The renowned shoemaker Nike is set to lay off a portion of its workforce. This decision is part of the company's strategy to reduce operational costs by $2 billion. The announcement comes when Nike grapples with a noticeable decline in global consumer demand for its products.
As a recent report indicates, the company has reportedly struggled to drive significant product demand outside peak sales periods such as Black Friday and back-to-school seasons.
This move to lay off employees marks a pivotal shift in Nike's operational approach in response to current market challenges.
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Nike to Lay Off Employees Due to Global Economy
In the recent earnings call, Nike's Chief Financial Officer, Matt Friend, cited the global economic situation as the reason for the company's cautious outlook, pointing out the sluggish sales in China and Europe as crucial factors for lower expectations.
Nike disclosed a marginal increase in its second-quarter revenue, noting only about a 1 percent rise on Thursday. However, the company anticipates a potential decline in revenue growth in the coming quarter.
Additionally, Friend revealed that the company expects to incur expenses ranging between $400 million to $450 million in the next quarter, primarily due to severance costs. At this point, the specifics regarding the number of employees to be laid off or the affected facilities remain uncertain.
Recent months have seen a diminishing concern over a potential recession in the U.S., as inflation rates continue to decrease and unemployment levels stay low. Throughout the early stages of the 2023 holiday shopping season, consumer spending has remained robust.
However, the economic situation is different globally, with other economies not keeping pace with the United States-notably, a decline in consumer spending in Chraisessing concerns the country's future economic stability.
"We have faced similar challenges in the past, and we know that it's during these times that Nike excels," he stated.
"We plan to stay proactive, handle risks effectively, make the most of opportunities, and use our strong points to further stand out from the competition."
Nike Cuts Revenue Forecast Amid Shifting Consumer Trends
Consumers increasingly focus on essential items and experiences like travel, moving away from non-essential purchases like sportswear and expensive sneakers.
According to Bloomberg, investors have expressed concerns about Nike's heavy reliance on the Chinese market, especially fears of decreased consumer spending.
In particular, Nike's online sales have seen a significant drop, most notably in the Greater China region, which encompasses Hong Kong, Taiwan, and Macau. This decline suggests a lack of consumer response to Nike's strategy of moving some products exclusively online.
Additionally, emerging brands such as Hoka from California and Switzerland's On are making inroads into Nike's previously dominant position in the footwear market, especially in the running shoe category.
Nike has not disclosed specific numbers regarding the job cuts they plan to make. However, the company has mentioned that they expect to face restructuring costs between $400 million and $450 million, primarily due to expenses related to employee severance.
Earlier this month, The Oregonian reported that Nike had been discreetly laying off staff in various departments, including human resources, recruitment, and innovation, over the past few weeks.
As the biggest company in Oregon, Nike employs about 83,700 people worldwide, per their most recent annual report.
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