Nike cuts 2% of jobs as customers cut back spending

Bengaluru — Nike will cut about 2% of its total workforce, or more than 1,600 jobs, the sportswear company says, to lower expenses as demand for its shoes and sneakers comes under pressure.

Higher rental and interest rates have led customers to cut back spending on high-priced goods, resulting in sportswear companies such as Nike and Adidas warning that retailers are lowering their orders through wholesale channels.

Nike had in December outlined a $2bn savings plan over the next three years, which included tightening the supply of some products and reducing management layers. The cost cuts would include about $400m to $450m in employee severance costs in third quarter, it had said. Nike had about 83,700 employees up to May 31, 2023.

The job cuts are Nike getting out in front of the fear that demand “could soften still further”, said GlobalData MDNeil Saunders.

Nike has also lost some retail shelf space to newer brands like Decker Outdoors’ Hoka and On Holding as their running shoes resonate with customers looking for catchy and innovative styles.

“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 said.

The Wall Street Journal said the cuts were expected to start this week and a second phase would be completed by the end of the current quarter.

The layoffs were not expected to affect employees in stores and distribution centres or those in its innovation team, the report said.

Nike shares were down 4% after brokerage Oppenheimer downgraded the stock to “perform” and cut price target on concerns of “spotty consumer demand” over the next several quarters.

Reuters