Following Levi's (Levi'S), at the beginning of this year, another clothing, footwear and hat giant officially announced layoffs. According to a number of foreign media reports, on the evening of February 15, US time, Nike CEO John Donahoe told employees in an email to the whole company that the company would lay off 2% of its workforce, and the layoffs are not expected to affect store employees, distribution center employees and employees of its innovation team.
As of the end of May 2023, Nike has a total of 83,700 employees, which means that more than 1,600 employees will be laid off. On February 19, a reporter from Nandu Bay Finance Agency contacted Nike China, but did not receive a response as of press time.
Nike's CEO called the layoffs a "painful reality."
Resources will be redeployed to find ways to reinvigorate growth
According to Wall Street, John Donahoe said the company is using resources to increase investment in the running, Jordan Jordan category. Responding to the layoffs, John Donahoe said, "It's a painful reality and I can't take it lightly. We're not performing at our best at the moment, and I'm ultimately going to hold myself and my leadership team accountable."
shelby knowles/bloomberg news
According to Reuters, higher rent and interest rates have caused customers to cut back on spending on ** goods, leading sportswear companies such as Nike and Adidas to warn retailers that they are reducing orders through wholesale channels. Reuters reported that Nike laid out a $2 billion savings plan for the next three years in December, which included tightening the ** of certain products and reducing management.
The reporter of Nandu Bay Finance Society noticed that on social platforms, bloggers who focus on trendy shoe information have posted relevant content. "We're in a very competitive industry. We have to edit, shift and divest less important work in order to create more focus and capacity for what matters most." He said Nike is redeploying resources to increase investments in the most important areas and growth opportunities, such as running, ** and the Jordan brand, "and that's how we're reinvigorating growth."
For this round of layoffs, John Donahoe said that the first phase begins this week, and employees affected by these changes are expected to start talking to their leaders this Friday and continue until next week, with the second phase to be completed by the end of the fourth quarter.
Cumulative cost savings of $2 billion over the next three years
**, Jordan and other categoriesseen as a way to reinvigorate growth
In fact, at the earnings conference on December 21 last year, Nike's top management had already revealed plans to lay off employees. In the same day's session for the second quarter of fiscal 2024 earnings, John Donahoe said that Nike is looking for opportunities to cumulatively save up to $2 billion over the next three years, with potential cost savings in areas such as streamlining product assortment, increasing automation and technology usage, streamlining the organization, and leveraging the company's size to improve efficiency.
In this way, Nike's 2% layoffs are also part of the cost-saving plan. Nike also said in its earnings report that the company is taking steps to streamline the organization, which is expected to result in about 400 million to 4$500 million of pre-tax restructuring charges, the majority of which will be recognized in the third quarter of fiscal 2024, primarily for employee severance payments.
Nike's financial results for the second quarter of fiscal 2024 (2023.)8.31-2023.11.30) shows that during the reporting period, Nike's revenue was US$13.4 billion, a year-on-year increase of 1%, net profit was US$1.6 billion, a year-on-year increase of 19%, and the gross profit margin was 446 percent, compared to 42 in the same period last year9%。
By region, revenue in Greater China increased 4% year-over-year to 18US$6.3 billion, up 8% year-on-year on a constant currency basis. Greater China is also the second fastest growing region for Nike. Looking at Nike's various businesses in Greater China, footwear revenue decreased by 1% year-on-year to 13$6.1 billion, apparel increased 19% year-on-year to 4$6.9 billion, equipment increased 32% year-on-year to 0$3.3 billion.
Screenshot of Nike's earnings report.
Nike China has also publicly stated that Greater China has grown for five consecutive quarters. John Donahoe said at the ** conference that in Greater China, Nike achieved double-digit growth in physical store sales during the National Day period, and Nike was in 11During the 11th period, it once again surpassed the industry and became the No. 1 sports brand on Tmall. In response to the growth of performance, Nike China once said that Nike has worked with the Shanghai Marathon to provide runners with high-quality products and services for 12 consecutive years, and the brand popularity has accelerated.
Based on the ** meeting and the layoff email released by Nike, Nike will focus on the development of the running series, ** and Jordan in the next three major businesses.
John Donahoe said at the conference that the Jordan brand is on its way to becoming the second-largest footwear brand in North America, the largest brand after Nike. Nike's ** business, which is valued at about $9 billion, has achieved average high-single-digit growth over the past three years. He revealed that 40% of Nike's members are female consumers, "they make up a larger percentage of new members, and the demand for members is growing faster." We see a tremendous opportunity to better serve that consumer by meeting their performance and lifestyle needs."
Nike's CFO Matt Friend said during the conference that total retail sales across the market fell short of their expectations due to weak demand, "Outside of key spending moments, while Nike's store footfall continues to grow, we see weaker digital footfall and higher levels of activity across the market." As a result, we are adjusting our channel growth plans for the remainder of the year."
Written by: Feng Jiaju, reporter of Nandu Bay Finance Agency.