A man wearing a protective face mask walks past a Nike brand store in kyiv, Ukraine, December 10, 2020.
Valentin 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, Oregon-based sneaker giant said it wants to better use its capital to invest in its growth areas, such as athletics, women's footwear 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 I do not take it lightly,” he added. “We are currently not performing at our best and ultimately I hold myself and my leadership team accountable.”
Nike said the layoffs will take place in two phases. The company will begin the first round this week and complete the second at the end of its fiscal fourth quarter, which typically concludes at the end of May. Cuts in Nike's EMEA region will be made on a different timeline based on local labor laws, the company said.
It's unclear which departments will see layoffs, but they will not affect Nike store retail employees or warehouse workers, the company said.
The cuts come as consumers become more cautious in their spending and the retail industry braces for a slowdown in demand for discretionary items like clothing and shoes, which are Nike's bread and butter.
In December, Nike unveiled a sweeping restructuring plan to cut costs by about $2 billion over the next three years. It lowered its sales outlook as it prepared for weaker demand and wholesale orders, weak online sales and a market that relies more on promotions.
As part of its plan to reduce costs, Nike said it was looking to simplify its product range, increase automation and use of technology, streamline the organization by reducing management levels 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 in recent weeks and had signaled that it was planning a broader restructuring. A number of divisions suffered cuts, including recruiting, sourcing, branding, engineering, human resources and innovation, the outlet reported.
It's unclear how many total jobs Nike has cut since December.
On Friday morning, Oppenheimer downgraded Nike to perform and lowered his 12- to 18-month price target, citing sluggish consumer demand, lulls in manufacturing innovation and competition.
“While NKE is by no means broken, we believe the company and its brand are in transition in the near term,” the firm said.
Donahoe said laid-off staff will receive a comprehensive package of financial, healthcare and relocation support services.
“We will emerge stronger and better equipped to fulfill our purpose of serving all athletes and growing the future of the sport,” Donahoe said.
