Layoffs have affected various industries, including technology, retail, and fashion, throughout 2023. As reported by The Guardian, Nike, a major apparel brand, is set to reduce hundreds of jobs and enhance automation for specific services to save $2 billion in costs. The decision comes as the company looks to trim expenses in various departments following a year of sluggish sales.
Streamlining Organization
Nike reduced its revenue forecast for the fiscal year, causing the stock to drop on Friday, which also affected its sneaker retailer, Foot Locker. The company is implementing layoffs and investing $450 million in restructuring and severance to streamline its U.S.-based sports apparel organization. As Nike's stock fell by 10%, the company reflected a broader trend in the sporting apparel market in after-hours trading, with companies like J.D. Sports and Sports Direct, despite a modest increase of 1% in sales over the last three months. This layoff marks the second-largest in Nike's history, following the 2020 move to cut 700 jobs during the global lockdown amid the COVID-19 pandemic.
Nike's stock fell over 11%, marking its worst day since September 30, 2022, when it dropped to 12.8%. Foot Locker, closely tied to Nike products, also saw a nearly 4% decline in its closing. In a report on Thursday, Nike revised its fiscal year revenue growth expectation to 1%, down from the earlier projection of mid-single-digit growth, and announced its plans to reduce costs by more than $2 billion over the next three years.
The updated forecast acknowledges challenges, especially in Greater China and EMEA, as finance chief Matthew Friend mentioned during Thursday's earnings call. He highlighted issues like decreased digital traffic and the impact of a stronger U.S. dollar, negatively affecting reported revenue in the second half compared to 90 days ago. TD Cowen analysts downgraded Nike's stock on Friday, citing the need for improved marketing beyond basketball, streetwear, and lifestyle trends. They also noted that innovation in the higher-end assortment is not gaining traction at a broad scale, and Nike is facing disruptions from smaller competitors in the footwear and apparel market.
Goldman Sachs analysts maintained their buy rating on Nike's stock. However, they recognized that the company's report offered concerns for skeptics. The report highlighted slowing growth due to a challenging economic environment, indicating a more competitive market. Additionally, the company discussed key franchise life cycle management, which is expected to impact sales momentum in the future.
Layoffs in 2023 Trigger Recession Fear
Western nations are raising recession concerns caused by the economic slowdown and inflation brought on by COVID-19 and the conflict in Russia and Ukraine, which led many businesses to resort to mass layoffs in 2023. On the other hand, layoffs at Indian companies have increased significantly by 58% over the previous year. In 2023, 1,175 tech companies in India laid off 260,509 employees, surpassing 2022 when 1,064 tech companies let go of 164,969 employees, according to data from layoffs.fyi.
