Nike Inc. has begun staff layoffs under a cost-cutting measure it announced in December aimed at trimming about $2 billion over a three-year period.
The Beaverton, Oregon-based company reported a headcount reduction of 1,500 to the state. However, a Wall Street Journal report from Thursday quoted a figure of 1,600 attributed to an internal memo.
The 1,600 job cuts would equate to nearly 2% of the global workforce of 83,700, based on the headcount Nike reported in its annual report for the year ended May 31.
“This is a painful reality and not one that I take lightly,” the Wall Streeet Journal reported Nike CEO John Donahoe saying in the employee memo. “We are not currently performing at our best, and I ultimately hold myself and my leadership team accountable.”
Layoffs begin Friday, with another round expected before the end of the current quarter, according to the Journal.
A Nike spokesperson could not be immediately reached for comment Friday morning.
Nike estimated in December future charges of $400 million to $450 million resulting from the workforce reduction, which it said will trim excess management layers among other positions.
Operating Environment
The layoffs had been looming and were hinted at in late December when Nike first revealed the cost cutting plan, “Save to Invest,” to investors and analysts during its quarterly earnings results.
The plan also calls for use of more automation, while plugging money back into the company for what executives said in December would be an increase in consumer-focused activities and growth areas such as women’s, Jordan Brand, and running.
Nike’s operating in a tough environment that’s been heavy with discounting and softening consumer demand that’s resulted in wholesale declines.
The company reported revenue down 1% in constant currency to $13.4 billion in the quarter ended Nov. 30. Meanwhile, net income rose 19% to $1.6 billion.
Based on current macro conditions, Nike in December adjusted its guidance for the full year to be slightly negative for the current quarter and up in the low single digits for the final quarter of its fiscal year.
