BEAVERTON, Ore. — Nike announced a $2 billion cost-cutting and restructuring strategy Thursday that it says will support future growth but appears to signal deep workforce cuts.
This streamlining of the business, Nike said, will “result in pre-tax restructuring charges of approximately $400 million to $450 million … primarily associated with employee severance costs.”
The company announced its plans in its second-quarter earnings report.
Areas that Nike (NYSE: NKE) said have potential for savings include simplifying product assortment, increasing automation through technology and leveraging scale to boost efficiency. These savings will then be invested, Nike said, into further growth and innovation.
“We see an outstanding opportunity to drive long-term profitable growth,” CEO John Donahoe said in a press release. “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 announcement comes weeks after Nike implemented a round of layoffs and an internal email that told Nike employees to expect various organizational changes in the coming months. Nike is one of the region’s largest employers, with more than 15,500 workers in the Portland and Southwest Washington area.
The sportswear giant reported modest second-quarter revenue growth of 1%, but with a drop of 4% in sales in Nike’s largest region, North America. Wholesale revenue was also down 2% as Nike continues to invest heavily into its direct-to-consumer business over its wholesale business.
“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,” said CFO Matt Friend in a press release.
Net income was up 19% to $1.6 billion and earnings per share were up 21% to $1.03. Nike announced earnings after the market closed. Shares were down about 5.8% in the first hour after close to $115.64. Share prices had a 52-week range between $88.66 and $131.31.
The Portland Business Journal, a KGW News partner, will be updating the story here.
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