Nike ($NKE) is the largest sporting goods brand in the world. Chances are pretty good that you’ve given Nike some of your money at one point or another. If you haven’t owned Nike shoes, you’ve probably owned their apparel, branded accessories, or products from one of their sub-brands.
This isn’t a lazy attempt at judging your character or purchasing habits. They’re just that big of a company.
In recent years, Nike took a backseat as buyers bought products from other sports-focused brands. Shoe and apparel manufacturers like Adidas and Puma exploded in popularity. Though Nike still made billions of dollars on Air Jordans and other fashion-forward shoes, they had to share the market — and the wealth.
Now, Nike is planning their big comeback by focusing on the company’s top-selling products. To accomplish this, they first need to lay off thousands of workers.
Nike is getting rid of 1,400 employees.
The company employs close to 70,700 people around the world, according to their SEC filings. Two percent of these employees will be out of a job sometime in the next year, as the manufacturer looks to decrease product offerings, increase automation, and make production faster. They haven’t announced which divisions will see massive layoffs yet, but those pink slips should come soon.
Say what about automation?
Shoe-making robots are nothing new. Adidas is bringing manufacturing back to their home country of Germany, though they’re replacing most workers with manufacturing robots. By having robots make shoes, companies can potentially create and ship products faster, meeting customer demand and staying on trend far longer than before. Nike will benefit greatly from automation by cutting labor and operating costs, though the workforce will ultimately take a hit by having fewer jobs.
So, how does Nike plan to get back on track?
To turn their business around, the swoosh brand plans to:
- Focus on high-performing products and get rid of low-selling ones. Nike makes a million-and-one products, though not every item is a hit. Twenty-five percent of their items (those with fewer sales) will be cut, and more attention will be paid to better-performing products.
- Target major cities across the world. Nike does a ton of business in cities like New York, Chicago, Tokyo, and Shanghai. By ramping up marketing in these cities, Nike stands to make more money in their best-performing places.
- Sell more to consumers through Nike physical and digital stores. The retail market is not so hot right now. The many trouble store chains and malls that sell Nike products are seeing fewer sales, which means less money for Nike. By focusing on selling directly through their own stores, the company stands to make more money per sale. They can also build more stores in major markets to make even more revenue.
Should you invest in Nike?
$NKE decreased by over 3% after the company announced this refocusing effort. When a company announces massive layoffs, it’s often met with praise and a stock increase, as it means less overhead and more money. Yet investors are not so pleased right now with Nike, and they don’t think their efforts could actually work.
If you think this focus on fewer, better products and more sales in high-performing markets will help the company, you might want to consider investing as Nike’s stock is currently down. If these efforts pay off, their revenue and profit could go back up and your investment would be worth more. (Just be sure to do your research before you invest.) If you think Nike could be eclipsed by better, smarter, and sleeker brands, you could always invest in the company’s competitors.