Raphael Stevens

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Chipotle Mexican Grill CEO Brian Niccol recently told CNBC’s “Closing Bell” that there will be a significant change from just a few months ago in how Americans choose to spend their “next dollar.”
CarMax said on Monday that declining sales in the red-hot used car market are a sign of “declining consumer confidence.”
Inflation hit its highest level in decades last month and 48% of Americans say they are thinking about rising prices all the time, according to a CNBC survey released last week.

Wang Ying | Xinhua News Agency | Getty Images

At what point do consumers say enough is enough when it comes to paying more for goods and services?
The question is top of mind for C-suite executives, regardless of industry, as inflation surges to levels not seen in decades. And as earnings season begins, so are the concerns about balancing the rising costs and the consumer.

“Either businesses are going to make a lot less money or they’re going to raise their prices,” RH CEO Gary Friedman said on the company’s earnings call on March 30. “I don’t think anybody really understands how high prices are going to go everywhere. … I think it’s going to outrun the consumer, and I think we’re going to be in some tricky space.”
Consumer prices rose 8.5% from a year ago in March, according to Labor Department data. That data reflects a rise that the U.S. has not seen since the late 1970s and early 1980s, with core inflation being the hottest since August 1982. The Producers Price Index, which measures what wholesalers are paying, posted its biggest rise year over year on record, up 11.3% in March.
So far in 2022, rising prices haven’t significantly slowed consumers down. Year-over-year retail spending was up 17.6% through February, according to the Commerce Department, and January spending was revised up to an increase of 4.9%, well ahead of the initial 3.8% estimate.
That continued strong demand is providing an opportunity for many companies to offset the increased pricing they’ve seen for materials and supply chain costs by passing it along to customers.
Nike upped its gross margin expectations by at least 150 basis points versus the previous year because of the “benefits of strategic pricing,” CFO Matt Friend said on the company’s most recent earnings call on March 21.

Conagra reported that its organic sales were up 6% in its most recent quarter even as volume declined 2.6% percent. The reason for that? Price/mix was up 8.6%. CFO Dave Marberger said on the company’s April 7 earnings call with analysts that the volume decrease was “primarily due to the elasticity impacts of the price increases.”
A hot job market, low unemployment and a historically high rate of savings have buoyed Americans, making them more willing to pay higher prices for goods and services. But while wages have grown, they have not kept pace with inflation. Real earnings were up 5.6% from a year ago while real average hourly earnings had a seasonally adjusted 0.8% decline last month, according to Bureau of Labor Statistics data.
There are signs the consumer strength is getting more tenuous, starting with a key earnings read from the used car market on Monday.
CarMax saw its used car unit comps drop 6.5% in its most recent quarter even as its used car revenue rose 32.6% due to average selling prices that skyrocketed. The company cited a number of macro factors as to why sales dropped, including “declining consumer confidence, the Omicron-fueled surge in COVID cases, vehicle affordability, and the lapping of stimulus benefits paid in the prior year period.”
Forty-eight percent of Americans said they are thinking about rising prices all the time, according to a CNBC survey released last week. Furthermore, 75% said they are worried that higher prices will force them to rethink their financial choices in the coming months.
To combat higher prices, there are several things that Americans say they are doing. Fifty-three percent said they have cut back on dining out in the last six months, while 35% said they’ve canceled a monthly subscription and 29% were forced to cancel a trip or vacation.
On top of that, 32% said they’ve already switched from a brand-name product to a generic version.
Historically, high earners have been a safe haven for companies when it comes to continuing to spend even through rough times. But even 68% of respondents with incomes of $100,000 indicated they’re worried about higher prices making them change financial decisions.
Chipotle Mexican Grill CEO Brian Niccol said on CNBC’s “Closing Bell” on Friday that while the company “continue(s) to see strength in the consumer,” that he thinks “they’re going to continue to be more discriminate going forward as they decide how to spend their dollars.”
“Our data tells us people are thinking twice about how far they want to drive, how often they want to drive; they’re also thinking twice about whether or not they want to spend their dollar on a restaurant experience or an entertainment experience,” Niccol said. “I just think it’s becoming more of a, I would say, conscious decision on how they’re going to choose to spend their next dollar versus maybe a couple of months ago.”
Niccol said Chipotle, which previously said it raised prices by roughly 6% so far this year resulting in customers paying about 10% more for their orders than a year ago, has “the pricing power to take the pricing when we need to.” However, he also noted that he “would love not to have to keep taking price, but we’ll have to see how everything unfolds going forward.”
CNBC research suggests that S&P 500 companies are expected to show earnings growth of 6.4% in the first quarter of 2022 and 6.8% in the second quarter, ultimately leading to about 10% growth across the second half of the year. But that is largely being driven by the energy sector, which is projected to have earnings growth of 233.5% in the first quarter.
In comparison, the consumer staples and consumer discretionary sectors are estimated to have a 1.9% and -11.9% earnings growth in the first quarter, a harbinger that the consumer spending and demand of the Covid era might finally be hitting a wall. More

Krispy Kreme, Bojangles and Walmart-owned Sam’s Club are among the companies that are picking up on Americans’ pain at the pump.
Some companies are dangling fuel-related discounts or perks to try to drive more foot traffic and sales, as inflation weighs on consumers’ wallets.
Retailers will get fresh clues about how consumers are responding to those prices on Thursday, as the Commerce Department reports retail sales in March.

A car is pumping gas at a Costco gas station. The conflict between Ukraine and Russia resulted in increased gas prices in the United States in the past two weeks.
Michael Ho Wai | Lightrocket | Getty Images

Along with fried chicken, biscuits and iced tea, family meals at Southern fast-food chain Bojangles now include a free $10 gas card.
At select Krispy Kreme shops, the price of a dozen glazed doughnuts has dropped temporarily on Wednesdays to cut drivers a break as they pay more for gallons of gas.

Companies are dangling gas-related perks as Americans feel pain in the pump and some start to make choices about where to trim back the budget. Warehouse clubs, including Walmart-owned Sam’s Club and BJ’s Wholesale, have rolled out special promotions to emphasize cheaper gas as a key membership benefit. Grocers, including Kroger and Giant Eagle, are touting fuel programs that turn customers’ grocery spending into a lower price per gallon.
“We are an automobile economy,” said Jackie Woodward, Bojangles’ chief brand and marketing officer. “It is something that really hits at the heart of how people go about their lives, and I think that’s why its resonating with our customers.”
Bojangles began handing out $1 million in gas gift cards last week at company-owned restaurants and franchises, many of which are in states in the South especially hard hit by inflation.
Woodward said the Charlotte-based company’s customer is typically a blue-collar worker who “cares about the food they feed their families and how to stretch their dollar.” She said the fast-food chain seized the opportunity to show it is tuned in to customers’ concerns. So far, she said, customers have responded with surprise and gratitude as they get more for their money.
Gas prices are just one of the everyday costs that have jumped as inflation hovers at an approximately 40-year high. The national average for a gallon hit $4.331 on March 11, the highest price on record, according to AAA. It has dropped off to an average of $4.098 as of Tuesday, but that’s still a significant increase from the $2.863 average a year ago. In some Northeast and West Coast states, gas prices are even higher. In California, for example, an average gallon of gas rang in at $5.748 as of Tuesday, according to AAA.

The prices, posted on big signs across the country, drive just a fraction of household expenses but can have an outsize impact on consumer confidence, said U.S. Bank Chief Economist Tendayi Kapfidze.
“The mindset effect is probably bigger than the wallet effect,” he said.

Retail sales impact

Consumers spend about 4% to 6% of their monthly expenses on gas, Kapfidze said. It is more of a burden in low-income households, where the percentage can rise to as much as 20%.
Retailers will get fresh clues about how consumers are responding to those prices Thursday morning, when the Commerce Department reports retail sales from March. Retail sales in February fell shy of expectations, signaling that consumers’ pace of spending may be slowing down.
Even before the March retail data are released, however, there are growing worries about the state of the consumer. Over the past two weeks, an uncertain economic backdrop has spurred analysts to downgrade some retailers’ stocks and upgrade others. The war in Ukraine has injected additional uncertainty about consumer mindset. Some economists have warned about the risk of a recession, even as unemployment remains low and job openings outpace people to fill them.
Companies, such as Macy’s, have acknowledged that they will have to compete for discretionary dollars as some consumers decide between buying a new outfit, booking a vacation or going out to dinner.

Gasoline prices are displayed at a gas station in Manhattan in New York City, New York, March 7, 2022.
Mike Segar | Reuters

Steve Sadove, former Saks CEO and senior advisor for Mastercard, said retailers are at an inflection point after “a period of almost nirvana” when consumers had fewer places to spend their money.
During the earlier part of the pandemic, people put stimulus checks and extra savings toward purchases. Companies had fewer promotions and higher profits because of lower-than-usual inventory. Holiday sales, for instance, hit an all-time record of $886.7 billion, despite supply chain snarls and omicron-fueled spikes in Covid cases.
Sadove said the consumer remains healthy, but he expects spending to slow. Higher retail sales numbers now reflect elevated prices of gas and other goods, not just shoppers’ appetite to spend, he added.

Sending a message

While the higher price at the pump is a burden on consumers, some retailers see an opportunity to seize a larger share of households’ budgets.
Starting last week, cashiers at Giant Eagle grocery stores began promoting the company’s loyalty program at the checkout. The privately held grocer has 200 supermarkets and 270 convenience stores with gas stations in Pennsylvania, Ohio, Indiana, Maryland and West Virginia.  
One of the cornerstones of the program is rewards that customers can redeem for dollars off groceries or gas. To nudge customers to sign up, the grocer is offering 10 cents off each gallon of gas bought from its pumps for the first 90 days, said Justin Weinstein, vice president of customer experience. It recently waived the expiration date of rewards, too, he said.
“Rising fuel prices were on our mind as we made this change,” he said.
Weinstein said Giant Eagle has noticed gas prices have already changed purchasing patterns. Customers have been trending toward smaller, more frequent fill-ups.
Some companies are having a little fun with an otherwise serious matter. Starting this week, Krispy Kreme said it is tapping its “strategic doughnut reserve.” Over the next four weeks, it will price a dozen of its glazed doughnuts on Wednesdays to match the national average for one gallon of gas. That’s less than half its typical price of over $10.
Dave Skena, chief marketing officer, said the idea was born from his own teams’ complaints about gas prices. The lighthearted idea, he said, gets at a very real problem for household budgets. Gas prices are unique because the billboard-size numbers are in consumers’ faces, he said.
“It’s very visible, and it’s not very substitutable, and for a lot of people, it has a significant impact on other things they can afford — especially on things that are fun to have,” Skena said.

Doughnuts are sold at a Krispy Kreme store on May 05, 2021 in Chicago, Illinois. The doughnut chain reported yesterday that it plans to take the company public again.
Scott Olson | Getty Images

For membership-based warehouse clubs, branded gas stations — and their lower prices — have become a way to draw customers.
Sam’s Club CEO Kath McLay said some members are signing up specifically for cheaper prices at the pump. When they fill up, she said, the club looks for ways to woo them inside.
“We see gas as being a member benefit — so we always want to be super competitive — and then that becomes a traffic driver to the club,” she said.
This month, Sam’s Club is offering 10% back in store credit every Tuesday for club members who use one of its signature credit cards at any gas station.
Warehouse club competitor BJ’s is encouraging shoppers to fill up their fridges and tanks at the same time. Customers who spend $100 or more in a club this month get 50 cents off per gallon on the same day of the transaction. If they shop with one of BJ’s co-branded credit cards, they get an additional 10 cents off during the one-month promotion.
Costco, another warehouse club, saw sales jump in March, as gas prices crept higher. Its comparable sales rose 17.2% in the five weeks ended April 3 compared with the year-ago period.
Some of those sales gains came from gas prices and customers who shopped at stores after being drawn to the warehouse club’s gas pumps.

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Bed Bath & Beyond missed analysts’ expectations for fourth-quarter earnings and revenue, as it struggled with out-of-stock merchandise.
CEO Mark Tritton said the company is making progress with its turnaround, though, by welcoming back customers, remodeling stores and expanding its private label business.
Along with its turnaround effort, the home goods retailer is competing for shoppers’ dollars as inflation is at a four-decade high and some consumers focus their attention outside of the home.

Bed Bath and Beyond on Wednesday reported a surprising holiday-quarter loss, as the company ran low on inventory and struggled to move merchandise out of congested ports and onto shelves.
Shares fell more than 10% in premarket trading, as investors weighed the news.

CEO Mark Tritton said out-of-stock merchandise caused the company to miss out on about $175 million in fiscal fourth-quarter sales. That’s higher than the prior quarter, when supply chain bottlenecks cost the company about $100 million.
Tritton said in a CNBC interview that the home goods retailer is disappointed by its results. He said “major headwinds in the macro environment” have slowed the company’s turnaround efforts. For instance, he said, moving goods costs more, and some best-selling items from national brands are in short supply due to missing components like microchips that go into vacuums. Plus, he said, the majority of its seasonal merchandise got stuck at ports and arrived late.
He said some of those challenges have carried into the current quarter.
Still, Tritton said, Bed Bath is making progress with its transformation. He said it is investing in technology, welcoming back customers with postcards and targeted emails and expanding its more profitable private label business.
Bed Bath has been on a bumpy ride, as Target veteran Tritton has sought to refresh the retailer’s brand with the launch of private label products, store remodels and closures of underperforming locations. Its stock has been drawn into meme-stock rallies along with AMC Entertainment and GameStop. It has also been under pressure from investors — including activist Ryan Cohen, chairman of GameStop and founder of Chewy.

The retailer recently struck a deal with Cohen’s firm, RC Ventures, by agreeing to add new board members and explore whether it should spin off or sell its BuyBuy Baby business, which has been one of its bright spots.
Bed Bath on Wednesday did not provide a specific forecast, but said it expects sales and margins to improve in the second half of the upcoming fiscal year, as supply chain conditions ease.
Here’s how the retailer did in the three-month period ended Feb. 26 compared with what analysts were anticipating, based on Refinitiv data:

Loss per share: 92 cents vs. profit of 3 cents expected
Revenue: $2.05 billion vs. $2.07 billion expected

The company’s net loss grew to $159 million, or $1.79 per share, from net income of $9 million, or 8 cents a share, a year earlier. Excluding one-time items, it lost 92 cents a share. Analysts surveyed by Refinitiv had expected earnings per share of 3 cents.
Sales fell 22% to $2.05 billion from $2.62 billion a year earlier. That fell short of estimates for $2.07 billion.
Same-store sales, a key retail metric, dropped 12% across Bed Bath’s business compared with the year-ago period. Same-store sales declined 15% for the Bed Bath & Beyond banner and grew by low single-digits for the BuyBuy Baby banner.
Digital sales declined by 18% compared with the year-ago period, which partially reflects the shift back to stores and normalizing e-commerce levels.
Tritton said Bed Bath is doing a complete overhaul of its supply chain so it can better manage all of its merchandise as it imports goods and moves them to distribution centers and stores. He said that technology, which acts like “a virtual control tower,” will go live at the end of this month. Those efforts were already underway, but have become more urgent, he said.
“The timing of these pressures and the timing of the completion of the strategy is the friction point,” he said.
Along with executing on its turnaround efforts, Bed Bath must compete for shoppers’ dollars as inflation is at an approximately four-decade high. Consumers are also weighing other spending priorities, such as summer vacations and spring wardrobes, which may direct their attention outside of the home.
Tritton said the backdrop is tougher for the retailer, especially since households no longer have extra dollars from the government like child tax credits. That is “dampening the overall demand for several categories, including home,” he said.
“We think there’s an evergreen, strong home market that has had some erratic ups and downs and when it normalizes, we think there’s a great business to be had,” he said. “We’re part of customers’ lives and their wants and needs and to ensure that we’re in stock and servicing that need is our key agenda.”
As of Tuesday’s close, Bed Bath’s shares are up about 23% so far this year. The retailer’s stock closed at $17.97 on Tuesday, down 6.75%, bringing its market value to $1.73 billion.
Read the company’s earnings press release here.

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Delta Air Lines expects to return to a profit this quarter thanks to a jump in bookings — and fares — that are helping offset soaring fuel costs.
The carrier forecast second-quarter capacity at 84% of 2019 levels.
Delta’s first-quarter fuel bill rose 6% from 2019 to $2.09 billion, even though its capacity was down 17%.

Delta Air Lines expects to return to a profit this quarter thanks to a jump in bookings — and fares — that are helping offset soaring fuel costs.
The company’s shares were up nearly 6% in premarket trading after the airline reported first-quarter results. Rivals American Airlines and United Airlines, which both report results next week, also rose.

Delta said Wednesday it expects unit revenues to rise double digits during the second quarter compared with 2019 and that sales overall will be recovered to as much as 97% of sales generated three years ago before Covid devastated travel demand.
In March, Delta logged the highest bookings in its history, CEO Ed Bastian told CNBC’s “Squawk Box” on Wednesday.
Bastian said he expects consumers to prioritize travel despite inflation, which has already pushed up prices at supermarkets, gas stations and in the housing market.
“People have been cooped up for the last two years,” he said. “They’re done investing in their homes and their garden and want to go see someone else’s garden for a change.”
Delta is ramping up its schedule as peak travel season approaches and plans to fly 84% of its 2019 capacity levels this quarter, the Atlanta-based airline said in its quarterly release.

Airlines are facing higher fuel prices and other costs associated with ramping back up. Domestic U.S. airfare rose 20% last month compared with 2019, according to Adobe data, a sign that passengers are willing to pay more to travel after two years of the pandemic.
Bastian said the airline is well staffed for the summer. Employee shortages, particularly for pilots, have hamstrung airlines’ growth and exacerbated flight disruptions over the past year.
Delta expects its costs, excluding fuel, to rise 17% in the second quarter as it increases flying and continues to hire to meet demand.
Here’s how Delta performed in the first quarter compared with what analysts expected, according to average estimates compiled by Refinitiv:

Adjusted loss per share: $1.23 versus $1.27 expected.

Revenue: $9.35 billion versus $8.92 billion expected.

The carrier reported a net loss of $940 million for the first three months of the year on revenue of $9.35 billion, above the $8.92 billion in sales that analysts polled by Refinitiv expected. Sales were off 11% from 2019 levels.
Carriers have been comparing results against 2019 to show their recovery versus pre-pandemic performance.

A Delta Airlines Airbus A-350 aircraft, flight number DL40 bound for Los Angeles takes off from Kingsford Smith International Airport on July 26, 2021 in Sydney, Australia.
James D. Morgan | Getty Images

Delta’s first-quarter fuel bill rose 6% from 2019 to $2.09 billion, even though its capacity was down 17%. Jet fuel prices have more than doubled from last year and are up more than 50% since the start of the year, according to Platts.
“As our brand preference and demand momentum grow, we are successfully recapturing higher fuel prices, driving our outlook for a 12 to 14 percent adjusted operating margin and strong free cash flow in the June quarter,” Bastian said in the quarterly release.
In January, Delta forecast a first-quarter loss as new Covid cases were peaking. Adjusting for one-time items, Delta posted a loss per share of $1.23 for the period, slightly better than the adjusted loss of $1.27 analysts expected.
The airline said other areas of its business also improved. It generated $1.2 billion from its American Express credit card partnership, up 25% from the same quarter of 2019 while spending rose 35% compared with three years ago. First-quarter revenue from its refinery was $1.2 billion, compared with $48 million three years earlier.
Delta ended the quarter with $12.8 billion in liquidity.
Delta executives will hold a call at 10 a.m. ET to discuss the results with analysts and media.

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The 47.5% figure includes a hardware platform fee of 30% for sales made through the Meta Quest Store, where it sells apps and games for its virtual reality headsets.
On top of that, Horizon Worlds, will charge a 17.5% fee.
Meta’s fees for the sale of virtual assets on Horizon Worlds are significantly more than the 30% Apple charges developers on its App Store.

Facebook on Thursday announced that it is opening up Horizon World, its virtual reality world of avatars, to anyone 18 and older in the U.S. and Canada.
Courtesy of Meta

Facebook-parent Meta is planning to take a cut of up to 47.5% on the sale of digital assets on its virtual reality platform Horizon Worlds, which is an an integral part of the company’s plan for creating a so-called “metaverse.”
The social media giant announced in a blogpost Monday that it is letting a handful of Horizon Worlds creators sell virtual assets within the worlds they build, which could eventually include NFTs. However, the company failed to mention in the post how much Meta will charge creators to sell their wares.

A Meta spokesperson confirmed to CNBC Wednesday that Meta will take an overall cut of up to 47.5% on each transaction. That includes a “hardware platform fee” of 30% for sales made through the Meta Quest Store, where it sells apps and games for its virtual reality headsets. On top of that, Horizon Worlds, will charge a 17.5% fee.
The size of the cut has angered some in the NFT community. One Twitter user wrote: “I hate you Facebook.” Another said: “If Meta wants 47.5% of NFT sales they gotta talk to the IRS because I don’t even have that after taxes.”
Elsewhere, NFT marketplace OpenSea takes a 2.5% cut of each transaction, while rival LooksRare charges just 2%.

Over the last few months, companies and individuals have been snapping up everything from art to real estate in virtual worlds on platforms like Decentraland and The SandBox. Hip-hop star Snoop Dogg has purchased virtual land and a fan paid $450,000 in December to buy a plot next door to him on The Sandbox.
Vivek Sharma, Meta’s VP of Horizon, reportedly told The Verge: “We think it’s a pretty competitive rate in the market. We believe in the other platforms being able to have their share.”

Horizon Worlds (formerly Facebook Horizon) is a free virtual reality, online video game that allows people to build and explore virtual worlds. Meta published the game on its Oculus VR headsets in the U.S. and Canada on Dec. 9 but it’s yet to be rolled out worldwide.

Meta vs. Apple

Meta’s fees for the sale of virtual assets on Horizon Worlds are significantly more than Apple charges developers on its App Store.
Meta CEO Mark Zuckerberg and other Meta executives have previously criticized Apple for charging developers a 30% fee for in-app purchases via the App Store.
In November, Zuckerberg said his company was going to try to help metaverse creators avoid Apple’s App Store fee.
“As we build for the metaverse, we’re focused on unlocking opportunities for creators to make money from their work,” he said. “The 30% fees that Apple takes on transactions make it harder to do that, so we’re updating our subscriptions product so now creators can earn more.”
Clarification: The headline and text of this story has been updated to state that the charge will be on all virtual assets within Horizon World. More

Blackwells says Peloton has made little to no progress under new Chief Executive Barry McCarthy.
This comes a little more than two months after Peloton founder John Foley transitioned to executive chairman and McCarthy, a former Netflix and Spotify executive, took the helm of Peloton.
“Remarkably, shareholders are worse off now than before,” Blackwells’ chief investment officer said in a statement.

A person walks past a Peloton store on January 20, 2022 in Coral Gables, Florida.
Joe Raedle | Getty Images

Activist Blackwells Capital is reiterating its push for Peloton to consider a sale, arguing that the connected fitness company has made little to no progress under new Chief Executive Barry McCarthy, according to a new presentation seen by CNBC.
Peloton’s powerful brand, proprietary technology, engaging fitness instructors and loyal subscriber base can be shaped into a much more attractive business, argues Blackwells, which has a less than 5% stake in Peloton.

But, the firm said, change cannot happen effectively in the public markets, particularly as Peloton founder and former CEO John Foley maintains control of the company through his super-voting shares.
Peloton shares about 2% in premarket trading, having tumbled about 33% year to date.
This comes a little more than two months after Foley transitioned to executive chairman and McCarthy, a former Netflix and Spotify executive, took the helm of Peloton. The shake-up transpired as Peloton was seeing demand for its bikes and treadmills wane as costs mounted, weighing on profits. In February, Peloton announced plans to ax about 2,800 jobs and slash roughly $800 million in annual costs.
“Two months have passed since John Foley was promoted into the role of Executive Chairman and Barry McCarthy came out of retirement to assume the post of CEO,” Jason Aintabi, chief investment officer of Blackwells, said in a statement. “Remarkably, shareholders are worse off now than before.”
Blackwells is calling on Foley to “recognize his own limitations,” Aintabi said, and to immediately eliminate the dual-class voting structure.

“Blackwells continues to believe that Peloton cannot be controlled by an executive chairman who appears to be under extreme duress, and will pursue all remedies available to it and to all shareholders,” he added.
The Financial Times first reported on the Blackwells presentation. Peloton and Foley didn’t immediately respond to CNBC’s request for comment.
Blackwells first took aim at Peloton in late January, after a series of CNBC reports, including one that the company hired consulting firm McKinsey & Co. to look for cost-cutting opportunities across the business and another that Peloton planned to temporarily halt production of some products as demand plummeted.
At the time, Blackwells argued that Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies, such as Apple or Nike.
Since taking over the top job, McCarthy has been clear about his plans to turn the company around himself, rather than pursuing a sale in the short term. In an email sent company-wide in early February, he said he was “here for the comeback story.”
Under his leadership, Peloton has already hired a new supply chain chief and is also testing a new pricing system, where customers pay a single monthly fee for both their workout equipment and for access to on-demand fitness classes. McCarthy’s background with membership-based businesses has spurred speculation that the CEO could pivot Peloton to become more focused on recurring subscription revenue over hardware sales.
Still, Blackwells argues that a more significant restructuring is necessary and Peloton’s cost-cutting measures won’t go far enough.
Peloton could garner a takeover price now that would take years to achieve as a standalone company, the activist said in its presentation. It lists Netflix, Google and Amazon as potential acquirers.

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