In an effort to reduce costs as demand for its shoes and sneakers declines, Nike (NKE.N), the world’s largest sportswear company, announced late on Thursday that it will eliminate over 1,600 jobs, or around 2% of its whole workforce.
Customers are cutting back on their purchases of expensive goods due to higher rental and loan rates; as a result, sportswear giants like Nike and Adidas (ADSGn.DE) are warning that retailers are dropping their orders through wholesale channels.
Nike announced a $2 billion savings plan in December that included cutting management levels and restricting the supply of specific products for the next three years.
As per the statement, the cost reductions will lead to employee severance expenses ranging from $400 million to $450 million in the third quarter. As of May 31, 2023, Nike employed over 83,700 people.
Nike is cutting jobs because it is concerned that demand “may soften even further,” according to GlobalData Managing Director Neil Saunders.
Additionally, as consumers seek for trendy and inventive running shoes, Decker Outdoors (DECK.N), a more recent brand, has gained some store shelf space from Nike.
“Nike also wants to invest more in areas like running so it can gain market share, to do that it needs to balance the additional expenses with some reductions elsewhere,” Saunders stated.
According to The Wall Street Journal, the layoffs will start on Friday, as reported first by the publication. We plan to finish a second phase by the end of the current quarter.
According to the article, workers in its creative team as well as those in stores and delivery hubs are not anticipated to be affected by the layoffs.
Nike’s stock fell 4% after Oppenheimer, a brokerage, lowered its price target and downgraded the company to “perform” due to “spotty consumer demand” over the next quarters.
