Tonal for home latest fitness company valued at $1.6 billionlaid off 35% of its workforce, which the company says was a “responsible” decision made in order to grow at a more sustainable pace.
“Tonal is prioritizing becoming a self-sustaining business with a focus on profitability,” the company said in a statement confirming the layoffs. “While sales continue to grow at an unprecedented pace, so do our business costs, especially in light of the macroeconomic climate and global supply chain challenges.”
The company said the restructuring affects all corporate functions at all levels, but it is not clear if there is a concentration of layoffs or if any senior executives are parting ways with the company.
CEO Ali Oradi, who remains at the company, sent out a memo to employees after announcing the 35% cut during the morning general meeting.
“As our business expanded, we quickly expanded our teams to keep up with demand and competition,” Oradea wrote. “Our growth has been supported by outside investors with large amounts of capital, while the same global challenges have pushed our costs up.”
He added that “capital markets have begun to deteriorate faster than anyone expected”, which has clearly changed how Tonal plans to build going forward. Here is an excerpt:
When it came down to it, we had to face these realities:
To cope with what lies ahead, we must prioritize self-sustaining and profitable businesses. Going self-sustaining requires us to significantly reduce both operations and headcount.
Our costs, growth and investment levels have been shaped and built on a hypergrowth trajectory. We owe it to our members and our shareholders, including former and current employees, to stay here long after the current economic downturn.
Those affected receive at least two months’ severance pay, medical benefits through the end of September, including mental health support from Modern Health, and enhanced equity investment.
“To those who are leaving, I am truly sorry. This decision is in no way a reflection of your work or contributions and I meant it every time I said that the Tonal team is the best team on the planet,” wrote Oradea, telling current employees that “dThe decision was part of becoming more compact as a business to address upcoming economic challenges and ensure that Tonal has a strong future.”
Tonal’s closest competitor is Peloton, the exercise equipment company that rose to prominence amid the tailwinds of COVID-19. Peloton was one of the first tech companies to announce massive layoffs in 2022. cutting about 2,800 jobs – or 20% of the workforce – in February. Along with the downsizing, then-Peloton CEO John Foley stepped down from his position to become executive chairman. New leadership has not solved all the problems: this week Peloton announced the cessation of production of its own products just three years after acquiring the facility for this sole purpose. As with Tonal’s announcement today, the reason for Peloton’s change was vague but related to a focus on simplifying the supply chain and streamlining the cost structure.
Credit: techcrunch.com /