2 hrs ago
Nike Plans Job Cuts as China Sales Fall 26%
Nike is having trouble selling as many products as before, especially in China.
Sales in China dropped 26% during the latest quarter.
Nike also said its total sales were lower than analysts expected.
The company plans to change how its global business is organized.
It will use three geographic regions instead of four and plans to cut some jobs.
Nike has not said how many jobs will disappear, but employees will be notified in 2027.
The changes are expected to save about $2.5 billion by fiscal 2031.
Nike says it needs to improve products and focus on sports such as running.
Analysts disagree about whether Nike mainly has a distribution problem or needs more appealing products.
Nike reported a 26% constant-currency sales decline in China during its first quarter.
The company plans more job cuts and will reorganize into three geographic regions.
Nike expects the restructuring to generate about $2.5 billion in savings through fiscal 2031.
First-quarter revenue fell about 4% to $11.21 billion, missing analysts’ expectations.
Nike’s North American sales rose 2%, while the company expects high-single-digit revenue decline in fiscal 2027.
- Who
- Nike, led by CEO Elliott Hill, announced the restructuring; analysts and investors are assessing the plan.
- What
- Nike plans additional job cuts, a three-region operating structure, and a new campus in India as sales weaken.
- Where
- The changes affect Nike’s global business, with particular weakness in China and a planned campus in India.
- When
- The announcement followed Nike’s first quarter, which ended August 31; employee notifications are expected to begin in 2027.
- Why
- Nike is responding to declining sales, especially in China, weak product momentum, increased discounting, and a need to reduce costs.
Nike’s strategy
Analysts’ concerns
Cause of China weakness
Nike’s strategy
Nike is tightening control over pricing and distribution by removing online sales rights from some major Chinese retail partners, saying the cleanup will take multiple seasons.
Analysts’ concerns
Some analysts argue Nike’s main problem is not distribution but a lack of products that Chinese consumers want.
Restructuring
Nike’s strategy
Nike says reorganizing its regions, reducing roles, and focusing on key sports can improve efficiency and revive growth.
Analysts’ concerns
Analyst Neil Saunders said the changes suggest Nike’s existing model is not fit for purpose and questioned why the changes were not made sooner.
Product strategy
Nike’s strategy
CEO Elliott Hill said Nike is rebuilding its performance business and deliberately reducing the volume of Jordan retro launches while it works to strengthen weaker areas.
Analysts’ concerns
Analysts say Nike’s difficulties have largely resulted from failing to release enough new, compelling products, contributing to greater promotions and discounts.
Key facts
- China sales
- Down 26% on a constant-currency basis in the first quarter.
- Quarterly revenue
- $11.21 billion, down about 4% and below the $11.32 billion analyst estimate.
- North America sales
- Up 2% on a constant-currency basis.
- Restructuring savings
- Approximately $2.5 billion expected through fiscal 2031.
- New regional structure
- Americas; Asia Pacific and Greater China; and Europe, the Middle East and Africa.
- Job-cut timing
- Nike has not determined the number of roles affected and expects to notify employees in 2027.
- Fiscal 2027 outlook
- Revenue is expected to decline in the high single digits.
Quotes
Neil Saunders
Managing director of GlobalData
“There is nothing inherently wrong with the (restructuring) plans, but they do suggest that Nike's current model is not really fit for purpose, which in turn raises the question of why these changes were not made sooner”
CNBC TV 18
“Our Nike performance business is not yet large enough to offset the pressure we're seeing in Nike sportswear, Jordan brand, and Greater China”
CNBC TV 18
Laurent Vasilescu
Senior analyst at BNP Paribas
“Nike does not have a channel problem in China, but rather a product problem”
CNBC TV 18
Sources
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