Blog: Leonie BarrieNike restructuring surprise

Leonie Barrie | 18 May 2009

Nike had made no secret of that fact that it was on the verge of a massive restructuring, but even so the scale of the cuts announced last week took the market by surprise.

Instead of an expected 1,400 jobs, the sporting goods giant is to axe 1,750 jobs, or about 5% of its global workforce of nearly 35,000, as it tries to realign the business for the future. 

Nike has been cutting costs since last year, when it froze hiring, cut travel spending and slowed its retail expansion. And in March it took steps to reorganise its brand into six geographies and reduce layers of management.

The company’s sales have held up fairly well during the recession, with revenue in its most recent third quarter down just 2% to $4.4bn. However, it also cautioned that worldwide orders for Nike footwear and apparel were down 10% in the period ending in July.

Teen clothier Abercrombie & Fitch Co is also taking a close look at its business by launching a strategic review of its struggling Ruehl chain. The decision came after the retailer swung to a first quarter loss of $26.8m as shoppers shunned its higher price tags. But it warned a strategic review of the 29-store Ruehl chain, which caters to post-college adults, could add another $55m to its losses.

US shopping habits are unlikely to change just yet, the National Retail Federation (NRF) warned last week, despite signs of a slow turnaround in the US economy. Its latest figures show April retail sales of clothing and accessories were 0.5% lower than in March and were down 3.0% year-on-year.

A similar caveat applied in the UK, despite retail sales in April rising at their fastest pace for three years. Warm weather and the later timing of Easter boosted demand for clothing and footwear, but the British Retail Consortium advised against reading too much into the figures – pointing out that jobs worries will hold back spending for some time.

Meanwhile in the US, workers at bankrupt men's suit maker Hart Schaffner & Marx have stepped up the fight to save their jobs by voting to stage a 'sit-in' if a new owner tries to shut the company’s factory in Des Plaines, Illinois. The protest is aimed at Hartmarx’s main creditor Wells Fargo, which received a US$25bn taxpayer bailout at the end of last year but is believed to want the company to close with the loss of around 3,600 jobs instead of seeking a buyer who will reinvest in the firm.

 


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