LUCKEY — A Peloton factory planned for Wood County’s Troy Township is off as the co-founder of the company announced he is stepping down as chief executive.
“Obviously we’re disappointed that this is happening,” said Doris Herringshaw, Wood County commissioners president.
The Peloton Output Park was announced last year and included the construction of a 1-million-square-foot manufacturing plant. A spokesman for Peloton said that once external construction is completed, the building and land will be sold.
“We are forever thankful to Wood County, Troy Township, JobsOhio, the Ohio Development Services Agency and the Regional Growth Partnership for welcoming Peloton to the community and for their invaluable partnership,” the spokesman said in an email statement. “While we won’t be able to ultimately occupy the property, overall we not only had the opportunity to highlight the talent and resources Troy Township offers, but we also invested approximately $100 million in the area.”
The Troy Township site is on a 200-acre site in Luckey, just south of the junction of U.S. 20 and I-280, and to the north of the Home Depot Distribution Center and NSG Group glass plant.
Ms. Herringshaw said the infrastructure is already there and the area is set up for economic development. Officials are optimistic that the site will be able to be either sold or leased.
“It’s in a great location,” she said. “It has some wonderful neighbors.”
Wade Gottschalk, executive director of the Wood County Economic Development Commission, said Tuesday that the site is still one of the best in Ohio.
“It’s a little different in that it’s a brand-new building,” he said. “We think it’s marketable.”
Company co-founder John Foley first pitched the idea of an interactive exercise bike in 2011, hoping to disrupt the industry. He will give up the CEO position and become executive chair at Peloton Interactive Inc. Barry McCarthy, who served as CFO at Spotify as well as at Netflix, will take over as CEO of the exercise and treadmill company, the company said Tuesday.
JobsOhio President and CEO J.P. Nauseef said in a statement released Tuesday that he was disappointed to hear about the decision to wind down its operations in Ohio but remains optimistic that another company will be able to move in to the site.
Though the state had committed performance-based incentives for the project, Mr. Nauseef said, no financial assistance has been drawn by the company.
“In the very near future, Wood County, Ohio, will boast a tremendous site that is ready for development and that will empower a company to move quickly to set up successful operations and create jobs for the dedicated and skilled workforce of Northwest Ohio,” he said.
The factory was expected to create more than 2,000 jobs with an annual payroll of $138 million.
Brian McMahon, president of Danberry National, a commercial real estate company in Perrysburg, said while it’s premature to speculate in detail about what the future of the site might hold, he believes it’s in a good location with a lot of amenities.
“We’re receiving numerous inquiries about existing buildings,” he said. “New buildings are very difficult to come by.”
Craig Stambaugh, president and CEO of NAI Harmon Group, a Toledo-based commercial real estate company, said there’s a demand for existing buildings and especially new construction. A million-square-foot building is enormous for the area though more common in larger cities like Dallas and Houston.
Mr. Stambaugh also pointed out that Peloton is spending money to finish the construction, so the company must be confident that it will either be sold or leased fairly easily.
“If it’s marketed well, this area has been great,” he said.
Peloton has been on a wild ride for the past two years during the pandemic. Company shares surged more than 400 percent in 2020 amid coronavirus lockdowns that included gyms. Nearly all of those gains were wiped out last year as the distribution of vaccines sent many people out of their homes and back into gyms.
This week, there were reports that Amazon or Nike might buy the company and those that have pushed for the sale of Peloton continued to do so this week.
Activist investor Blackwells Capital asked again for the company to be sold Tuesday despite the change in leadership.
Blackwells sent a presentation to Peloton Monday outlining “the mismanagement of the company by John Foley, the poor governance and board composition and the rationale for immediately commencing a sale process.”
In addition to the leadership shakeup, Peloton announced Tuesday that it is cutting 2,800 jobs, including approximately 20 percent of corporate jobs at the New York City company. The instructors who lead interactive classes for Peloton will not be included in cuts, nor will the content that the company relies on to lure users.
In addition to winding down the development of its Peloton Output Park in Ohio, the company will also reduce its owned and operated warehousing and delivery locations and will instead ramp up its third-party relationships.
Peloton is looking to reduce its planned capital expenditures for this year by about $150 million. The restructuring program is expected to result in approximately $130 million in cash charges related to severance and other exit and restructuring activities and $80 million in non-cash charges. The majority of the charges will be recorded in fiscal 2022.
In a conference call with analysts, Mr. Foley acknowledged that mistakes had been made and that the company invested too quickly.
“We own it. I own it and we are holding ourselves accountable," Mr. Foley said. “That starts today.”
The company anticipates at least $800 million in annual cost savings once its actions are fully implemented.
Wall Street took the shakeup Tuesday as a pivotal moment for Peloton, including the odds of a sale.
“We believe Foley leaving makes it more likely that Peloton ultimately sells the company and the board clearly has major decisions to make in the days/weeks/months ahead," wrote Wedbush analysts Daniel Ives and John Katsingris.
But a sale is not assured.
“I think the moves, as a whole, do not signify that Peloton is throwing in the towel. I believe this means they are going to slim down, refocus, and stay independent. Investment from outside firms should be on their agenda but not a sale," Raj Shah, North America lead for tech, media, and telecom at digital consulting firm Publicis Sapient, said.
That uncertainty sent shares of Peloton tumbling 7 percent seconds after the leadership change was announced, with many believing the odds of a sale had diminished.
By the opening bell, however, the company's shares were rising, with many pointing to the new CEO’s background in finance and the potential for a deal.
“Promoting Barry McCarthy with his eye on the financials makes sense — he’s the type who can objectively look at Peloton’s operations and choose where to invest and where to cut,” said Timothy Hubbard, assistant professor of management at the University of Notre Dame’s Mendoza College of Business.
Information from The Blade’s news services was used in this report.
First Published February 8, 2022, 2:16 p.m.
