What is Nike doing? Company shares drop after job cuts

Nike aims to be ‘nimbler’ but their strategy feels counterintuitive and shares are dropping as a result.

This should be a good time of year for Nike. NBA and NHL playoffs just wrapped and as a result, there’s plenty of ads, activations and most importantly merch to share and sell surrounding the athletes they work with. And yet, the news from the business side is rather bleak. The sneaker company announced significant layoffs on Thursday and its market shares quickly dropped.

According to Business Insider, Nike is cutting 2 percent of its global workforce, which amounts to more than 1,400 jobs. The company will also eliminate a quarter of its shoe styles and reduce business segments from four to six. But the market is not responding well to this news and Nike shares are down 2.7 percent.

All these changes are part of what the shoe company is calling the “Consumer Direct Offense” and that offense is targeted at 12 key cities, including New York, Berlin, Paris and Barcelona, in 10 countries. Nike will focus on newer styles — ZoomX, Air VaporMax and NikeReact — and “on categories with high growth potential, including running, basketball and soccer.”

However, this strategy runs counter to repots from the Los Angeles Times that the market place is moving in the opposite direction. Classic, not newer, styles climbed 26 percent last year and sales of running performance sneakers or basketball performance sneakers — a Nike focus — were flat. It’s concerning that, for a brand with such a strong collection of classic and ‘fashion’ styles, Nike appears to actively be moving in a different direction.

Nike also announced that they would be “doubling the speed of its innovations” and “cut the time it takes to create products by half.” To do so, Nike is changing up the leadership structure and the layoffs, apparently, fall under this innovation.