Nike to cut over 1,600 jobs amid declining demand

WEB DESK: Nike, the global sportswear giant, has revealed plans to trim approximately 2 per cent of its total workforce, equating to over 1,600 jobs, in a strategic move to streamline operations and reduce expenses.

This decision comes as the company faces mounting challenges stemming from a decline in demand for its iconic shoes and sneakers.

The sportswear industry has witnessed a notable dip in consumer spending on high-priced items, attributed to the impact of higher rental and interest rates.

Industry leaders like Nike and Adidas have issued warnings, citing a reduction in orders from retailers through wholesale channels.

In December, Nike had already outlined a comprehensive $2 billion savings plan over the next three years, aiming to address the evolving economic landscape.

Part of these cost-cutting measures includes a range of initiatives, with an estimated $400 million to $450 million allocated for employee severance costs in the third quarter. As of May 31, 2023, Nike employed approximately 83,700 individuals.

According to GlobalData managing director Neil Saunders, these proactive job cuts are a strategic move by Nike to pre-emptively address concerns about potential further softening in demand.

The company aims to navigate economic challenges while maintaining its competitive edge in the market.

Nike has faced additional competition, losing retail shelf space to emerging brands like Decker Outdoors’ (DECK.N) Hoka and On Holding.

These newer brands have resonated with consumers seeking distinctive and innovative styles, prompting Nike to reevaluate its market strategy.

Saunders explained, “Nike also wants to invest more in areas like running to gain market share. To achieve this, it needs to balance additional expenses with reductions elsewhere.”

This strategic realignment reflects Nike’s commitment to staying ahead in a rapidly evolving industry.

The Wall Street Journal, which first reported the news, indicated that the job cuts are expected to commence on Friday, with a second phase slated for completion by the end of the current quarter.

Notably, these layoffs are not anticipated to impact employees in stores and distribution centres or those involved in Nike’s innovation team.

In response to the announcement, Nike shares experienced a marginal 1 per cent decline in premarket trading on Friday.

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