Nike has announced a strategic workforce reduction, constituting 2% of its existing personnel, equivalent to over 1,500 positions. This move is an integral aspect of a broader organizational restructuring initiative disclosed late on Thursday. The renowned sneaker behemoth, headquartered in Beaverton, Oregon, aims to optimize its capital allocation by directing investments towards key growth sectors, notably running, women's offerings, and the esteemed Jordan brand.
In a memo procured by CNBC, CEO John Donahoe articulated, "This is our method to rekindle the flames of growth." He candidly acknowledged the painful reality of the situation, emphasizing a self-imposed accountability on himself and the leadership team for the current suboptimal performance. The planned layoffs will be executed in two phases, with the initial round commencing this week and the culmination of the second phase expected by the conclusion of the fiscal fourth quarter, traditionally concluding in May.
Nike specified that the timing of layoffs in the EMEA region would adhere to distinct schedules dictated by local labor regulations. Although the affected departments remain undisclosed, reassurances were given that retail staff in Nike's stores and warehouse personnel would be exempt from the downsizing.
These cutbacks unfold against a backdrop of heightened consumer spending caution and a retail sector bracing itself for a deceleration in demand for discretionary items, notably Nike's core products of apparel and footwear. In December, Nike unveiled an extensive restructuring blueprint, aiming to slash costs by approximately $2 billion over the ensuing three years. This strategic pivot factored in a revised sales outlook, anticipating reduced demand and wholesale orders, sluggish online sales, and a market environment increasingly reliant on promotional strategies.
As part of its cost-cutting strategy, Nike delineated intentions to streamline its product assortment, enhance automation and technological integration, restructure the organizational hierarchy by minimizing management layers, and harness its scale for heightened operational efficiency. Preceding the official restructuring announcement, reports surfaced that Nike had discreetly initiated layoffs in various divisions, including recruitment, sourcing, brand management, engineering, human resources, and innovation.
Quantifying the total job reductions since December remains unclear. In response to these developments, Oppenheimer downgraded Nike to "perform" and revised its 12- to 18-month price target downward. The rationale cited encompassed sluggish consumer demand, lapses in production innovation, and intensified competition. Despite the transitional phase, Donahoe assured the affected workforce of a comprehensive support package, encompassing financial, healthcare, and outplacement services.
In his optimistic outlook, Donahoe affirmed, "We will emerge fortified, better positioned to fulfill our mission of serving all athletes and nurturing the future of sport."
