Nike (NYSE:NKE) has announced that it will be trimming its global workforce by 2 percent. About 1,400 employees are expected to lose their jobs. Nike had 70,700 employees as of May 31, 2016. Shares of Nike’s stock fell more than 2 percent following the announcement. That was the biggest intraday decline in almost a month.
The job cuts are part of a bigger restructuring aimed at combating weakening sales. Nike’s futures orders fell 1 percent in the third quarter, representing the first drop since 2009. Nike’s fiscal fourth quarter financial results are due for release on June 29.
Nike plans to focus on serving consumers in 12 cities across 10 countries: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan. The retailer has forecast that these areas will represent over 80 percent of Nike’s projected growth through 2020. The retailer said in a statement, “Nike’s leadership and organizational changes will streamline and speed up strategic execution.”
Nike has now created a faster pipeline to serve shoppers with customization options, called the Consumer Direct Offense. Nike CEO Mark Parker said in a statement, “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.” Trevor Edwards, president of the Nike brand, will head up this new division.
Nike will also change the reporting divisions of its company. The company will change from six to four reporting segments: North America; Europe, Middle East and Africa; Greater China; and Asia Pacific and Latin America. This is meant to simplify its geography structure. Nike will report financial results based on these four operating segments beginning in fiscal 2018.
Nike also reported that it plans to combine Nike.com, its Direct-to-Consumer retail channel, and the Nike+ digital products business. The group, called Nike Direct, will be led by Heidi O’Neill as president, and Adam Sussman as chief digital officer.
Nike will also cut the number of its shoe styles by a quarter and focus more on core brands. In recent months, sales of its running brand have stagnated and its basketball brands continue to face increased pressure from competitors. Nike brand market share has continued to decline on top of the drops it suffered last year. This has resulted in higher markdowns so that the company and its retail partners can continue to move inventory. In the current retail environment, this seems unlikely to change anytime soon.