Nike to Cut Over 1,600 Jobs in Cost-Cutting Strategy
Weak Profit Forecasts Trigger Workforce Reduction
In a move to combat weak profit forecasts, global sportswear giant Nike has announced plans to cut approximately 2% of its workforce, equivalent to over 1,600 jobs. The company aims to implement a cost-cutting strategy that includes a $2 billion savings plan spread out over three years.
Measures to Achieve Savings
Supply Reduction and Enhanced Supply Chain
As part of its cost-cutting strategy, Nike will be reducing the supply of certain products and enhancing its supply chain. These measures aim to optimize efficiency and drive down expenses.
Streamlined Management and Increased Automation
To further achieve its cost-cutting targets, Nike plans to streamline its management layers. This reduction in bureaucracy is expected to result in operational savings. Additionally, the company will be investing in automation technologies to improve productivity and reduce labor costs.
Response to Dwindling Consumer Spending
Like many of its competitors, including Adidas, Puma, and JD Sports, Nike has been grappling with reduced consumer spending on non-essential items. The trend towards prioritizing essential purchases has taken a toll on the sportswear industry.
Severance Costs and Timeline
Nike is bracing itself for the financial impact of these job cuts, estimating severance costs of $400 million to $450 million in the third quarter. However, the layoffs are not expected to affect store and distribution center employees or the innovation team.
The workforce reduction is set to commence on Friday, with full completion anticipated by the end of the current quarter. Nike employed approximately 83,700 individuals as of May 31, 2023.
Nike's proactive response to weak profit forecasts through this cost-cutting strategy showcases its determination to navigate the challenging business landscape. By making tough decisions now, the company aims to position itself for a more resilient future.
Analyst comment
Neutral: Nike’s plan to cut jobs and implement cost-cutting strategies is a response to weak profit forecasts and reduced consumer spending on non-essential items. This is in line with similar measures being taken by competitors. The market may see some short-term negative impact due to the severance costs, but the cost-cutting initiatives are expected to benefit the company in the long term.
