Nike is looking to cut costs, and it's willing to give its employees the boot in order to do so. The athletic footwear company has laid off over 1,600 of its employees, cutting 2% of its workforce, and it warned its remaining employees that there will be more layoffs to come, according to a report from The Wall Street Journal.
“To compete, we must edit, shift and divest less critical work to create greater focus and capacity for what matters most,” wrote Nike (NKE) CEO John Donahoe in a memo obtained by the Journal.
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He also claimed in the memo that the layoffs are a “painful reality” and something that he doesn’t take “lightly” while he holds himself and other executives accountable for the company's recent poor performance.
The memo also revealed that the change has not impacted employees at Nike's retail stores, distribution centers or those on the innovation team, and the second half of layoffs are expected to take place sometime before the end of the quarter.
During an earnings call in December last year, Nike Chief Financial Officer Matthew Friend hinted that the company was set to undergo some major changes in the next few years as it looks to save $2 billion in costs. He also claimed that the upcoming changes are the result of the company adding “complexity and inefficiency” since it made additional investments in fiscal year 2019.
“In this competitive environment, we need to accelerate our pace of innovation, elevate our marketplace experiences, maximize the impact of our storytelling and increase our speed and responsiveness, all in service of the consumer,” said Friend. “To do this, we are creating investment capacity to fuel NIKE's next phase of innovation, growth and profitability. We are identifying opportunities across the company to deliver up to $2 billion in cumulative cost-savings over the next three years.”
Friend also indicated that during the second quarter of fiscal year 2024, which ended in December, Nike saw “a bifurcation of performance” where retail sales were “below the expectations” the company set for itself, and as a result, it lowered its revenue predictions for the next few quarters.
So far for the month of January, over 776 companies have conducted mass layoffs, according to data from software firm Intellizence.
The news of Nike’s layoffs follow Cisco’s announcement on Feb. 15 that it has cut 5% of its workforce, which affected 4,000 employees. Even after the Super Bowl generated record ratings, Paramount Global, which owns CBS, laid off around 800 employees on Feb. 14. All three companies have one thing in common, they all cited cost-cutting as the reason for the layoffs.
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