Even though the stock price has rebounded sharply, Nike’s tough times are still not over.
This week, Nike announced that it would increase the number of layoffs at its headquarters by 40% to 700 people. American media also revealed that Nike has laid off more than 100 vice presidents this summer.
Many institutions on Wall Street are still betting on Nike’s recovery. Based on the latest shareholding data, BlackRock and Vanguard’s positions in Nike each exceed RMB 80 billion.
This year, Nike was on the hot search list due to its huge quarterly loss of 5.3 billion. Even though the latest financial report has improved and online revenue has soared by 80%, Nike’s recovery process still faces considerable challenges.
Some voices in the market believe that in order to cope with the challenges of the epidemic, Nike will focus on online business in the future, and offline business will face organizational structure optimization, that is, layoffs.
Nike expands layoffs by 40%
Fires 700 people, with compensation of approximately 1.7 billion
According to According to the Hong Kong Economic Journal, this week, the American sports giant Nike officially announced changes to its global headquarters layoff plan, increasing the number of layoffs to 700 from the 500 announced in July.
Nike Vice President Kim Lupo wrote in a letter to local authorities, “As previously stated in the letter on July 23, 2020, Nike will Permanent layoffs. This permanent layoff will affect approximately 700 employees by January 8, 2021.”
Previously, Nike first revealed in July this year that it would be located in Layoffs at global headquarters in Beaverton, Oregon, USA.
According to Nike’s executives, the initial 500 layoff plan is expected to incur employee severance costs of US$200 million (approximately 1.4 billion RMB) to US$250 million (approximately 1.7 billion RMB).
Now, Nike’s layoffs have further expanded, and severance compensation will also increase further.
It is reported that the employees Nike will lay off include members of the company’s leadership team and employees of child care centers. The layoffs are closely tied to Nike’s direct-to-consumer strategy, which prioritizes Nike’s direct-to-consumer channels while cutting wholesale operations.
Nike wrote in a press release, “The leadership changes, coupled with adjustments to Nike’s operating model and strategy, will create greater focus and flexibility, which will be driven by a more nimble , a flatter organization to serve consumers. To achieve this goal, Nike will streamline its organizational structure, including the company’s leadership team.”
More than 100 vice presidents have been laid off
China may also lay off 400 people
Nike’s layoffs are already underway quietly.
According to the US “Oregonian” report, Nike fired more than 100 vice presidents throughout the summer.
Sam Poster, an analyst at options trading giant Haina International Group, also mentioned in the report, “A large number of Nike employees at the executive level will be laid off. The layoffs are not unexpected and are in line with changes in Nike’s management strategy. Investigations also indicate that Nike will lay off a small number of senior employees in the coming weeks.”
There are also rumors in the market that Nike will lay off employees. It will soon spread to the Greater China region, which has the “fastest performance recovery”. According to Blue Whale Finance, Nike China may also plan to conduct overall layoffs in phases, with nearly 400 layoffs, accounting for about 20% of the total number of employees. It is understood that this round of layoffs will mainly focus on the regional offices in Beijing and Guangzhou.
It is reported that the group’s new goal is to increase the sales proportion of digital business to 50% from 30% in the previous quarter. After Nike gradually shifts its sales method to online, the impact on physical stores will be huge, including potential layoffs.
This year’s quarterly loss exceeded 5 billion
The latest quarterly performance exceeded expectations
This year, Nike suffered a huge loss of 53 due to its quarterly report. Yili became a hot search topic.
According to Nike’s fiscal 2020 fourth quarter financial report (as of May 31), in the three months from March to May, due to the impact of the global epidemic, Nike suffered a huge loss of US$790 million. , 5.3 billion yuan. In the same period last year, Nike achieved a net profit of US$989 million.
In terms of revenue, during the reporting period, Nike only achieved revenue of US$6.313 billion, a decrease of 38% from US$10.184 billion in the same period last year. Among them, revenue in North America fell by 41% year-on-year, Europe, the Middle East and Africa fell by 46%, and Asia Pacific and Latin America fell by 42%. Only Greater China performed solidly, with revenue falling only 3%.
In the latest financial quarter, Nike’s operating conditions have improved.
At the end of September, Nike announced its first quarter financial report for fiscal year 2021 (as of August 30), and all data exceeded market expectations.
The financial report shows that during the reporting period, Nike’s online sales soared by 82%, and revenue in Greater China increased by 6%; total revenue reached US$10.6 billion, far exceeding market expectations of US$9.15 billion; earnings per share 95 cents, higher than market expectations of 47 cents and higher than the 86 cents in the same period last year.
Digital business is the focus of Nike’s recent development. Nike said, “We know that digitalization is the new normal. Today’s consumers are digital and will never look back.”
In terms of offline stores. Nike said that as long as��Passenger traffic has declined compared with the same period last year, but most of its stores have resumed business.
Nike also mentioned that “like many retailers, Nike is still limiting the number of people who can enter its stores at one time to help curb the spread of the virus,” and as a result, the overall traffic in physical stores has declined. But Nike also emphasized that “when people actually come to Nike stores, their purchase intentions are stronger than before, and the company said the conversion rate is rising,” which will make up for the impact of insufficient customer traffic on revenue to a certain extent.
Nike CEO John Donahoe said: “In such a dynamic environment, the speed at which we launch new products and the close connection between our brand and consumers are unparalleled.” Nike CFO Matt Friend believes that “Nike is accelerating its recovery.”
BlackRock and Vanguard are optimistic about holding positions of over 80 billion
On Wall Street, many people are Bet on Nike’s recovery.
After Nike released its latest quarterly report, Matthew McClintock, an analyst at investment bank Ruijie, raised the target price of Nike (NKE.N) to $121 from $115 and maintained an overweight rating. He believes that although first-quarter results present an increasingly difficult situation, this will ultimately lead to strong shareholder returns.
In addition, some large asset management institutions are also investing in Nike. According to Yahoo Finance, Nike’s top two institutional investors are Vanguard Fund and BlackRock, which hold 105 million shares and 96 million shares of Nike respectively. Based on Nike’s closing price on Tuesday, the value of Vanguard Fund and BlackRock’s stock holdings reached US$12.7 billion and US$11.9 billion respectively, with the value of each stock holding exceeding RMB 80 billion.
The stock price has rebounded by more than 100%
But recovery still faces the challenge of the epidemic
As business recovers, Nike’s stock price is also recovering.
Currently, Nike’s stock price has rebounded by more than 100% from the bottom in March. Since the beginning of this year, Nike’s stock price has increased by nearly 24%.
However, it is worth noting that as the epidemic in the United States further escalates, the upward momentum of Nike’s stock price has also been curbed, which reflects that its recovery process will still face certain challenges.
At present, the epidemic situation in the United States is still severe, with the cumulative number of confirmed cases approaching 10 million, and the number of new cases in a single day remaining at more than 80,000. According to Worldometer’s real-time statistics, as of about 6:30 on November 4, Beijing time, there were a total of 9,637,870 confirmed cases of COVID-19 in the United States, and a total of 237,891 deaths. Compared with the data at 6:30 the previous day, there were 88,859 new confirmed cases and 998 new deaths in the United States.
The United States is facing an “epic-level” wave of layoffs
This year, the wave of layoffs has swept across the United States, which has been hit hard by the epidemic. Entertainment, aviation, retail and other industries have It is the hardest hit area for layoffs.
There are many industry giants among the companies laying off employees. In August, Coca-Cola said it would provide voluntary severance plans to about 4,000 employees; in September, Disney announced that the company would lay off 28,000 people in some departments; recently, National Defense and aerospace giant Raytheon Technologies announced 15,000 layoffs.
Financial industry giants are also laying off employees. On Monday, Charles Schwab announced plans to lay off approximately 1,000 employees. In the statement, Schwab stated that the layoffs will reduce the total number of employees after the merger by approximately 3%. Its main purpose is to reduce some overlapping or redundant jobs. .
Gus Faucher, chief economist at PNC Financial Services, pointed out, “This is a secondary impact of the new crown epidemic. As we see more layoffs in different industries, The U.S. economic recovery will slow down.”</p
