SoulCycle CEO Evelyn Webster joins Yahoo Finance Live to discuss the company's growth plans, including a new instructor compensation package, and how it's changed since COVID.
SEANA SMITH: SoulCycle is making some big changes as a result of the pandemic, shifting its strategy to better position the company for future growth. Joining me now is the CEO of SoulCycle. We want to bring in Evelyn Webster.
Evelyn, it's great to see you again here at Yahoo Finance. Thanks so much for joining us. So you're launching a new initiative here, steering SoulCycle in a direction, post-pandemic direction. What are some of the steps that you're taking to better position your company?
EVELYN WEBSTER: You know, like many, many businesses right now, we're having to really scrutinize all of our operating costs. One of the things that we did just over a month ago was rationalize our studio footprint. And so the steps that we've taken, the measures that we've taken earlier on today to reset our instructor compensation and our HQ organization, really positioned-- position as very strongly for the future.
SEANA SMITH: And what does that new compensation package look like?
EVELYN WEBSTER: So we engaged PwC to do a really significant piece of benchmarking work for us around our instructor compensation earlier on this year. What that told us was that we had somewhat of an unbalance between-- across the pay spectrum. So we found that there were some instructors who were paying a very significant premium versus our competitive market and others who were not quite at market minimum.
We've been very proud of the fact that, for many years, we have paid a premium to our instructors. We have rock star instructors. They're the best in the world. And we will continue to pay a premium to the market. What we're seeking to do with the new compensation plan is just rebalance that plan, to some extent, so reducing the premium amongst our most senior instructors and bringing a number of others up. So it benefits very many across the organization.
SEANA SMITH: What has the feedback been like so far? Have you gotten any feedback yet--
EVELYN WEBSTER: Well--
SEANA SMITH: --because it was just announced today?
EVELYN WEBSTER: It's kind of very, very current news. And so what I will tell you is I don't think I've ever worked at any company where people do cartwheels when you say your compensation is at risk of being reduced, somewhat. But, of course, those that are receiving a compensation increase are thrilled.
SEANA SMITH: And, Evelyn, what has it been like just the experience here, especially over the last 6 to 12 months, in recruiting instructors because we are, obviously, facing a massive labor shortage, one that is affecting the fitness industry? Have you guys been having a tough time getting new instructors through your doors?
EVELYN WEBSTER: You know, we haven't had a major instructor acquisition drive since-- ooh, I kind of want to say once within the last 12 months. And I have to say we have not struggled. I do understand that there are challenges in certain areas.
But certainly amongst our instructor population, SoulCycle is a phenomenal brand. For many fitness enthusiasts, for much of our instructor talent, it's the pinnacle of their career in terms of the boutique fitness destinations that you want to work in. So we have not struggled. In fact, we were oversubscribed with the last group-- recruitment group that we did.
SEANA SMITH: And you announced, you briefly mentioned there, closing a number of studios there. So you have announced some cuts. Do you see any additional cuts here down the line?
EVELYN WEBSTER: Never say never. As I said at the outset, you know, like many executives, we're looking at our ongoing basis, looking at the operating model. With the changes that we have made a month ago with the studio rationalization and the changes that we've announced this morning, this feels as if we are setting ourselves up very, very firmly for success as we move forward. I'm not anticipating or planning for any further changes. Obviously, we have to continue to watch what the current economic landscape presents to us in terms of further challenges. But, no, we're good where we are.
SEANA SMITH: Well, speaking of the economic landscape right now, obviously inflation at the highest level that we've seen in just about 40 years affecting millions and millions of Americans, what are you seeing from your riders? Have you seen a change just in terms of spending patterns at all?
EVELYN WEBSTER: I can't say that we've seen a specific change as it pertains to inflation rates. We've obviously-- as we continue to navigate the pandemic-- because we're clearly not quite out of it yet-- we've definitely seen a change in behaviors. So many of our riders are now riding with us at home on their at-home bike, which means that they are either riding at their convenience. They're balancing that with the in-studio experience.
So we are seeing different cohorts of riders behaving in slightly different ways. What I would say is, as you might imagine, slightly more mature, more affluent consumers have the opportunity to ride both at home on their at-home bike, as well as in studio. Younger riders, perhaps a smaller living space, they don't have the luxury of having a bike in their apartments, they're back in full force.
SEANA SMITH: Evelyn, you mentioned the at-home component of SoulCycle. And we've heard from a competitor out there. Peloton, the CEO there, Barry McCarthy, saying that there are headwinds, there are challenges in the connected fitness sector. He doesn't see them abating any time soon. What's your view of that sector of the economy right now?
EVELYN WEBSTER: So, of course, we think about at-home fitness as part of a broader SoulCycle ecosystem. And so we think it's a very vital part of our business and our brand proposition, very much about being where our consumers are. So if they choose to ride in the convenience of their own homes or coming to a studio or, of course, stream the Soul content on the Equinox Plus app, we encourage them to do so.
We feel that that ecosystem is very robust, and it's not going anywhere fast. Of course, as behaviors change, as people return to the office, the balance of what is convenient might change. That inclination over the last couple of years, of course, has been to work out at home. But as we return to the office, they'll probably start coming into the studios more. So we'll see behaviors change, but the ecosystem is what's important, making sure that we are where our consumers want us to be.
SEANA SMITH: What about differentiating yourself from some of the competitors out there because you are going after the same riders in a lot of instances? What has that been like? And I guess, what type of risk does this potentially pose to your business?
EVELYN WEBSTER: I mean, it's very difficult for me to comment on what other organizations are doing. But, look, what I can say about SoulCycle is the SoulCycle experience is truly unique. There is more division than unity in the world right now.
What we are seeing consumers seek is human connection and community, and they are SoulCycle's superpowers. So for us, I see a very exciting future as the world gets back to normal, as we see people coming back to the studios connecting with each other, just so excited to be back as a community. That presents an abundance of opportunity for the business as we move forward.
SEANA SMITH: And, Evelyn, speaking of the future there, we have had-- we have had SoulCycle shelve plans to go public in the past, lots of speculation about whether or not that is in the pipeline. What do you think?
EVELYN WEBSTER: We are very, very happy to be a part of the Equinox Group family.
SEANA SMITH: Evelyn Webster, always great to have you. Thanks so much for joining us here--
EVELYN WEBSTER: Good to see.
SEANA SMITH: --at Yahoo Finance.