A bad week for stationary bikes: A look inside the downfall of SoulCycle and Peloton after the former fitness giants slashed hundreds of jobs and closed stores on the same day
- Both Peloton and SoulCycle announced layoffs and store closures on Friday within hours of each other.
- The move comes as both companies struggle to overcome sales slumps and struggle to regain momentum.
- Experts told Insider the downsizing was inevitable, and “a reflection of hubris born from success.”
Peloton and SoulCycle, two of the biggest names in indoor cycling, both announced layoffs and closures within hours of each other Friday — the latest in a progressive decline for the once-beloved fitness brands as Americans shift exercise preferences.
While SoulCycle’s star had been dimming slowly in recent years thanks to the rise of luxury fitness competitors, Peloton’s fall from grace has been more dramatic. The company once hailed a “pandemic winner,” a powerhouse that could hardly keep up with overwhelming demand, is now struggling to manage its balance sheets.
Experts told Insider that the downsizing for both companies was ultimately inevitable as consumer preferences shifted, and that while stationary bicycles aren’t going anywhere, Peloton and SoulCycle will have to fight for their relevance.
‘Hubris born from success’
In a memo to staffers on Friday obtained by Insider, Peloton CEO Barry McCarthy said the company will slash an additional 800 jobs, close stores, and increase the prices of its stationary bicycle and treadmill products.
The announcement marked the third round of layoffs for the company this year. Peloton fired 2,800 people in February and axed its Taiwan-based employees in July, bringing the total to more than 4,150. The cuts are part of McCarthy’s turnaround strategy following consecutive quarters of sales slumps.
That same day, SoulCycle CEO Evelyn Webster told employees during an all-hands meeting the company will close 19 studios in “oversaturated markets,” a move she said will “lead to a number of our teammates losing their employment with SoulCycle.”
While Peloton in particular saw a meteoric rise during the height of the pandemic, the company has been plagued by a number of hurdles, including the resurgence of gyms and group fitness classes, and operational mismanagement that led to the resignation of CEO and co-founder John Foley earlier this year.
According to Bryan O’Rourke, a fitness analyst at the International Health Racquet and Sportsclub Association, Peloton’s downsizing was “a reflection of hubris born from success.”
“Their original S1 filings reflected a huge market share forecast that was always unlikely, yet they built the business around anticipated continued hyper growth,” O’Rourke told Insider.
The future of indoor cycling
As a result, online marketplaces are flooded with discounted used Pelotons, as consumers look to recoup money spent on bikes now collecting cobwebs as they return to in-person fitness.
And yet even with the return of group classes, many, like SoulCycle, are having difficulty regaining momentum. While the company tried to prevent losses during the pandemic by hosting outdoor classes, renting out bikes, and launching a digital memberships, it’s struggled to find its footing after reopening studios.
In something of a Hail Mary, SoulCycle last month even took a shot at its top competitor with a promotion to swap preowned Peloton bikes for 47 classes valued at $1,400. A standard Peloton bike is $1,445 and a membership is $40 a month.
“Riding in a studio is an unrivaled experience, adding a much needed dose of intoxicating energy and an electric atmosphere into our workout routines, and we missed this during the pandemic,” Webster said in a statement.
But her cheery attitude toward the promotion contrasted starkly with her remarks Friday during the company’s somber meeting.
“The timing was appropriate to look at our studio footprint by market to understand whether we continue to believe that we had indeed oversaturated some markets, and the conclusion is that after much work and analysis, that perhaps we have,” Webster said, according to audio leaked to Insider.
O’Rourke said SoulCycle in particular was hurt by increased competition not just from Peloton, but also newer at-home fitness offerings.
“As for SoulCycle, while the company was adversely impacted by COVID, at the same time competition in studio cycling and other studio fitness offerings from F45, Xponential, and others has surged,” he said.
While both companies took a massive hit this week, O’Rourke said hope is not lost and future success will come down to leadership.
“Going forward, if management of Peloton and SoulCycle can make the necessary cost adjustments without destroying quality fitness experiences and teams of people who make those experiences great, their prospects remain good for the long term,” he said.
Likewise, Sucharita Kodali, principal analyst at business research and analysis firm Forrester, said that while stationary bikes will always be part of American fitness scene, the reductions at SoulCycle and Peloton show the “significant slowing down” of the trend.
“The good news is that they shouldn’t be getting any viable new competitors in the space,” Kodali told Insider. “As people go back to gyms, maybe the older equipment will be replaced with Pelotons.”