Nike Cutting Jobs to Reallocate Resources to DTC
In what should worry team dealers already battling the biggest player in the sports business, Nike this week announced that it is cutting jobs. Thar’s not the real news, though, The bigger impact is that the cuts are being made as the Swoosh refocuses on selling directly to consumers. The losers here: Traditional retailers such as Dick’s Sporting Goods and, certainly, the fewer and fewer team dealers – other than BSN Sports, of course – who were still selling the Nike brand to schools and clubs.
Nike CEO John Donahoe, who came into Nike in January from Silicon Valley, told employees in a memo that this new phase in its e-commerce push is called Consumer Direct Acceleration and along with that “acceleration” would probably come some layoffs.
“Consumer Direct Acceleration is the next digitally empowered phase of our strategy,” the company said in a memo. “We are building a flatter, nimbler company and transforming Nike faster to define the marketplace of the future. We are shifting resources and creating capacity to reinvest in our highest potential areas and we anticipate our realignment will likely result in a net loss of jobs.”
Even in the midst of the pandemic, e-commerce sales were a bright spot for Nike, growing 75 percent as its overall revenue plunged and shipments to its wholesale customers were down almost 50 percent. Nike’s gross margin fell 8.2 percentage points to 37.3 percent, falling well short of projections. That was its worst performance since 1998, according to data analyzed by Bloomberg.
So you know when you see a headline that shouts “Nike Shares Tumble After Pandemic Batters Sales,” some drastic changes were inevitable.