Nike, the popular sneaker giant based in Beaverton, Oregon, has announced significant job cuts as part of a company-wide restructuring effort. Over 1,500 employees will be affected by the layoffs, which represent 2% of Nike’s current workforce.
The decision to make these cuts comes as Nike aims to reallocate its capital towards investing in growth areas such as running, women’s products, and the Jordan brand. CEO John Donahoe stated in a memo obtained by CNBC that these changes are necessary to reignite the company’s growth. He acknowledged that Nike is not currently performing at its best and takes responsibility for the situation.
The job cuts will be implemented in two phases, with the first round starting this week and the second finishing by the end of Nike’s fiscal fourth quarter in May. However, the timeline for cuts in Nike’s EMEA region will depend on local labor laws. It is unclear which departments will be affected, but the company has assured that retail employees at Nike stores and warehouse workers will not be impacted.
Nike’s decision to reduce its workforce comes amidst a shift in consumer spending habits and an anticipated slowdown in demand for discretionary items like clothing and shoes. This presents a challenge for Nike as these products are their primary focus. In December, the company unveiled a comprehensive restructuring plan aimed at cutting costs by $2 billion over the next three years. The plan includes simplifying its product assortment, increasing automation and technology usage, streamlining the organization, and leveraging its scale for greater efficiency.
Prior to the official announcement of the restructuring plan, reports emerged that Nike had been quietly laying off employees over the past few weeks. Divisions across the company experienced cuts, including recruitment, sourcing, brand, engineering, human resources, and innovation. The total number of job cuts since December remains unknown.
This news prompted Oppenheimer to downgrade Nike to perform and lower its price target for the next 12-18 months. The firm cited sluggish consumer demand, lack of production innovation, and increased competition as reasons for the downgrade. However, CEO John Donahoe remains optimistic about Nike’s future. He assured laid-off employees that they will receive comprehensive support services, including financial aid, healthcare assistance, and outplacement support.
In conclusion, Nike’s announcement of significant job cuts as part of a company-wide restructuring reflects its commitment to refocusing its resources on growth areas. As consumer spending patterns change and the retail industry faces an anticipated slowdown, Nike is taking proactive measures to streamline its operations and increase efficiency. While these changes may be challenging in the short term, Nike aims to emerge stronger and better equipped to serve athletes and drive the future of sport.
