Global Shoe Company Unable to Withstand Poor Performance in China... Lays Off 1,600 Employees

Nike Plans 2% Global Workforce Reduction
Sales Growth Declines Amid Poor Performance in Zhong Market

Global sportswear company Nike plans to lay off more than 1,600 employees. This move comes as the company seeks to cut costs amid a bleak outlook for future performance.

On the 15th (local time), according to the US 'Wall Street Journal' (WSJ), John Donahoe, Nike's Chief Executive Officer (CEO), announced a plan to reduce the workforce by at least 1,600 in a recent internal memo to employees.

Nike logo [Photo by Yonhap News]

Regarding the layoffs, he stated, "This is a painful reality and not something we take lightly," emphasizing, "We are not delivering our best performance, and this is entirely the responsibility of myself and the management team."

The reason for the layoffs was explained as "to reduce, transition, and divest less critical tasks in order to focus resources on the most important work." CEO Donahoe added that the company plans to concentrate resources and capabilities on running, women's apparel, and the Jordan brand going forward.

As of May last year, Nike employed approximately 83,700 people. A reduction of at least 1,600 employees represents a 2% cut of the total workforce. The layoffs will begin on the 16th and are expected to be completed by the end of March. However, this round of layoffs is not expected to affect store, distribution center staff, or the innovation team.

Nike also announced restructuring plans last year. At that time, Matthew Friend, Chief Financial Officer (CFO), stated during a conference call after the fiscal second-quarter (September to November) earnings announcement that "sales will slow further in the second half."

He emphasized the importance of cost reduction and pledged to cut $2 billion (approximately 2.669 trillion KRW) in operating expenses over the next three years.

At that time, Nike's sales increased by only 1% year-over-year to $13.39 billion (approximately 17.8955 trillion KRW), falling short of market expectations of $13.43 billion.

Struggles in the Chinese market were cited as a major cause of the poor performance. Sales in the Greater China region grew by 4% in the second quarter, a 1 percentage point slowdown compared to the previous quarter's 5% increase. Nike's sales in the Chinese market have failed to exceed $2 billion for six consecutive quarters since the third quarter of last year.