Athletic apparel giant Nike (NYSE:NKE) is cutting 1,600 jobs, roughly 2% of its staff, as demand for its products slows down.
The company hopes to cut costs by $2 billion over the next three years.
Investors weren’t impressed, sending NKE stock down 1.5% overnight. Nike opened this morning at about $104.50, a market capitalization of $159 billion on 2023 revenue of $51.2 billion.
Swoosh Where It Is
Calling the layoffs a “painful reality,” CEO John Donahue said they would not impact store employees, store managers or distribution workers. That means most will be in the company’s Beaverton, Oregon headquarters. Rival Columbia Sportswear (NASDAQ:COLM) announced it was laying off 3% of its workforce at the start of February.
Nike’s growth has slowed in recent years, and profits fell in 2023. Over the last two years the stock is down nearly 26%.
Nike has been hit by Tiger Woods leaving the brand and by bad reviews for some of its game apparel. The company is hoping new stars like Iowa basketball player Caitlin Clark, already signed to the brand, can reignite sales in new demographics.
CEO Donahue joined Nike in 2019 from ServiceNow (NYSE:NOW) and led a move away from retail stores toward direct online sales. This helped Nike recover well from the Covid-19 year of 2020, but it needs a new catalyst.
Most of Nike’s athletic apparel rivals have done no better. Under Armour (NYSE:UA) and Adidas (OTCMKTS:ADDYY) are also down over the last two years. An exception is Lululemon Athletica (NASDAQ:LULU). That stock is up 800% over the 10 years, four times more than Nike, and is now worth $57 billion on its leisurewear and women’s clothes. But even Lululemon’s stock is down in 2024.
The apparel maker hopes to blunt Lululemon’s gains through a new line created with rapper Megan Three Stallion.
Nike Layoffs: What Happens Next?
Nike and the whole athleisure industry need to find new growth to regain investors’ attention. These Nike layoffs are just a first step.
As of this writing, Dana Blankenhorn held a LONG position in NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
