Nike to cut 2% of its workforce (1,500 jobs), most of them at Oregon headquarters, as CEO admits “we are currently not performing at our best” and company criticized for new designs of uninspiring sneakers.

Nike will cut about 2 percent of its total workforce, or more than 1,600 jobs, as the sportswear giant looks to reduce expenses as demand for its shoes and sneakers comes under pressure.

Chairman and CEO John Donahoe announced the cuts in a memo Thursday night, saying the first rounds of layoffs would begin Friday at the company’s headquarters in Beaverton, Oregon.

“This is a painful reality and I do not take it lightly,” Donahoe said in the email, according to Willamette Week. “We are currently not performing at our best and ultimately I hold myself and my leadership team accountable.”

Higher rent and interest rates have led customers to cut back on spending on high-priced products, leading sportswear companies such as Nike and Adidas to warn that retailers are reducing their orders through wholesale channels. .

Nike had outlined in December a $2 billion savings plan over the next three years, which included adjusting the supply of some products and reducing management levels.

Shoppers are seen at the Nike store during ‘Black Friday’ in New York in November

The cost cuts would include $400 million to $450 million in employee severance costs in the third quarter, it had said.

Nike had about 83,700 employees as of May 31, 2023, of which about 12,000 work at the Beaverton corporate campus.

Those employees are more likely to be targeted for layoffs, as Donahue said store employees, store managers and distribution center workers will not be affected.

The job cuts are a way for Nike to get ahead of fears that demand “could decline further,” said GlobalData CEO Neil Saunders.

Nike has also lost some space on retail shelves to newer brands like Hoka and Decker Outdoors’ On Holding, as its running shoes resonate with customers looking for bold, innovative styles.

“Nike also wants to invest more in areas like running in order to gain market share, to do so it needs to balance the additional spending with some reductions elsewhere,” Saunders said.

The Wall Street Journal, which first reported the news, said the cuts were expected to begin on Friday and that a second phase would be completed by the end of the current quarter.

Nike had about 83,700 employees as of May 31, 2023, of which about 12,000 work at the corporate campus in Beaverton, as seen above.

The layoffs are not expected to affect employees in stores and distribution centers or those on its innovation team, according to the report.

Nike shares fell 4 percent after brokerage Oppenheimer downgraded the stock to “perform” and lowered the price target over concerns of “uneven consumer demand” over the next few quarters.

Nike’s stagnant market share has also been linked to a lack of innovation, something Donahue said last year the company planned to address.

“Nike is regaining the lead in our key areas of innovation and growth,” the executive who replaced former CEO and co-founder Phil Knight in 2020 said in a December memo about cost-cutting plans.

‘We see an excellent opportunity to drive long-term profitable growth.

“Today we are embracing an enterprise-wide journey to invest in our highest potential areas, increase the pace of our innovation, and accelerate our agility and responsiveness.”

The plan, Donahoe said, will save $2 billion over the next three years, although the executive also warned of “softer” revenue prospects for the second half of this year.