Peloton plans to lay off 2,800 people and remove chief executive John Foley as part of a corporate overhaul meant to “right-size” its operations, the at-home fitness company announced Tuesday morning.

The restructuring comes as demand for Peloton’s connected fitness products has cratered from its early-pandemic heyday, erasing billions of dollars in market value.

The company benefited from a work-from-home tech boom in 2020 when the closure of in-person gyms sent homebound workers clamoring for exercise gear, rocketing its stock price upward more than 600 percent. But demand for new bikes trailed off in 2021 as many resumed their pre-COVID routines, forcing Peloton to back off its more lofty goals.

On Tuesday the company slashed about $700 million from its revenue projections for the fiscal year. Last August the company predicted it would take in about $5.4 billion in revenue for the one-year period ending June 30; it now expects between $3.7 billion and $3.8 billion. It ran a net loss of $439 million in the most recent quarter.

The restructuring plan announced Tuesday is estimated to shave some $800 million in annual costs, in large part through layoffs that the company said would affect “nearly all of our operations and across almost all levels.” The company is also aborting plans for a new production facility in Ohio.

“This has been a humbling time for Peloton, but we remain confident in the fundamentals of our business, the strength of our platform, and the significant growth potential for Connected Fitness and our leadership position within it,” Foley wrote in a letter to shareholders.

Foley, who co-founded the company and saw it through an initial public offering, will move out of the CEO job to become executive chairman, according to a Tuesday letter to shareholders. He will be replaced by Barry McCarthy, a tech executive who held senior leadership roles at Spotify and Netflix. William Lynch, who served as president of the company, will also step down.

Foley’s removal comes after activist investor Blackwells Capital acquired a stake in the company and criticized his “repeated failures to effectively lead Peloton” in a public letter to the company’s board of directors. Blackwells now wants Peloton to sell itself to the highest bidder, arguing that the company is chronically mismanaged and cannot generate enough value as a stand-alone company. The Wall Street Journal reported Friday that it had drawn interest from multiple suitors including Amazon.

Even as its financial projections have been repeatedly edited downward, Peloton’s executives argue that the company still has promising long-term growth prospects. They are banking on the idea that the pandemic has permanently changed how consumers approach fitness, and they believe Peloton’s new products will keep it at the forefront of a fast-growing connected fitness industry even as competitors enter the market.

In a call with investors Tuesday, executives admitted the company’s recent performance has “fallen short of expectations,” as chief financial officer Jill Woodworth put it. But she emphasized that demand for connected fitness products is still significantly higher than where it was before the pandemic.

“We know that consumers coming out of COVID are more predisposed to want to workout at home than they ever were before COVID,” Woodworth said.

The company has staked its future on a range of workout products that it hopes can capture a market beyond its traditional Bike and Bike+. Subscribers can turn the bike’s screen outward and take a boxing class, for example. In April it will be rolling out Peloton Guide, a suite of strength training projects that includes a smart camera to track members’ bodily movements.

Executives say they believe the company’s connected treadmill product, called Tread, could eventually offer an even larger market than the signature Bike, noting that treadmills have traditionally sold more widely than stationary bikes.

Tread has had problems of its own, however. In April, Foley led Peloton’s aggressive fight against federal safety regulators over whether to recall its $4,300 Tread+ treadmill.

The Consumer Product Safety Commission wanted Peloton to pull the product off the market after a 6-year-old boy was sucked under the treadmill and killed. But Foley refused until a public backlash led the company to reverse course and issue a public apology.

The CPSC eventually discovered the treadmill was connected to at least 39 incidents involving children, objects and one pet being trapped under the machine. The recalls cost Peloton roughly $27.5 million last year and contributed to $51.8 billion in legal costs.

Problems could continue to mount as Peloton slashes costs, says Wedbush managing director Dan Ives, increasing the likelihood that the company sells itself to a rival.

“If Peloton tries to go alone ahead, not sell, there are cautionary tales of troubled consumer products in cost cutting mode that have been down this path with Fitbit and GoPro coming to mind in darker stories,” Ives said.

It will be up to McCarthy, an executive with a track record in building subscription-based tech businesses, to chart a path forward.

The company’s stock price opened at $30.25 per share, up roughly 2 percent from the previous day’s close, before surging 20 percent throughout the morning. Even with the morning’s gains it is down 70 percent over the last six months.

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