A man wearing a protective face mask walks past a Nike brand store in Kyiv, Ukraine, on Dec. 10, 2020.
Valentyn Ogirenko | Reuters
Nike is cutting 2% of its current workforce, or more than 1,500 jobs, as part of a broader restructuring, the company said late Thursday.
The Beaverton, Ore. based sneaker giant said it wants to better use its capital to invest in its growth areas, such as running, women’s and the Jordan brand.
“This is how we will reignite our growth,” CEO John Donahoe said in a memo obtained by CNBC.
“This is a painful reality and not one that I take lightly,” he added. “We are not currently performing at our best, and I ultimately hold myself and my leadership team accountable.”
Nike said the layoffs will take place in two phases. The company will start the first round this week, and finish the second by the end of its fiscal fourth quarter, which typically concludes at the end of May. Cuts in Nike’s EMEA region will be on a different timeline based on local labor laws, the company said.
It’s not clear which departments will see layoffs, but they will not affect retail employees at Nike’s stores or warehouse workers, the company said.
The cuts come as consumers become more cautious in their spending and the retail industry braces for a demand slowdown for discretionary items such as clothes and shoes, which is Nike’s bread and butter.
In December, Nike unveiled a broad restructuring plan to cut costs by about $2 billion over the next three years. It lowered its sales outlook as it prepared for lower demand and wholesale orders, soft sales online and a marketplace that relies more on promotions.
As part of its plan to cut costs, Nike said it was looking to simplify its product assortment, increase automation and its use of technology, streamline the organization by reducing management layers and leverage its scale “to drive greater efficiency.”
Shortly before the restructuring was announced, The Oregonian reported that Nike had been quietly laying off employees over the past several weeks and had signaled that it was planning for a broader restructuring. A series of divisions saw cuts, including recruitment, sourcing, brand, engineering, human resources and innovation, the outlet reported.
It’s not clear how many jobs in total Nike has cut since December.
On Friday morning, Oppenheimer downgraded Nike to perform and lowered its 12-to-18 month price target, citing sluggish consumer demand, lulls in production innovation and competition.
“While NKE is by no means broken, we believe that the company and its brand are transitioning, near-term,” the firm said.
Donahoe said laid off staffers will receive a comprehensive package of financial, healthcare and outplacement support services.
“We will emerge stronger and better equipped to fulfill our purpose to serve all athletes and grow the future of sport,” Donahoe said.