. But the rally soon evaporated, with shares down more than 2%.
The reshuffle extends a year of upheaval at New York-based Peloton, which thrived in the early days of the pandemic but is now suffering from declining sales and mounting losses. Its shares are down about 90% in the past year, and the company is struggling to operate through an inventory glut.
As part of a turnaround plan, McCarthy cut thousands of jobs and outsourced operations to third-party suppliers. But to Peloton quarterly report signaled in August that his comeback efforts have a long way to go.
McCarthy’s goal is to make Peloton cash flow positive in the second half of the next fiscal year. “We continue to make steady progress, but we still have work to do,” he said last month, while acknowledging that the company’s financial results may cause some to question the “viability of the business.”
With Peloton’s longtime CEO now out of the picture, McCarthy may have a freer hand to make changes. The executive said the company needs to prioritize its digital offering over hardware and is exploring the possibility of subscribers streaming content from their smartphones to fitness equipment other than Peloton.
Separately, Chief Commercial Officer Kevin Cornills is also leaving Peloton and will not be replaced. Some of Cornills’ responsibilities will be assumed by Dion Sanders as he assumes the role of chief emerging business officer, according to an internal memo from McCarthy seen by Bloomberg. Chief content officer Jen Cotter will take control of apparel and accessories, showing the company remains committed to this market.
Albarran will take over Peloton’s legal operations on October 3. She helped oversee a corporate overhaul of Uber, which set out to rebrand itself in 2017 after its hard-charging style led to scandals and strained relations with drivers.
Peloton is looking to draw on Albaran and Boone’s experience to “help move the company forward into our next chapter of growth,” McCarthy said.
Foley said he plans to build the business “in a new space” after he leaves the company. The CEO helped turn Peloton into an iconic fitness brand with a loyal following, but has been criticized for not predicting a sharp decline in demand for its exercise bikes.
Some investors in Peloton also hoped that Foley — and then McCarthy — would consider selling the company. But no suitor emerged, and McCarthy said he did not take over as CEO to oversee the sale.
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