Coverage: Nike to cut 1,400 jobs, target consumers directly
Nike Inc., the world’s largest maker of sports shoes and apparel, said Thursday it will cut about 1,400 jobs, or 2 percent of its workforce worldwide, as part of a new strategy to sell products more directly to customers.
Roger Yu of USA Today had the news:
The Beaverton, Ore.-based company, which has 70,700 employees worldwide, including retail and part-time employees, also plans to reduce the number of product lines by 25% and introduce more selections for the remaining lines, such as Flyknit shoes.
“This new structure aligns all of our teams toward our ultimate goal—to deliver innovation, at speed, through more direct connections,” said Trevor Edwards, president of the Nike brand unit, which includes the Jordan Brand, Action Sports and Hurley.
Nike remains a popular global brand and its sales continue to climb. In the last quarter, its revenue spiked 5%. But sportswear is a globally competitive business with entrenched and emerging brands that are eager to take market share.
For years, Nike has relied mostly on its retail partners — such as sporting good stores and big-box retail chains — to sell shoes, clothes and sports gear. But with more people avoiding brick-and-mortar stores for the convenience of shopping online, Nike plans to cut down on distribution to smaller retail shops and focus more on its online business.
Jeff Manning and Mike Rogoway of The Oregonian reported that Adidas and Under Armour have been gaining market share:
And yet Nike has been losing ground to Adidas and Under Armour, which have been growing faster and taking market share.
Nike executives had hinted in their third-quarter earnings call that significant change was afoot to speed product development. “I didn’t find it a complete surprise,” said Jim Duffy, a stock analyst with Stifel, of the restructuring. “Business is tough. The company needed to streamline and simplify things.”
On Thursday, the company said it will focus on 12 cities — New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan – where it expects to generate 80 percent of its growth over the next few years.
The campaign comes two years after Adidas launched its own “Key Cities” initiative. Adidas, which has been on a tremendous roll in the past two years, has taken momentum and market share from Nike.
Micah Maidenberg of The New York Times reported that the strategy might result in local styles and products:
The strategy might result in localized products and styles, tailored to tastes in its target cities.
Despite the move to online shopping that is transforming retailing, Nike is not giving up on its physical stores. Instead, the company will use the stores to try to foster relationships with customers and further link the shops to its digital efforts.
Nike, which is known for sponsoring star athletes like LeBron James and Rafael Nadal, will also try to speed up how quickly it designs and works with its suppliers to deliver new gear. The company wants to cut its product-creation cycle time in half.
That idea is not a new one. Retailers such as Zara have found success by continually delivering fresh products to its physical and online stores.
Nike executives would not comment beyond the company statement. But in March, Mr. Parker told analysts that consumers wanted the product fast, in easy way, and with personal service. “These are all things that are driving some of these shifts in the marketplace.”