Nike, the renowned sneaker giant based in Beaverton, Oregon, has announced plans to cut 2% of its workforce, which amounts to over 1,500 jobs. This move is part of a broader restructuring effort aimed at reallocating capital towards the company’s growth areas, including running, women’s products, and the Jordan brand. CEO John Donahoe expressed his belief that this restructuring is necessary to reignite Nike’s growth.
In a memo obtained by CNBC, Donahoe acknowledged the difficulty of the situation, stating, “This is a painful reality and not one that I take lightly.” He also emphasized that accountability lies with himself and his leadership team for the company’s current performance. The layoffs will be carried out in two phases, with the first round beginning immediately and the second concluding by the end of Nike’s fiscal fourth quarter in May. However, the timeline for cuts in Nike’s EMEA region will be determined by local labor laws.
While it remains unclear which departments will be affected by the layoffs, Nike has assured that retail employees at its stores and warehouse workers will not be impacted. The decision to downsize comes as consumers exercise caution in their spending habits and the retail industry anticipates a slowdown in demand for discretionary items such as clothing and shoes, which are Nike’s primary products.
In December of last year, Nike unveiled a comprehensive restructuring plan aimed at reducing costs by approximately $2 billion over the next three years. This plan included measures such as simplifying the product assortment, increasing automation and technology utilization, streamlining the organization by reducing management layers, and leveraging scale to drive efficiency. Prior to the official announcement of the restructuring plan, The Oregonian reported that Nike had already been quietly laying off employees in various divisions, including recruitment, sourcing, brand, engineering, human resources, and innovation.
The total number of job cuts since December remains unknown. However, financial services firm Oppenheimer downgraded Nike’s rating to perform and lowered its price target for the next 12 to 18 months. The firm cited sluggish consumer demand, a lack of production innovation, and increased competition as reasons for the downgrade. Despite this, Donahoe assured laid-off employees that they would receive comprehensive support packages encompassing financial assistance, healthcare benefits, and outplacement services.
In conclusion, Nike’s decision to cut 2% of its workforce as part of a broader restructuring effort reflects the company’s commitment to investing in its growth areas and adapting to changing market conditions. While the layoffs are undoubtedly challenging, CEO John Donahoe remains optimistic that Nike will emerge stronger and better equipped to serve athletes and shape the future of sport.
