Nike is upping job cuts across its Beaverton, Ore., headquarters from a previously disclosed 500 to approximately 700 as the company shifts priorities to a more direct-to-consumer focus that already began to pay dividends in the first quarter.
In July, when the athleticwear and footwear giant shuffled its executive team in its pivot to the Consumer Direct Acceleration (CDA) business model, it incurred expenses that were excepted to lead to a net loss of jobs across the company. One-time employee termination costs related to the anticipated cuts were approximately $200 million to $250 million, the company said.
“Reductions are not being done for cost savings,” Nike said in a statement upon reporting the initial job cuts. “Any savings will be reinvested into our priorities. We are committed to showing compassion and respect for our transitioning employees through thoughtful and robust severance practices, consistent with our company values, our legal obligations, the competitive marketplace and individual employee situations.”
The company didn’t reveal the number of jobs expected to be cut upon announcing the restructuring, but first indicated in a Worker Adjustment and Retraining Notification (WARN) notice to the Office of Workforce Investments at the Oregon Higher Education Coordinating Commission on July 30 that it planned to lay off “at least 500” workers at its headquarters starting Oct. 1. The workforce reduction also included 192 employees at two of the company’s closing childcare centers.
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But in an updated notice posted on Nov. 2, Nike upped that number to approximately 700 job cuts, making the job titles and number affected in each category available to the agency upon request. The company said it expects to complete the staff reductions by Jan. 8.
Nike filed the notices in compliance with the WARN Act, which requires companies with 100 or more employees to notify affected workers 60 days prior to closures and layoffs. The Act is set up to help ensure advance notice in cases of qualified plant closings and mass layoffs.
At the center of the layoffs remains the CDA initiative, which includes Nike’s lofty goal to make digital 50 percent of its overall sales. The initiative will require significant capital investments on its own, as it also includes plans to open 150 to 200 smaller format “mono-brand stores” across North America and the EMEA region designed to “integrate online-to-offline capabilities,” according to CEO John Donahoe. Donahoe hinted during the company’s fourth-quarter earnings call in July that Nike is looking to use the stores to capture more of the women’s apparel market.
The direct-to-consumer model is looking very favorable compared to its wholesale business, which struggled during the Covid-19 pandemic. While Nike’s first quarter was a great bounce back for the company, with total income surpassing $1.5 billion and the direct business seeing a 13 percent increase in sales, it was largely offset by declines in wholesale.
In the September first quarter earnings call, chief financial officer Matthew Friend referred to “high single-digit growth in differentiated wholesale, offset by a decline of over 20 percent in undifferentiated wholesale.” Friend noted later in the call that within 90 to 120 days, Nike was in the process of exiting this undefined, “undifferentiated” wholesale distribution.
Although Nike has never specifically confirmed this, an August report from Susquehanna Financial Group analyst Sam Poser indicated that Nike is in the process of pulling back from as many as nine wholesale accounts, including Belk, Zappos, Dillard’s and Fred Meyer among other retailers. Nike products, as of now, still appear on these retailers’ websites.
From a brand perspective, the added layoffs come at a time when Nike is aiming to simplify its men’s, women’s and kids categories, with the goal to drive even greater specialization through performance sport and sport lifestyle.
There is no indication that any of the cuts will impact workers at retail stores, distribution centers and manufacturing facilities. The affected employees are not represented by a labor organization and will be provided notice directly, Nike said in the WARN notice.
Bumping rights, which refer to a contractual privilege granted when a more senior employee is allowed to replace a less senior employee in the event that their job is eliminated, are not available for the affected workers.
According to Nike’s most recent annual report on May 31, the company prior to the layoffs had 12,800 employees in its headquarters and 74,700 worldwide.
Nike last announced major layoffs in 2017, cutting approximately 1,400 jobs worldwide, or approximately 2 percent of its workforce.