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Business

Small Businesses Get Creative as They Still Struggle With Hiring

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The challenges are prompting some entrepreneurs to seek more creative ways to fill labor shortages at a time when they might have expected hiring to get easier.

Lindsay Goodson,

owner of Keith McDonald Plumbing in Milledgeville, Ga., hasn’t been able to find enough experienced plumbers. So she spent $700 to build a camera system that lets junior plumbers live stream their work while Ms. Goodson or another more-experienced plumber supervises from the office.

“It will be a step-by-step, start-to-finish training from afar,” said Ms. Goodson, who tried out the system for the first time in early September and said it would allow the 20-person business to take on more clients.

More than one-third of small businesses said hiring challenges had worsened in the three months ended Sept. 1, according to a Goldman Sachs survey of nearly 1,500 small-business owners. Forty-seven percent of them said finding and retaining qualified employees was the most significant problem small businesses faced, up from 43% in the survey released in June.

Lindsay Goodson hasn’t been able to find enough experienced plumbers for her business.

The data suggest a cooling labor market isn’t having the same impact on small firms that it is on big U.S. companies, some of which have reported that hiring has gradually gotten easier. Government data show the tight U.S. job market loosened a bit in August, with employers adding fewer workers and more people seeking work.

“Even though the news is talking about the labor market opening up, we’re not feeling it yet,” said

Wendy MacKenzie Pease,

owner of Rapport International, a Boston-based provider of translation services.

Ms. Pease and other small-business owners say they are having a harder time matching the salary and benefit increases that big companies are offering. Rapport, which has seven full-time and five part-time employees as well as hundreds of contractors, hasn’t been able to fill two full-time openings even though it boosted wages by about 10% this year, Ms. Pease said. She looked into adding health-insurance coverage but concluded she couldn’t afford it.

A worker at the job site, top, wears a camera on his head as Lindsay Goodson watches from her office with an employee.

Nearly 60% of small companies report that worker shortages are affecting their ability to operate at full capacity, according to a September survey of more than 725 small-business owners by Vistage Worldwide Inc., a business coaching and peer advisory firm.

Southeast Constructors Inc. in Des Moines, Iowa, is addressing the labor shortage by creating its own training school. The new academy, set to open early next year, will offer three months of instruction in construction basics such as how to hang drywall, paint and drive a Bobcat. The heavy-construction firm hopes to hire some graduates of the program, which is expected to start with 50 students.

“During Covid, it was really hard as far as hiring. After Covid, it was even harder,” said

Perlla Deluca,

president of the 22-year-old company, which specializes in bridges, roads, parking lots and other government projects.

Perlla Deluca, president of a company that specializes in bridges, roads and other government projects, says hiring has gotten harder since earlier in the pandemic.



Photo:

Perlla Deluca

Ms. Deluca borrowed nearly $750,000 to buy and renovate a former middle school to house the program; she plans to charge $4,200 for the three-month class.

Overall, small-business confidence inched up slightly in September, as expectations for the national economy improved and the portion of entrepreneurs who expect profits to increase or remain at current levels edged upward, the Vistage survey found.

Nearly 80% of small-business owners said they have increased wages and compensation in response to hiring challenges, according to the survey, and another 11% plan to do so. In addition, 60% of small businesses have refined their recruiting strategies, while 46% have boosted employee benefits.

Some small-business owners say they see the job market easing at the margins. William Duff Jr., founder and managing principal of William Duff Architects Inc. in San Francisco, said the firm is getting more applications for junior-level jobs that require six to seven years of experience or less. Senior architects are harder to find, he said. The 30-person firm, which struggled most of the year to fill job openings, handed out raises at the start of the year and again in the summer.

“At the end of the summer, sort of continuing now, we’ve seen a lot better set of candidates” responding to job postings and coming through recruiters, Mr. Duff said.

Boudreau Pipeline Corp., based in Corona, Calif., says it has turned down more than $13 million in work this year, roughly 22% of the amount it has been awarded, because it doesn’t have enough staff. The roughly 350-person company installs underground utilities, water, sewer and storm drains.

Amid a record hiring streak in the U.S., economists are watching for signs of a possible wave turn. WSJ’s Anna Hirtenstein looks at how rising interest rates, high inflation, market selloffs and recession risks challenge the growth of America’s workforce. Photo: Olivier Douliery/AFP

“It’s frustrating,” said the company’s president,

Alan Boudreau,

who figures he could easily employ 50 more people. The company has boosted wages by 22% over the past two years and added three in-house recruiters. It offers hiring bonuses of as much as $2,500 and retention bonuses of up to $5,000, provided workers stay at least one year. In early 2021, the company boosted referral bonuses to as much as $1,500, up from $150 four years ago. Referrals are the best source of new hires, Mr. Boudreau said.

In August,

Vladimir Gendelman

eliminated college-degree requirements from all job positions at his Company Folders Inc., a Pontiac, Mich., maker of custom presentation folders, binders and envelopes. He came up with the idea after promoting his executive-assistant to a job as print project manager, though she didn’t have any skills or training in printing, prepress or graphic design.

“We realized we don’t need an education,” he said. “We need somebody who is learning on their own, somebody who can figure things out.”

Ms. Goodson, the owner of the plumbing company in Georgia, said she developed her virtual camera system after trying out a widely available camera and discovering that it was too complicated and didn’t have enough battery life. With the system, she can tell less-experienced plumbers to back up if they miss a step. Her lead technician plans to take the camera out on calls to record more complicated jobs, which will then be edited to create training videos.

Jon Hollis, a field technician who has worked for the plumbing company for about a year and half, said he was initially skeptical but now sees the camera system as a very useful tool. “It’s become a pretty integral part of our everyday work,” he said.

Lincoln Vinson gets tools to do plumbing repairs at a home in Milledgeville, Ga.

Write to Ruth Simon at ruth.simon@wsj.com

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Business

Ford Confirms Layoffs, Says It Is Cutting About 3,000 Jobs

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Ford Motor Co.

F -5.04%

confirmed Monday it is laying off roughly 3,000 white-collar and contract employees, marking the latest in its efforts to slash costs as it makes a longer-range transition to electric vehicles.

Ford sent an internal email Monday to employees, saying it would begin notifying affected salaried and agency workers this week of the cuts. The email was viewed by The Wall Street Journal.

The 1% reduction in Ford’s workforce of about 183,000 mostly targets employees in the U.S., Canada and India. About 2,000 of the targeted cuts will be salaried jobs at the Dearborn, Mich., auto maker. The remaining 1,000 employees are working in contract positions with outside agencies, the company said.

The cuts weren’t unexpected. The Wall Street Journal and other media outlets reported in July that layoffs were coming for white-collar staff as part of a broader restructuring to sharpen the car company’s focus on electric vehicles and the batteries that power them.

Ford shares closed down 3.9% each on Monday, after news of a $1.7 billion jury verdict in a case involving a rollover accident with one of the company’s F-250 pickup trucks that left two people dead.

The company’s email, signed by Executive Chair

Bill Ford

and Chief Executive

Jim Farley,

said Ford is changing the way it operates and redeploying resources as it embraces new technologies that weren’t previously core to its operations, such as developing advanced software for its vehicles. The job cuts are effective Sept. 1, a spokesman said.

“Building this future requires changing and reshaping virtually all aspects of the way we have operated for more than a century,” the internal message said.

Mr. Farley has said recently that Ford has too many employees, and that the existing workforce doesn’t have the expertise needed to transition to a portfolio of electric, software-laden vehicles.

He has said he aims to cut $3 billion in annual costs by 2026 as part of his goal to reach a 10% pretax profit margin by then, up from 7.3% last year.

Like many global auto makers, Ford is pouring money into electric vehicles in an effort to close the sales gap with

Tesla Inc.

The company has said it would spend about $50 billion through 2026 to develop EVs, targeting global sales of two million by then.

Mr. Farley earlier this year divided the company into separate divisions, including one to focus on electric vehicles and advanced technologies, and another to handle its traditional internal-combustion-vehicle lines.

He has said profits from its lineup of gasoline and diesel-engine vehicles will help fund the transition, but that part of the business must operate more efficiently.

Supply-chain issues and a shift toward electric vehicles have accelerated changes in the car-buying process. We visit a car dealer to see how consumers and sellers are adapting and what changes might be here to stay. Photo: Adam Falk/The Wall Street Journal

Write to Nora Eckert at nora.eckert@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the August 23, 2022, print edition as ‘Ford Cuts 3,000 White-Collar Jobs.’

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Business

Walmart Lays Off Hundreds of Corporate Workers

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Walmart Inc.

WMT -1.64%

is cutting hundreds of corporate roles in a restructuring effort, according to people familiar with the matter, a week after the retail giant warned of falling profits.

The retailer began notifying employees in its Bentonville, Ark., headquarters and other corporate offices of the restructuring, which affects various departments including merchandising, global technology and real-estate teams, the people said. Around 200 jobs in total are being cut, said one of these people.

A Walmart spokeswoman confirmed that there were roles being eliminated as the company updated its structure, but said that the company was also investing in other areas and creating some new roles.

Last week, Walmart warned that its profit would decline in the current quarter and fiscal year because it was having to mark down apparel and other merchandise that has piled up in its stores. The retailer said higher prices for food and fuel were causing U.S. shoppers to pull back on other categories that are more profitable for it.

Walmart was one of several retailers that was caught off guard this spring as shoppers shifted their spending away from products that have been in high demand throughout much of the pandemic. In addition, some products arrived late due to supply-chain snarls, causing oversupply as shopper interest waned.

Target Corp.

in June issued a profit warning after it reported quarterly results that, like Walmart, showed a surge in inventory levels. Last week,

Best Buy Co.

cut its sales and profit goals, saying consumers had pulled back on electronics.

Walmart is the largest private employer in the U.S. and while much of its workers are hourly staff, it has thousands of people in corporate roles. Walmart employed 2.3 million worldwide, including 1.7 million in the U.S., as of Jan. 31.

While the overall U.S. job market has been strong, a handful of other major employers are pulling back on hiring or cutting some jobs.

Ford Motor Co.

is preparing to cut thousands of white-collar workers, while technology giants such as

Microsoft Corp.

and Facebook parent

Meta Platforms Inc.

have pulled back.

Investors will get another update on the health of the U.S. job market on Friday when the government releases data for July. Economists surveyed by The Wall Street Journal think Friday’s jobs report will show that they added more than 250,000 in July, compared with 372,000 in June.

This is a developing story and will be updated.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the August 4, 2022, print edition as ‘Walmart Trims White- Collar Personnel.’

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Business

Robinhood Lays Off 23% of Staff as Retail Investors Fade from Platform

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Robinhood Markets Inc.

HOOD 2.10%

is slashing about 23% of its full-time staff as the flashy online brokerage continues to reel from a sharp slowdown in customer trading activity.

The job cuts mark the second round of layoffs this year at Robinhood, which in April reduced its staff by about 9%. Together, the two rounds have cut more than 1,000 jobs from the company.

The layoffs come alongside a broader company reorganization,

Vlad Tenev,

Robinhood’s chief executive, said in a message posted to the company’s blog. In the statement, Mr. Tenev said the previous round of layoffs in April “did not go far enough” in helping the company cut costs.

“Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the Covid era would persist into 2022,” Mr. Tenev said in the message. “In this new environment, we are operating with more staffing than appropriate. As CEO, I approved and took responsibility for our ambitious staffing trajectory—this is on me.”

Robinhood also moved up the release of its second-quarter results a day earlier than scheduled, reporting its monthly active users tumbled to 14 million, down 34% from a year earlier. Revenue fell 44% to $318 million.

Launched less than a decade ago, Robinhood ushered in a free-stock trading phenomenon during the Covid-19 pandemic, thanks to its easy-to-use, mobile-first online brokerage platform.

By the second quarter of last year—Robinhood’s best, according to public filings—the company boasted more than 21 million active users, who flocked to the app to trade flashy meme stocks, options and cryptocurrencies.

But the pandemic-darling has seen its fortunes unwind this year as markets have tumbled and customers are no longer stuck at home like they were during the Covid-19 pandemic. Revenue tied to customers’ trading activity dropped 55% in the latest quarter to $202 million.

Robinhood’s stock price plunged this year and finished Tuesday at $9.23, down 76% from its initial public offering price last year of $38 a share. Its stock fell 1.6% in recent after-hours trading.

Robinhood scaled up staffing quickly during the Covid-19 pandemic to meet the surge in demand for its services. On the company’s earnings call in April, Mr. Tenev said the company grew its head count to nearly 3,900 in the first quarter of this year from roughly 700 at the end of 2019. Tuesday’s reduction will bring the head count to about 2,600.

In his blog post, Mr. Tenev said all employees would receive an email and a Slack message with their employment status immediately following Tuesday’s companywide meeting where the layoffs were announced. Employees who were laid off will be able to remain employed through October, Mr. Tenev said.

“The reality is that we over-hired, in particular in some of our support functions,” Mr. Tenev said later on the call with reporters. He noted that employees in support, operations, marketing and program management would be most acutely affected.

A number of technology companies have laid off employees in recent months as they grapple with a slowdown in growth and the threat of a looming recession.

Twitter Inc.,

Netflix Inc.

and

Tesla Inc.

are among those that have made staff cuts.

Within the brokerage landscape, Robinhood has found itself more deeply affected by the current market environment. Compared with larger, entrenched players in the industry, Robinhood’s users tend to be younger and have less money in their brokerage accounts. Jason Warnick, Robinhood’s chief financial officer, said Robinhood customers tend to invest in growth stocks and cryptocurrencies. Both categories were hammered by a downturn in markets this year.

In addition to slowing growth, Robinhood has found itself under the watchful eye of regulators. The New York State Department of Financial Services said Tuesday that it imposed a $30 million fine on Robinhood’s cryptocurrency trading unit for alleged violations of anti-money-laundering and cybersecurity regulations.

The company, meanwhile, has encountered questions about the future viability of part of its business model, after Securities and Exchange Commission Chairman

Gary Gensler

earlier this year outlined a revamp of trading rules that could threaten one of the key ways Robinhood makes money.

As its business has struggled this year, Robinhood has increasingly been considered a takeover target by some market watchers, especially in the highly competitive brokerage industry. In May, one of the biggest names in cryptocurrency,

Sam Bankman

-Fried, unveiled a roughly $648 million investment in Robinhood in exchange for 7.6% of the company’s Class A shares.

Any outside investor, including Mr. Bankman-Fried, would face an uphill battle in mounting an aggressive takeover bid for Robinhood, due to a dual-class share structure that gives the majority of voting control to Mr. Tenev and

Baiju Bhatt,

Robinhood’s other co-founder.

Mr. Warnick reiterated on Tuesday’s media call that Robinhood intends to continue as a stand-alone, independent company.

“We’ve got an incredibly strong balance sheet with $6 billion in cash and we’ve got a lot of momentum on the product side,” he said. “To the contrary of being acquired, we actually think that we should be looking more aggressively at opportunities to acquire other companies that would help speed our innovation.”

Mr. Warnick added that Robinhood plans to roll out tax-advantaged retirement accounts later this year, following its earlier launch of other products including a new debit card. Some former employees, customers and analysts, however, have criticized the brokerage for being too slow to unveil new products that could diversify its revenue stream.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

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Business

Shopify Says It Will Lay Off 10% of Workers, Sending Shares Lower

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Shopify Inc.

SHOP -14.06%

is cutting roughly 1,000 workers, or 10% of its global workforce, rolling back a bet on e-commerce growth the technology company made during the pandemic, according to an internal memo.

Tobi Lütke,

the company’s founder and chief executive, told staff in a memo sent Tuesday that the layoffs are necessary as consumers resume old shopping habits and pull back on the online orders that fueled the company’s recent growth. Shopify, which helps businesses set up e-commerce websites, has warned that it expects revenue growth to slow this year.

Shopify’s shares fell 14% to $31.55 on Tuesday after The Wall Street Journal first reported on the layoffs. The shares have fallen more than 80% since they peaked in November near $175 adjusting for a recent stock split. The company reports quarterly results on Wednesday.

Mr. Lütke said he had expected that surging e-commerce sales growth would last past the Covid-19 pandemic’s ebb. “It’s now clear that bet didn’t pay off,” said Mr. Lütke in the letter, which was reviewed by the Journal. “Ultimately, placing this bet was my call to make and I got this wrong.”

The Ottawa-based company will cut jobs in all its divisions, though most of the layoffs will occur in recruiting, support and sales units, said Mr. Lütke. “We’re also eliminating overspecialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products,” he wrote. Staff who are being let go will be notified on Tuesday.

Shopify’s job cuts are among the largest so far in a wave of layoffs and hiring freezes that is washing over technology companies. Rising interest rates, supply-chain shortages and the reversal of pandemic trends, including remote work and e-commerce shopping, have cooled what was once a red-hot tech sector.

Shopify’s job cuts are the first big layoffs the company has announced since Tobi Lütke founded it in 2006.



Photo:

Cate Dingley/Bloomberg News

Netflix Inc.

cut about 300 workers in June as it deals with a loss in subscribers.

Twitter Inc.,

now mired in a legal standoff with

Elon Musk,

laid off fewer than 100 members of its talent acquisition team. Mr. Musk’s own company, electric-vehicle maker

Tesla Inc.,

late in June laid off roughly 200 people, after announcing it would cut 10% of salaried staff.

Other firms, including

Microsoft Corp.

and

Alphabet Inc.’s

Google, said they would slow hiring the rest of the year.

Tuesday’s announcement is Mr. Lütke’s first big move after Shopify’s shareholders approved a board plan to protect his voting power. The job cuts are the first big layoffs the company has announced since Mr. Lütke started the company in 2006.

Shopify’s workforce has increased from 1,900 in 2016 to roughly 10,000 in 2021, according to the company’s filings. The hiring spree was made to help keep up with booming business. E-commerce shopping surged during the pandemic, and many small-business owners created online stores to sell goods and services.

Shopify reported annual revenue growth of 86% in 2020 and 57% in 2021 to about $4.6 billion. However, the company reported a softening this year, and warned that 2022’s numbers wouldn’t benefit from the pandemic trends.

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In his memo on Tuesday, Mr. Lütke said, “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”

Shopify has been expanding its business in recent years to provide more services for merchants. It has developed point-of-sale hardware for retailers, launched a shopping app for its merchants to list products and created a network of fulfillment centers to ship orders for its business partners.

In May, Shopify agreed to buy U.S. fulfillment specialist Deliverr Inc. for $2.1 billion in cash and stock. It announced partnerships with Twitter in June and with YouTube earlier this month, allowing users to buy items that Shopify merchants post on those platforms.

Shopify is offering 16 weeks of severance to the laid-off workers, plus one week for every year of service.

Write to Vipal Monga at vipal.monga@wsj.com

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Business

Lyft Lays Off About 60 Employees, Folds Its Car Rentals for Riders

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Lyft Inc.

has shed about 60 people while hitting the brakes on renting its cars to riders and consolidating its global operations team, according to people familiar with the matter and an employee memo reviewed by The Wall Street Journal.

The cuts covered less than 2% of staff and mainly affected employees who worked in operations, the people said. In a memo to some staff sent Tuesday, the company said it was folding the part of its business that allowed consumers to rent its fleet of cars on the app.

“Our road to scaling first party rentals is long and challenging with significant uncertainty,” according to the memo, sent by Cal Lankton, vice president of fleet and global operations at Lyft. Mr. Lankton wrote that conversations about exiting the business started last fall and “then accelerated as the economy made the business case unworkable.”

Lyft shares rose around 8% Wednesday to close at $14.70, while the tech-heavy Nasdaq Composite Index climbed less than 2%.

The company said it is going to continue working with big car-rental companies. Lyft’s car-rental business had five locations while it has car-rental partnerships with

Sixt

SE and

Hertz Global Holdings Inc.

in more than 30 locations, a spokeswoman said.

“This decision will ensure we continue to have national coverage and offer riders a more seamless booking experience,” the spokeswoman said in a statement.

The company also is reorganizing its global operations team, consolidating from 13 to nine regions and closing a location in Northern California and its Detroit hub, according to the memo.

Lyft joins other tech companies that are trimming staff or scaling back hiring plans as economic challenges cool the once-hot sector. The industry has been hiring at a rapid pace for years, but easy money is drying up and share prices have been plunging amid the reversal of some pandemic trends, high inflation, supply-chain shortages and growing worries about an economic slowdown.

Lyft’s stock has fallen more than 70% in the past 12 months compared with the less than 20% decline in the Nasdaq Composite Index.

In May, rival Uber Technologies Inc. said it would slow hiring. Its stock has halved over the same period.

Last week, Alphabet Inc.’s Google said it will slow hiring for the rest of the year while Microsoft Corp. cut a small percentage of its staff, attributing the layoffs to regular adjustments at the start of its fiscal year. Rapid-delivery startup Gopuff cut 10% of its staff last week, citing growing concerns about the economy.

Earlier this month,

Facebook

-parent Meta Platforms Inc.’s head of engineering told managers to identify and push out low-performing employees, according to an internal post. Snap Inc. Chief Executive

Evan Spiegel

recently told staff the company would slow hiring, warning that the economy “has definitely deteriorated further and faster than we expected.”

In May, Lyft President

John Zimmer

said in a staff memo the company planned to slow hiring, reduce the budgets of some of its departments and grant new stock options to some employees to make up for its eroding share price. At the time, Mr. Zimmer said the company didn’t plan to cut staff.

After enduring the pandemic, ride-share companies like Uber and Lyft are now facing a new world of high inflation, driver shortages, and dwindling passenger numbers. WSJ’s George Downs explains what they’re doing to try and survive. Illustration: George Downs

Write to Preetika Rana at preetika.rana@wsj.com and Emily Glazer at emily.glazer@wsj.com

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Business

Bitcoin Price Dips Below $21,000 as Crypto Firms Announce Layoffs

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The price of bitcoin continued to fall Tuesday as the crypto industry struggles with fallout from the extended selloff.

Bitcoin traded as low as $20,834 earlier on Tuesday, according to CoinDesk. The original cryptocurrency hasn’t traded under $20,000 since December 2020.

For the day, bitcoin fell 5.4% to $21,991.89, its lowest close since Dec. 16, 2020, according to Dow Jones Market Data. It is down about 68% from its all-time high in November last year at $67,802.

Coinbase Global Inc.,

one of the largest and most valuable crypto exchanges, said Tuesday that it was laying off 18% of its staff, a move that comes roughly a month after the company imposed a hiring freeze. Two other prominent crypto companies, Crypto.com and BlockFi, have also announced layoffs.

Coinbase shares closed down 0.8% at $51.58. The stock has fallen about 80% year to date.

WSJ’s Dion Rabouin explains why Wall Street is now betting big on crypto and what that means for the new asset class and its future. Photo composite: Elizabeth Smelov

Cryptocurrencies have been sinking along with other higher-risk assets as the Federal Reserve steadily reverses the aggressive monetary policies it adopted earlier in the coronavirus pandemic. Lately, its efforts to raise interest rates to combat surging inflation have further dented investors’ risk appetite.

The market value of the entire crypto sector has fallen to less than $1 trillion from about $3 trillion in November, according to CoinMarketCap. Those falls reflect a significant drop in trading activity and momentum, and until that turns around, industry players like Coinbase are likely to remain under pressure, said KBW Managing Director

Kyle Voigt.

Coinbase Chief Executive

Brian Armstrong

said the company had grown too quickly, expanding from about 1,250 employees at the start of last year to around 5,000 currently.

“We saw the opportunities but we needed to massively scale our team to be positioned to compete in a broad array of bets,” he wrote in a note to staff. “While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”

The price of ether, the in-house currency of the Ethereum network, fell 4.5% to $1,187.30, its lowest close since Jan. 21, 2021. Over the weekend, the price fell below $1,360, the early 2019 high from the previous cycle.

Other cryptocurrencies were mixed. Cardano fell 1.9%, but Solana was up 1.3% and Stellar was up 0.5%.

Write to Paul Vigna at paul.vigna@wsj.com

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Business

Peloton CEO John Foley to Step Down, Firm to Cut 2,800 Jobs

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Peloton Interactive Inc.

PTON 20.93%

plans to replace its chief executive, cut costs and overhaul its board after a slowdown in demand caused the once-hot bike maker’s value to plummet.

Peloton co-founder

John Foley,

who has led the company for its entire 10-year existence, is stepping down as CEO and will become executive chairman, the company told The Wall Street Journal.

Barry McCarthy,

the former chief financial officer of

Spotify Technology SA

and

Netflix Inc.,

will become CEO and president and join Peloton’s board.

The New York company will also cut roughly 2,800 jobs, affecting 20% of its corporate positions, to help cope with the drop-off in demand and widening losses. The cuts won’t affect Peloton’s instructor roster or content.

A little over two weeks ago, activist investor Blackwells Capital LLC called for Peloton to fire Mr. Foley and explore a sale of the company, which the Journal has reported is attracting potential suitors including Amazon.com Inc.

Blackwells reiterated its call Tuesday, saying Mr. Foley should leave the company entirely rather than become executive chairman. The company also released a 65-page presentation in which it estimated a sale could value Peloton above $65 a share. Peloton shares closed Monday at $29.75.

“We are open to exploring any opportunity that could create value for Peloton shareholders,” Mr. Foley said in an interview prior to Blackwells’s Tuesday release. Mr. Foley, a former Barnes & Noble Inc. executive who co-founded Peloton 10 years ago last month, declined to comment further.

The naming of a new CEO could indicate that Peloton sees an independent future for itself, or at least doesn’t want to sell at the current depressed share price. Any deal would likely require Mr. Foley’s support, as he and other insiders have shares that gave them control of over 80% of Peloton’s voting power as of Sept. 30, according to a securities filing.

Former Spotify CFO Barry McCarthy said his strength is a deep understanding of content-driven subscription models.



Photo:

Michael Nagle/Bloomberg News

Once a pandemic darling as homebound customers ordered its exercise equipment and streamed its virtual classes and its valuation soared, Peloton’s fortunes have recently sagged, with its stock until recently trading below its September 2019 IPO price of $29 a share as lockdowns ease and gyms start to fill up again.

The company’s shares fell 2% in early Tuesday trading. The company confirmed news of the leadership changes and reported a second-quarter net loss of $439 million. Peloton also lowered its revenue forecast for its full fiscal year to a range of $3.7 billion to $3.8 billion, down from its prior range of $4.4 billion to $4.5 billion.

The company’s value has fallen from a high of around $50 billion roughly a year ago to around $8 billion last week, before its shares rose 21% Monday on news of potential suitors.

Peloton has said it was planning cost cuts and reviewing the size of its workforce and production levels. Investors have been awaiting details of its plans.

Messrs. Foley and McCarthy said that the company had long been planning to hire a new CEO and that Mr. McCarthy entered the picture in the past few weeks.

“I have always thought there has to be a better CEO for Peloton than me,” said Mr. Foley, 51. “Barry is more perfectly suited than anybody I could’ve imagined.”

Mr. McCarthy, who is in his late 60s and plans to move from California to New York, said his strength is a deep understanding of content-driven subscription models, while Mr. Foley’s is in product development and marketing.

“Together we can make a complete grown-up and build a really remarkable business,” Mr. McCarthy said. He has consulted for Peloton investor Technology Crossover Ventures, sits on the boards of Instacart Inc. and Spotify, and was CFO of the music-streaming service until early 2020.

Peloton is making other personnel changes:

William Lynch,

the company’s president, will step down from his executive role but remain on the board;

Erik Blachford,

a director since 2015, will leave the board; and two new directors will be added.

The new directors are

Angel Mendez,

who runs a private artificial-intelligence company focused on supply-chain management, and

Jonathan Mildenhall,

the former chief marketing officer of

Airbnb Inc.

and co-founder of branding company TwentyFirstCenturyBrand.

Peloton said it expects to cut roughly $800 million in annual costs and reduce capital expenditures by roughly $150 million this year. The company will wind down the development of its Peloton Output Park, the $400 million factory that it said in May it was building in Ohio, and reduce its delivery teams as well as the amount of warehouse space it owns and operates.

“Where the company got over its skis is it built out a cost structure as if Covid was the new normal,” Mr. McCarthy said.

Mr. Foley has said the company is acting to improve its profitability and would share details with earnings. The company reported preliminary second-quarter revenue of $1.14 billion and said it ended the period with 2.77 million subscribers.

Peloton’s Pandemic Rise and Fall

Write to Cara Lombardo at cara.lombardo@wsj.com

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Travel’s Covid-19 Blues Are Likely Here to Stay—‘People Will Go Out of Business’

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The outlook for a rebound in travel this year has dimmed after the global pandemic ravaged the industry and hurt tourism-dependent economies, with travelers postponing plans amid vaccine delays and border restrictions.

Tourist destinations from Thailand to Iceland had been hoping Covid-19 vaccines would allow countries to reopen their borders and drive a much-needed recovery in 2021. Now, with vaccine rollouts delayed in some places and new virus strains appearing, it is looking more likely that international travel could be stalled for years.

After declaring that 2020 was the worst year for tourism on record, with one billion fewer international arrivals, the United Nations World Tourism Organization says prospects for a 2021 rebound have worsened. In October, 79% of experts polled by the agency believed a 2021 rebound was possible. Only 50% said they believed that in January, and some 41% didn’t think travel would reach pre-pandemic levels until 2024 or beyond.

James Sowane, who owns a transportation company catering to tourists in Fiji, called a staff meeting earlier this month and told employees to start looking for other jobs. He recently took advantage of a government-assistance program and had brought back some laid-off workers, optimistic that vaccines could spark a travel rebound as early as April.

But now Mr. Sowane doesn’t think tourists will return until next year, and he and his wife can’t afford to keep paying wages at their company, Pacific Destinations Fiji. He is borrowing from his bank to keep a few core employees.

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