Tonal just cut more than a third of its staff to help it become a “self-sufficient, profitable business” – TechCrunch

Tonal, a home A fitness company last valued at $1.6 billion, has laid off 35% of its workforce in what the company sees as a “responsible” decision taken in order to grow at a more sustainable pace.

“Tonal prioritizes becoming a self-sustaining business with a focus on profitability,” the company said in a statement confirming the layoffs. “While sales continued to grow at an unprecedented rate, the costs of our business also increased, particularly in light of the macroeconomic climate and global supply chain challenges.”

The company said the restructuring had an impact on all functions of the business at all levels, but it is unclear if there is a concentration of cuts or if high-level executives are parting ways. ‘company.

CEO Aly Orady, who remains with the company, sent a memo to staff after announcing the 35% cut during a morning town hall meeting.

“As our business evolved, we quickly expanded our teams to meet demand and competition,” Orady wrote. “Our growth has been supported by outside investors with deep capital at a time when these same global challenges are driving up our costs.”

He added that “capital markets have started to deteriorate faster than expected”, which has clearly led to a change in the way Tonal plans to build going forward. Here is an exerpt :

In the end, we had to face these realities:

To get through what lies ahead, we must prioritize becoming a self-sustaining and profitable business. Becoming self-sufficient forces us to reduce considerably, both operationally and in our workforce.

Our costs, growth and investment levels have been shaped by and built for a hyper-growth trajectory. We owe it to our members and shareholders, including past and current employees, to be here for the long haul beyond the current economic downturn.

The persons concerned benefit from at least 2 months of severance pay; healthcare benefits through the end of September, including mental health support from Modern Health; and extensive equity investment.

“To those who are leaving, I am truly sorry. This decision is in no way a reflection of your hard work or contributions, and I meant it every time I said Team Tonal was the best team on the planet,” Orady wrote, telling the current employees that the “decision was part of the company’s streamlining process to meet the economic challenges ahead and secure Tonal a strong future.

Tonal’s closest competitor is Peloton, an exercise equipment company that has risen to prominence amid the tailwinds of COVID-19. Peloton was one of the first tech companies to announce dramatic layoffs in 2022, shedding around 2,800 jobs — or 20% of its workforce — in February. Along with the downsizing, Peloton CEO John Foley resigned and became executive chairman. The new management hasn’t solved all of its problems: this week, Peloton announced that it would stop manufacturing its own products just 3 years after acquiring a facility for that sole purpose. Similar to Tonal’s announcement today, the reasoning behind Peloton’s change was vague, but related to a focus on simplifying the supply chain and optimizing cost structures.