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Nike has just unveiled a strategic plan aimed at slashing costs by $2 billion and revamping its structure, signaling potential layoffs in the pipeline. The initiative, disclosed within its second-quarter earnings report, entails a significant restructuring effort set to incur around $400 million to $450 million in pre-tax charges, primarily allocated to employee severance expenses.
The sportswear giant, headquartered in Beaverton, Oregon, intends to streamline operations by simplifying its product offerings, embracing technology-driven automation, and leveraging economies of scale to drive efficiency gains. These cost reductions are earmarked for reinvestment into fueling future growth and fostering innovation across the company.
CEO John Donahoe expressed enthusiasm about steering the company towards sustained and lucrative growth. “Today, we are embracing a company-wide journey to invest in our areas of greatest potential, increase the pace of our innovation, and accelerate our agility and responsiveness,” stated Donahoe in a press release.
This announcement follows recent layoffs and an internal email hinting at organizational shake-ups within Nike. The company, a major employer in the Portland and Southwest Washington region with over 15,500 workers, forewarned its employees about impending changes.
Despite reporting a modest 1% uptick in second-quarter revenue, Nike witnessed a 4% decline in sales within its largest market, North America. Furthermore, wholesale revenue dwindled by 2%, as the company continues to prioritize its direct-to-consumer business over wholesale operations.
“While Nike’s second-quarter financial performance showcased progress in steering toward more profitable growth, the company anticipates a softer revenue outlook in the latter half of the year,” remarked CFO Matt Friend. He emphasized the company’s commitment to robust gross margin execution and disciplined cost management.
Despite the positive financial indicators with a 19% surge in net income and a 21% increase in earnings per share, Nike’s stock faced a downturn of approximately 5.8% post-market close, trading at around $115.64. The share prices have oscillated between $88.66 and $131.31 over the past year.
As Nike initiates these strategic shifts, updates regarding the company’s restructuring and their impact on the workforce and financial landscape are expected. For further developments, stay tuned to the Portland Business Journal, in partnership with KGW News.