Nike said on Thursday that its $2 billion cost-cutting and restructuring plan will support future growth, but it also seems to be a hint at significant workforce reductions.
As a result of this business restructuring, Nike said “result in pre-tax restructuring charges of approximately $400 million to $450 million … primarily associated with employee severance costs.”
The plans were disclosed by the company in its earnings report for the second quarter.
Nike stated that streamlining product selection, utilizing technology to increase automation, and utilizing scale to increase efficiency are areas with potential for savings. Nike stated that these savings will subsequently be put toward expansion and innovation.
We see an outstanding opportunity to drive long-term profitable growth,” stated CEO John Donahoe in a news statement. “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.”
This news follows several weeks of layoffs at Nike and an internal email informing staff members to anticipate a number of organizational changes in the upcoming months. Nike employs more than 15,500 people in the Portland and Southwest Washington areas, making it one of the biggest employers in the area.
The giant of sportswear revealed a 1% increase in revenue for the second quarter, but sales in Nike’s main market, North America, fell by 4%. Since Nike continues to prioritize its direct-to-consumer business over its wholesale business, wholesale revenue decreased by 2% as well.
“Nike’s second-quarter financial performance was a turning point in driving more profitable growth. As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management,” CFO Matt Friend stated in a press release
Earnings per share increased by 21% to $1.03 and net income increased by 19% to $1.6 billion. Following the close of the market, Nike released its earnings. In the first hour following the close to $115.64, shares were down roughly 5.8%. The 52-week range of share prices was $88.66 to $131.31.
This story will be updated by KGW News partner The Portland Business Journal.