Nike, the world’s largest athletic-gear company, said it would trim about 1,400 jobs as part of a restructuring that comes in the wake of softening North America sales and a challenging climate for retail and apparel purveyors.
On Thursday, Nike (NKE) announced that in order to streamline the company’s organization and essentially speed up any strategic initiatives the brand wants to pursue, it would cut the company’s global workforce by about 2%. Nike has 70,700 employees worldwide as of the company’s latest annual filing.
“This new structure aligns all of our teams toward our ultimate goal—to deliver innovation, at speed, through more direct connections,” said Trevor Edwards, president of the Nike Brand, in a statement.
Nike is in the midst of pursuing an ambitious sales target it set less than two years ago: achieving $50 billion in sales by 2020, a sharp increase from the $30.6 billion the company generated in fiscal 2015. But since then, athletic-apparel sales have faced some headwinds in the U.S. as consumer traffic to traditional brick-and-mortar retailers, especially department stores, has softened. The sports-apparel industry has also been stung by a number of bankruptcies. That tough climate led Nike CEO Mark Parker to lament earlier this year that the U.S. retail landscape is “not in a steady state” as consumers spend more online.
Critically, not all are suffering. While sales gains have slowed at Nike, Under Armour (UAA), and Lululemon Athletica (LULU), a pair of German sportswear makers—Adidas (ADDYY) and Puma—are performing well. That’s because retro activewear is back in fashion, boosting sales for Adidas’ Superstar and Stan Smith and Puma’s Clyde and Suede sneaks.
Nike outlined some operational changes it would make to better compete. Edwards has been named to steer the company’s so-called “consumer direct offense”—an alignment that will focus on driving a bulk of sales from 12 key cities: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan. That is similar to the strategy that Adidas started to enact a few years ago when it targeted six global cities (all six, including New York and London, are also on Nike’s list). Adidas and Nike say that global gross domestic product are increasingly concentrated in those metropolitan areas, making it increasingly important to focus marketing, retail distribution, and other efforts on those markets.
Nike said it will also simplify the company’s regional operating segments, changing from six to four, and restructured the leadership of those geographies to reflect those changes. The company says it is also reducing its styles by 25%, instead opting to place bigger bets on key franchises. And it aims to cut production creation cycles in half. Because retail is changing faster than ever, manufacturers have had to tighten production cycle times to compete. Toy maker Mattel (MAT) on Wednesday made a similar promise to cut the product development cycle time.