Nike will cut $2 billion in costs: Will there be layoffs?
Nike, the world’s largest supplier of sports shoes, will cut costs by $2 billion over the next three years. This will involve layoffs and more automation.
Sports footwear giant Nike is planning to take cost-cutting measures to save $2 billion over the next three years in response to escalating worries about a global slowdown in consumer spending.
The company intends to take streamlining steps which include laying off employees, simplifying its range of products, and increasing the use of automation.
The stock market saw Nike shares dropping by as much as 14% after the announcement.
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Why is Nike taking measures to save $2 billion in costs?
Nike has cut its revenue projections for the year as they foresee more cautious consumer behavior around the world. People have been changing their buying habits, and have been spending more on basic necessities and experiences like travel instead of non-essentials like sports wear and high-priced sneakers.
Investors have reportedly been worried about the company’s emphasis on China as a crucial market due to apprehensions about a potential reduction in consumer spending in that region, per Bloomberg.
Nike’s online sales have been plummeting, especially in the Greater China market, which includes Hong Kong, Taiwan, and Macau. This indicates that consumers did not follow when the company moved some of its products to become available solely online.
Up-and-coming brands like California shoemaker Hoka and Swiss company On have also managed to chip away at Nike’s dominance of the footwear market, particularly in running shoes.
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Nike will cut $2 billion in costs: How many employees will be laid off?
Nike did not provide exact figures of the number of jobs they intend to slash, but indicated that they would incur restructuring expenses worth some $400 million to $450 million that were mostly related to employee severance costs.
The Oregonian had reported earlier this month that Nike had been quietly laying off employees the past few weeks in different units including human resources, recruitment, and innovation.
Nike is the largest company in Oregon, with 83,700 employees around the world according to its latest annual report.