Nike to reduce its styles by 25%

Nike to cut 2% of global workforce

Under Armour estimates lowered at Susquehanna

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Nike ( $NKE ), a Dow Jones industrial average component, is in focus today after the company announced a new business structure, which involves cutting 2% of its overall workforce. Nike had more than 70,000 employees at the end of fiscal 2016.

#Nike intends to boost its revenue to $50 billion by the end of fiscal 2020, with North America making up 40% of that target.

REALIGNMENT

Nike announced a new alignment structure called the Consumer Direct Offense, which includes cutting its global workforce by approximately 2%.

“Nike’s leadership and organizational changes will streamline and speed up strategic execution,” the company said in a statement.

 

As a result of the new alignment, Nike will reduce its styles by 25% and attempt to cut product creation cycle times in half.

Nike also said it will create the Nike Direct organization, which will be led by Heidi O’Neill, President of Nike Direct, and Adam Sussman, Chief Digital Officer.

The changes are intended to “streamline and speed up strategic execution,” said Nike in a press release. Its new “consumer direct offense” targets a dozen cities — New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan — that are seen accounting for over 80% of its growth through 2020.

WHAT’S NOTABLE

Piper Jaffray analyst Erinn Murphy said earlier this month that she believes Nike’s innovation pipeline “has paused” while competition “remains fierce.”

In April, Nike posted third quarter revenue slightly below consensus expectations and said worldwide futures orders were down 1%, excluding the impact of currency.

The apparel maker, however, beat earnings per share estimates for the quarter. Nike is expected to report fourth quarter earnings on June 29.

COMPETITION

Nike competes most directly in the space with adidas (ADDYY) and Under Armour (UAA, UA). Separately, Under Armour got an estimate cut as one analyst says stores are “likely canceling” product orders.

#Susquehanna analyst Sam Poser told investors to sell Under Armour due to poor product segmentation in the moderate channel, which he sees pressuring its top line and margins. The analyst said sports retailers are planning the Under Armour business down because of the poor product segmentation and he said the top line may be pressured even if the Curry 4 sneaker lives up to expectations.

Nike (NKE) shares are down 2.7% in Thursday’s trading to $53.18.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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