Nike announces a $2 billion cost-cutting plan to boost revenue and growth.

In the face of a challenging quarter that saw a 3.5% decline in North America revenue, Nike is undergoing organizational restructuring to foster further growth.

Nike’s Chief Financial Officer, Matt Friend, emphasized the company’s significant investments in accelerating its consumer-direct vision since fiscal year 2019. These investments resulted in the creation of new operating capabilities, the addition of millions of new members to the customer base, and an incremental revenue return of over $12 billion. However, Friend acknowledged that the pursuit of this vision had introduced complexity and inefficiency into the organization. In response, Nike aims to intensify its pace of innovation, enhance marketplace experiences, amplify the impact of storytelling, and improve speed and responsiveness in the competitive environment.

As part of the restructuring plan, the company is undertaking a “streamlining” of its organization, with the majority of the associated charges, exceeding $400 million, allocated to severance costs. While specific details, including the number of employees affected, were not immediately provided by Nike, the company spokesperson indicated that the restructuring would also target supply chain efficiencies, reduction of management layers, and enhancements to procurement capabilities.

Nike Direct revenues experienced a 6% increase in the quarter, contrasting with a 2% decline in wholesale. The company has recently renewed partnerships with several wholesale collaborators it had previously distanced itself from, such as Macy’s and DSW. CEO John Donahoe emphasized the positive impact of the restructuring under the leadership of Heidi O’Neill and Craig Williams, who assumed new roles in May. Donahoe highlighted the focus on aligning the entire team to leverage Nike’s strengths, including innovative products, compelling storytelling, and unique marketplace experiences.

The restructuring comes amid a series of leadership changes at Nike throughout the year. In 2023, the company appointed new leaders in key roles, including chief technology officer, chief marketing officer, chief design officer, chief innovation officer, chief diversity, equity, and inclusion officer, and head of the women’s business.

Looking ahead, Nike plans to invest in expanding its women’s business by offering leggings and bras across various price points. Donahoe emphasized the introduction of leggings in the $100-plus range, representing a new market segment for the company. The strategic focus on women’s apparel aligns with broader industry trends, recognizing the significance of this market segment and catering to diverse consumer preferences.

In summary, Nike’s organizational restructuring aims to address challenges faced during the quarter, enhance operational efficiency, and drive future growth. The company’s emphasis on direct-to-consumer strategies, innovation, and a diverse product portfolio reflects its commitment to staying competitive in the dynamic retail landscape.