Peloton Replaces CEO, Cuts Jobs

Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern Time on the Bloomberg Radio or watch us on YouTube search Bloomberg Clovel News check out shows a Peloton Charlie was talking about what's going on up up I think roughly well more than fifty at its highs over the last couple of days, and we know that there's a lot going on, a new CEO, and we're still

waiting on maybe a possible sale. Well, let's talk about it with Ed Ludlow, West Coast correspondent at Bloomberg News. He joins us from our San Francisco bureau, and our our investors bullish because they think that the company is going to be bought or they bullish because this new you know, it's all about a turnaround story and Peloton is going to go out it alone. Yeah, it's a great question because you have to read each of the kind of Wall Street cell side notes in isolation for

each of the actions that Peloton took. I guess the the overall takeaway is that the global Wall Streets kind of hopeful that this Lena mina more focused Peloton will be ripe to be acquired. Right. It's more attractive to be acquired because it's not so reliant on the hardware, bike in and treadmill business. And I heard you guys

talking about in the last block. The talent is so key and if they're more focused on a subscription based company model, which this new CEO has a lot of experience in, then it does make it more attractive takeover target. You can't help but feel add that Peloton definitely was onto something. I feel like earlier on it wasn't just about giving somebody a bike to cycle on. It's so much about this community. And I know we all use the word community throw it around a lot, but it

really did create one. And I think there's something really tangible in what they do, so I I agree with you. As you know, Carol, I'm a big Peloton user. You know people who asked me over the last twenty four hours. You know my favorite instructives and a big Alex two song guy. I'm a big Olivia guy. Do I use the Peloton as much in February of two as I did in the summer of I know they answered to that, No,

that doesn't matter. Does that matter? I mean you're still paying the same amount of money, you still pay the monthly Here's the thing that is true. But we're looking at to the future here. So regardless of a takeover target or not, this new CEO wants to move to shrink the business right because they grew to a scale where they could service demand on the hardware side that just wasn't there. Do you guys remember the conversation we had in November around their fiscal first quarter earnings. I

remember it. It was with you two specifically, and there was a chart in there. And the chart in the earnings deck was average monthly workouts per connected fitness sub and that that chart is what spookeed investors even back in November on that fiscal first quarter. It basically showed that the US existing consumers, existing subscribers, just weren't using our products as much as we were in the depths of the pandemic. And we have a choice as consumers

to cancel and go back to the gym. And you know, it does seem like that's a concern. What is it that Peloton retains that's enough that if consumers faced with a choice, do I join my gym that I used to go to or do I stick with Peloton? And and it's the leadership that's in focus on this point. They didn't feel John Foy could do that. And what would the synergies be if they got taken over by an Amazon or a Nike? What are the merits of one versus the other? And I guess the question is

too I think about my world. You know, here I've been doing I have the ability to do yoga at home virtually right, I've been you know, with an instructor that I've known for years, but I don't have to go to the studio. And it actually feels kind of okay, I kind of like it. But you do wonder write on the other side of this that part of the thing we love is going to a gym, working out with people, right, being part of a class. I do

to some extent miss that as well. Yeah, and you know, without it doesn't really matter what what you and I think I think the streets kind of looking at that some of the really painful actions that Peloton took. I think BMO said these were kind of painful but prudent. But you know, two is very much like a new year. You me, I've certainly picked back up, you know, the

classes that I'm doing at home. I think we we kind of agree, right, guys, the contents there, I think that they, you know, what they're looking for is some execution, that classic word execution. And the street, based on the notes I read this morning, seems really kind of confident that whether we get a takeover or not, they're the right people now in place to kind of make painful decisions, including job cuts, although as we know, those job cuts

not extending to our favorite instructors. Yeah. Hey, by the way, it's good that you're it's February and you're still sticking with it, because the Strata CEO told our own Bloomberg Business Week that if you're sticking with your New Year's resolutions by January. You are going to make it. Okay, it's a very good song. Check in with me and August Well. Barry McCarthy is the company's new EO. Before Pelotonni,

we know him from Spotify where he was CFO. We also know him from Netflix where so as well before that, with some other things in between. What do we know about the way that he's going to run this company. I mean, I think they're very very very interesting. It's a very interesting background. Yeah, there seems to be two main parts, and again I'm summarizing Wall Streets response. But the first is that he's a known quantity, So Folly

stepping down is one thing. Folly founded this company a decade ago, right, He's a founder CEO, not just the CEO. So the person that's coming in seems like a capable and safe pair of hands. That's one Wall Street read. The other is that at his time at Spotify, Netflix, he was able to make a subscription rate, subscription revenue based business model work. And if they peloton is going to sell fewer bikes and fewer treadmills, irrespective of whether

it's acquired. You know, the Street seems to think that he will be able to lead them down a path where they're not just Lena. But of course the subscription revenue is a higher margin revenue than selling hard where you know, some of the other actions they're taking include moving to third party distribution, relying on outsourcing more. They've they've scrapped their plans for an Ohio factory, Ohio factory,

Lean Mean and services in subscription. Those all boost bottom line potentially in Wall Street seems to really like that. All I can say is a lot of this is happening quickly, where we're talking about a year ago right there, couldn't even meet to Manda year ago. Yeah, Yeah, It's just pretty remarkable how this story is playing out and so quickly. Hey, Ed Ludlow, thank you so much. He

is West Coast correspondent Bloomberg News on camera. For those of you been watching on YouTube in our San Francisco bureau, you're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio, what the heck is going on at the US Canadian border, including at that land crossing that is so important, a very important link for goods moving between the U, the US and a Canta really and it's a crucial artery when

it comes to the auto industry as well. To Brian Platt, is Canadian government reporter for bloom News, truns us on the phone from Ottawa. Brian, take us into what's going on here. Get everyone up to speed about what's going

on right outside of Detroit. I mean, it's a it's been an utterly bizarre situation for a while now in Ottawa, where in my office right now, I'm in the middle of what's essentially become an occupied zone in this in Canada's capital city of this trucker convoy that arrived here about a week and a half ago and became just this sort of massive protest um that drew in all kinds of other people. I mean, this may have started as a trucker protest, that I can tell you, it's

a lot more than just truckers here. And so you know, this trucker protest has created a crisis in Ottawa, in the actual city of Ottawa that the City of Ottawa still trying to deal with because most of downtown is completely shut down. But as as it stayed here for about a week and a half. It sparked all these offshoots in other places. Um there's been a border crossing in Alberta between Alberta and Montana that that has been

occasionally shut down over the past week. But last night the Ambassador Bridge between Windsor and Detroit was shut down by a sort of parallel protest. Much much smaller than what's in Ottawa, but it's only one bridge, so it doesn't take very many people to shut it down, and it is a massively important bridge. It carries about a quarter of all trade between by land between Canada and

the US. It's you can't overstate how important this this bridge is uh to um land trade between the two countries. So it's a very very big deal. And I guess we will see how quickly they can get traffic flowing again. Why is this happening? I mean, we know we're all tired of the pandemic and maybe what's being asked of us, But is this much more a political thing? What's going on?

It's so trying to explain what's going on is really hard because um it's it gets called trucker protest or the trucker convoy, and it did the the spark of this was the U, first Canada and then the US in mid January, bringing in a requirement that truckers had to be vaccinated to cross the border. Until then, truckers had an exemption from the border vaccination rules, so that exemption ended in mid January, large large like made more.

Now of truckers in Canada are vaccinated. So it actually wasn't I mean, it was seen as potentially disruptive, but for the most part Canadian truckers are highly vaccinated and still on the job. Um the problem, but it kicked off this convoy, this protest, that this, and so they drove out from Western Canada and picked up more people along the way, and then people also drove in from

other parts of the country. They all converged on Ottawa about ten days ago, and there are semis parked all over downtown Ottawa, like the streets are totally blockaded, and on the weekends all these other protests, protesters fled into the city. And it is much more now about a backlash against all COVID nineteen restrictions, mask mandates, vaccine mandates, everything. It's not just nobody even really talks about the border issue anymore. It's now just like a total backlash movement

against COVID nineteam restriction. So go ahead, we only have a minute left with you, Brian. How does it get resolved? Its police are baffled here. I mean they cannot get these trucks out there. You have to picture what it would be like having like five hundred semi trucks vockading the streets in the in a fairly major city. I mean, Ottawa's about one point five million people, so so you know, smaller than a lot of other cities might think of, but it's one of Canada's biggest city, and it's also

the capital city. Of course, the parliament buildings are all around here, and so police don't know what to do. So is it okay, thirty seconds left really quick? Is it force that ends this or is there some kind of agreement conversation that ends this. I think it's very unlikely this gets solved through a negotiation. Um, you never know,

maybe something will surprise me. I think if the police have already asked for federal reinforcements to basically double the size of their police force, I think ultimately this is going to get solved through arrests. And towing of the trucks. But it's very very difficult, unbelievable, just interesting. Brian, great reporting and really great clear understanding of what's going on there, which is not a very clear situation, to put it mildly.

Brian Platty's Canadian government reporter at Bloomberg News on the phone from Ottawa. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes, Tim Stinovic on Bloomberg Radio and The Curnis Show of Bloomberg Business Week. We've got a story about the Chinese American born Olympic star. Uh really keeping I guess you could almost say to him a game day face and strategy being very careful, especially

as her brand explodes. Yeah, we're talking about the teenage freestyle skier Eileen gu You might recognized the name now if you didn't before yesterday, because she's fresh off a gold medal win. Although she was born in San Francisco. She's representing China at the Olympic Games. It's a fantastic feature. Joe Webber is Edirett Bloomberg Business Week. He joins us on the access line from Brooklyn. Joel, I gotta tell

you the crystal ball. It was working really well again last night because you guys have this issue, this story in the January twenty seven issue of Bloomberg Business Week magazine. But there are a lot of people now who are learning who Eileen you is for the first time. Well, you're you're gonna hear more about Eileen gou Um. Not only did she have one gold medal, she could win multiple gold medals, or at least multiple medals um. She's

also the face of a lot of brands. Um. And especially after this win, you're going to have to think that the that even more brands are are going to line up to have her be the be part of their promotions. Okay, So what I find particularly compelling about her story story since I've learned about her twenty four hours ago, I mean and and it's it's I encourage everybody to go check out this story. I don't know how, I'll be honest with you, I missed it in that

issue of Bloomberg Business Week. And uh, she was born in California, but she somehow got permission to represent China and she's become the face of winter sports in China. How did she do that? So the story is is really an amazing one because UM, you know, the as

you described their American born but Chinese athlete. UH, this was a decision of hers rooted UM a couple of years ago, UM, and the moment she did that, I think it was actually very tactical on her part of looking at where the Olympics we're going to be held, realizing that UM to be the face of a country UM, and and President g in China has really made her the face of it UM that it was going to

have huge commercial amplications. I mean in the US, I'm sure she would have been fine, but there she really is the star of of of the national this national symbol UM of hosting the Olympics UM. As we've talked about before on the show. Beijing obviously hosted the two

thousand eight ones that had a completely different tone. So so really I think this allowed her to not only be the face of these Olympics, but also step into UM a really lucrative commercial role to right, and she's being very careful not to say some anything right about anything. That is the most amazing part about this story is the backdrop of UM and the art did a really good job with our story of showing this. You know,

she's basically doing a sixteen twenty. I can't even count how many rotations that is UM as she jumps over all of the tension between um, the US and China. And you know, in the Trump world, was the trade war, and now it's weaker weak, the weakers, it's the Hong Kong, it's Taiwan. It's just endless, right, um. And you're not gonna hear talk about in any of that. If anything, somebody did ask her about paying the tennis star and sort of the weird spectacle that that was UM and

and that was as close as she'd gotten. And still she managed to kind of like step in it when she did. But it there is just no incentive to talk about anything that borders on geopolitical UM. And you know, to her credit, I mean, she is an eighteen year old kid. She hasn't even started college yet. She will go to Stanford beginning in the fall. UM. So clearly like there's a lot of ways that this could go wrong, and she is staying firmly on a messaging track that

that involves nothing that could be misconstrued. Well past these next couple of weeks. I wonder what the future looks like for her. You have images of her in the story appearing at the met Gala, but also at the same time um appearing as a model for a Chinese dairy brand as well. Uh. She said in the pastoral that when she's in China, she's Chinese, when she's in

the US, she's American. And it was remarkable to watching the Olympics last night when she landed I think it was the second of her three runs of her gold medal three runs. She she put both to the camera in English talking about how she wasn't crying, and she sounded like an American teenager because she is, you know, she really straddles both sides of of the Pacific. And you know you mentioned Um, you know, like a Chinese

dairy brand there. But like, we have not seen this campaign rollout, but she has thought so highly of by brands and an advertisers. She's going to be one of the faces of Victoria's Secret. Victoria's Secret obviously mired in this just like you know, a vestige of of everything that was wrong a couple of years ago, has completely tried to rebrand itself and Eileen Goo is one of the handful of uh young UM models UM that will

be basically the face of the brand going forward. So to give you a sense of like how big Eileen who's gonna gonna become and the gold medal is just gonna burnish that. So you're gonna see her a lot. You know, she's already backed by by the Red bulls. And I just think the the sponsors like what they see because they get an athlete who can speak to a Chinese audience that everyone in China can now you know, look up to UM, and in America they basically just

get a multinational. So it's a very very interesting story. There's not that you know this as um Ellen Hewitt story document. There are a couple other athletes that have done a similar um uh judo kind of positioning where they're they're born in America and also represented China. One of those other athletes is in the Games and has not nearly faired as well. So I think who's really

rising above the noise? Still, yeah, modeling for the other time noise, you know, I think all of these are you know, this is like such a difficult Olympics UM and none of it is real noise, but she's managing to to walk a tight rope that, you know, I think few other athletes could probably do. Attended last year's

met Gala modeling for Louisvatan Tiffany. It's so interesting at a time when brands are being asked to step up on a lot of issues, and yet you look at the success she has in really staying um about so many important issues that are out there. Joe Weber, editor Bloomberg Business Week magazine. Catch this in the January issue. Yeah, I'll bet you let me drive. Oh no, no, no, no no, oh please, I'll do the ride gravel. I want to drive. It's good question. Drive is the drive to the clothes

on Bloomberg Radio. Oh my god, it's confusing day. Uh. We are just about ten minutes away from the closing bell, and we have definitely seen stocks um higher for most of the day. We did see kind of a turnover and just coming off the highs. But here we are once again and we're just kind of bouncing around. You. Our best office of the day, our performers heard from Charlie really the nastac up more than one percent. Let's let's bring in Ryan Dietrich chief market strategist at LPL

Financially joins us on the phone from Charlotte, North Carolina. Ryan, I love when you join us because you have so many technicals that you're looking at here we are, uh, you know, at the beginning of February. Still give us an idea technically how you're analyzing the market right now? Yeah, Tim and Carol, thanks for having me back. But you know, the way we're putting it as this what we're telling our advisors, this is a mid term year. We all

know that, right. Historically when you look at the four year presidential cycle, guys, you know, the most of volt out of the four the mid term years. You see almost a seven team percent peak to trough correction during the midterm year. Did we expect to be like you know, the temperson correction to start this year in the SMP and even more in small caps in other areas well, Probably that soon at the start of the year. But it shouldn't be shocking to people that we're having more

volatility right now. Now. The truth is we you know, a couple of mondays ago, was that below right, we had the record volume all to put the call ratio spiked a lot of fear. We think we're carving out a bottom. We had about a ten percent correction in the smp here um. You know, we can maybe go back down and tested from technical point of view. But the truth again is this market just kind of seems like it's choppy and wants to kind of just bide

its time here. It's not necessarily bearish, maybe not super bowlish either, but if not the end of the world after the rally we saw last year. So wait, so you're blaming mid terms historically technically, well, we wouldn't say we're blaming them. We're just pointing out, Carol, that historically midterm years are vault. Let's not forget twenty eighteen. Right, we saw a bear market in pretty much in late in the year. At the same time, other reasons expect

a little more volatility to fit. It's starting to high rates. We've seen volatility. Can the technician talk fundamentals? Can the technician talk fundamentals? I'm just wondering, Yeah, you know, I use the efforts sometimes. Whoa okay, technician, it's a technician joke. I know, I know, I can tell. So we talked to a little bit more about though, how are you thinking you must look like you said you have to

roll in it all? M yeah, I mean, you know, let's just look back the last time the Fed hike rates, right, we remember December we started the high rates. I should say December fifteen, had a pretty big sell off in the February of sixteen as you recalibrate kind of the expectations of those hikes. You know, everyone's sawing, oh, four hikes,

five hikes, and we're not minimizing it. But the truth is, when we've looked in history, Carol, when you do that first rate hike in a new cycle, you know, sp does because thirty six more months on average and gains like sevent So just because the Fed is hiking, you're probably more mid cycle and there could be you know, a good amount of time left. Investors need to remember that as we start to see some rate hikes. So you've got mid terms increasing volatility. You've also had a correction.

Stocks to well after correction, stocks do well in a rising rate environment. Having said that, Ryan, you know, I love looking at technicals and I love looking at historical patterns, but this is a pattern to we're coming out of a pandemic. Most of us have never seen this before h and have lived through it. So there's still a fair amount of questions. Absolutely, Carroll, I mean you're talking

about questions. I mean, just look at those sentiment polls that we've seen, right, We've seen a lot of people are questioning what exactly is going on in that fear that comes. But again, you know what patents say when you know, if everyone's thinking, like somebody isn't thinking, we are optimistic that again we've had all these bearishness coming in because so many people have been hit hard by by this vicious, vicious correction to start the year, and

there's still opportunities. I mean, you know, if all you look at we're financials and energy, and I know there's more stocks than that, but I mean energy is unwell. Financials are still strong. Look at these bank stocks. A lot of bank stocks are just now breaking out above where they were in two thousand seven, two thousand eight. It's hard for us to be bearished a global economy to see that leadership. And we've I've called you guys

for a while. So we like cyclical value financials and an energy have done well this year, and we still think cyclical value this point in the cycle makes a lot of sense to a continue to outperform a little bit here. Okay, back to fundamental speach. Just because we have you, we cannot ignore the inflation print that we're getting Thursday morning. Seven point is what economist survey by Bloomberg anticipate. How should investors read a potential upside or

downside surprise? Yeah, well it's gonna be a big number, tim, I mean that's obvious. I think the way the investors should look at it as a reaction, Right, what's the tenure yield do on it? What is stocks do on it? But the truth is this, the tenure yield is still not above two percent. Maybe since we started talking it is. But you know, the market was truly worried about massive inflation. I think gold would be way above eighteen hundred. I

think the tenure yield be way above two percent. It's not um I think we're more optimistic that how strong this earning season has been. Let's corporate Americas say, right, what's the CEO GM just say we could go He said, hey, listen, we see full production the second half of this year and improvement in supply chain. To me, that matters more for the average investor than the scary headline we're going to see on Thursday, which the politicians are going to

play up. That's how it works. But investors need to focus on earnings. Are still strong. Global earnings, my goodness, grow. Global earnings are really strong. That's a that's a positive thing for investors to rem right. Watch that bottom line. Um. But what's interesting too is we've got to watch margins and margin compression because that's certainly something that investors are keeping an eye on. Hey, I think one of the indicators as a technician that you're really leaving out is

the Super Bowl indicator. Yeah, I don't invest in this, right, I've gotta bet disclaimer, But historically, guys, the winner of the Super Bowl fice from the NFC, the stock markets up for the year like seventy nine percent of the time a f C when the FC wins only two thirds of a time. Now I am, I'm from Cincinnati. I'm a Bengals fan. That's what I like to hear you. Now listen to this. Ten of the last eleven times an a f C team has won the Super Bowl,

the SMP was higher. So go Bengals. And that should be good for stocks. Don't invest in that. But I hope the Bengals win. Leave it at that too. That's one thing we can all agree on. I think, Well, I think I think it just speaks to the moment in time. Right. There's so many things that we can kind of point to to maybe kind of get an

idea of what comes next. But I mean, ultimately it will be down to what the Fed does, whether they kind of get it right um massaging those calls, and how earnings react ultimately and what kind of economic growth or do we ultimately fall into some kind of recession, even if it's a quick one, and what that can do certainly to the financial markets. No, you're right, let's not forget this economic cycle of growth is almost two years old, will be two years old here in a

couple of months. Your average cycle of growth usually last five years. So I'm not saying this one couldn't fall into recessions soon. We just don't see it. With the consumer this strong se GDP, the consumer is still pretty healthy out there, spending out there, getting jobs. I mean they're quitting their jobs. I think it's hard to think millions of people to quit their jobs if they were comfortable about the state of the economy to go find

a new job or create a new job. And likely, you know, usually small businesses and and the consumers are right about the economy more than the economists are, so we're going to trust them. And then that should still mean the cycle has probably a couple more years left, the growth left to in our opinion, we shall see. Ryan Dietrich, thank you so much, chief markets strategist at LPL Financial, on the phone from Charlotte, North Carolina, giving

us certainly a lot to think about. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News