Nike,
the maker of Air Jordan basketball shoes, plans to cut more than 1,600 jobs, or some 2% of its workforce.
Chief Executive Officer John Donahoe announced the move in a memo, The Wall Street Journal reported. The company didn’t immediately respond to a request for comment from Barron’s early Friday.
Nike
plans to use the savings to invest more in areas such as running, women’s apparel and the Air Jordan brand. The cuts won’t affect workers in stores, distribution centers, or on the innovation team, according to the Journal report.
The overnight news didn’t help the stock. Shares fell 1.3% in premarket trading to $104.70. Coming into the session, they have risen 5% in the past month but remain 15% lower than a year ago.
Analysts at Oppenheimer led by Brian Nagel downgraded Nike to Perform from Outperform and cut their price target to $110 from $150.
We are “increasingly concerned that over the next several quarters that top-line trends at the enterprise are likely to remain sluggish,” the Oppenheimer analysts wrote in a note. “While Nike is by no means broken, we believe that the company and its brand are transitioning, near-term.”
Nike has been warning for months that it has been seeing more caution from consumers, particularly in Europe and China, where economic growth has been weak. It’s also coping with tough competition and a shift in consumer spending toward experiences rather than goods.
The cuts were partially flagged in December, when the company lowered its revenue outlook and said it would look to reduce expenses by $2 billion over the coming three years.
The U.S. retail sales report released Thursday underscored the challenge, showing a bigger-than-expected drop in January.
Nike isn’t the only iconic sports-clothing brand having trouble.
Adidas
surprised markets earlier this month by lowering its guidance–its shares have declined 7% this year.
Under Armour
shares have slipped 4%, and
Lululemon
has dropped 10%.
Puma
has plunged 19% since Jan. 1.
Write to Brian Swint at [email protected]
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