Nike is to cut hundreds of jobs, simplify its product ranges and increase its use of automation as part of attempts to save US $ 2 billion in costs over the next three years amid poor sales.
The US sportswear company announced that it was “taking steps to streamline the organisation” and that the modifications will cost up to US $ 450 million, primarily in the form of employee payoffs.
The announcement comes after Nike reported that sales increased by just 1 per cent to US $ 13.4 billion in the three months ending on 30th November. When the impact of foreign exchange rates was subtracted, sales actually decreased by 1 per cent. But because profit margins were higher, earnings increased by 19 percent to US $ 1.6 billion.
Global sales of the group’s Converse brand fell by 11%, while sales of the Nike brand rose by the same percentage. While sales declined in the US and Europe, they increased in China.
“Our Q2 results demonstrated how we are getting back on our front foot in our key areas of innovation and growth,” stated Nike Inc. CEO John Donahoe.
Nike’s chief financial officer, Matthew Friend, stated: “Nike’s financial performance in the second quarter marked a turning point in the company’s strategy to drive more profitable growth.” We are still committed to maintaining a good gross margin and practicing careful cost control even with a less optimistic revenue forecast for the second half of the year.
Nike is increasing the use of automation and other technologies, reducing its product lines to concentrate on more recent launches that are proving to be more profitable than their classics, and pushing towards “leveraging our scale to drive greater efficiency.”
