Sports

Nike CEO John Donahoe tells employees that layoffs are coming

Key Points
  • Nike CEO John Donahoe sent an email to employees  warning of layoffs.
  • Layoffs will not impact store employees, distribution or manufacturing centers.
  • The company is shifting resources and creating capacity to invest in high-potential areas. 
People walk past a Nike store in New York.
Carlo Allegri | Reuters

On the same day that Nike announced dismal earnings, CEO John Donahoe sent an email to employees warning them that layoffs are coming. 

"We will soon be forced to make some difficult choices that will likely result in a net reduction of jobs," said the email sent late Thursday, according to Complex Magazine

Nike, whose stock has rallied more than 50% from its March 23 close, reported that sales were down 38% with a net loss of $790 million in the fiscal fourth quarter, after Covid-19 forced the closure of most of its stores around the world. It's a rare miss for the company that has only fallen short of earnings estimates twice in the last eight years. 

All of its stores are now reopened. 

"We are building a flatter, nimbler company and transforming Nike faster to define the marketplace of the future. We are shifting resources and creating capacity to reinvest in our highest potential areas, and we anticipate our realignment will likely result in a net loss of jobs," Nike said in a statement to CNBC. 

Despite the timing of the email, the sports apparel company said the reductions are not being done for cost savings. "Any savings will be reinvested into our priorities," it said. 

The layoffs are expected to come in two waves: in July and in the fall. It's not yet known how many people will be impacted. Nike has 76,700 employees, according to a filing with the Securities and Exchange Commission. 

Nike said its retail store athletes, distribution centers and its Air MI manufacturing facilities are not expected to be affected by the layoffs.   

"We are committed to showing compassion and respect for our transitioning employees through thoughtful and robust severance practices, consistent with our company values, our legal obligations, the competitive marketplace and individual employee situations," Nike said. 

One bright spot for Nike's quarter was digital sales, which soared 75%. Online sales are about 30% of its total business, ringing up $5.5 billion in sales in fiscal 2019. 

On its investor call Thursday, the company touted its focus on speeding up its direct-to-consumer efforts, highlighting it as the next phase of its strategy.

"Consumer direct acceleration is more than just the next phase of our strategy. It's the spark that will ignite and empower our entire company to serve consumers, our business and our teams better," Donahoe said. 

Nike shares were down 6% in Friday afternoon trading. The stock has a market value of nearly $150 billion.