Nike and Lululemon Athletica are planning to trim their labor force, the companies confirmed Friday, with Nike planning on cutting upwards of 700 jobs as the company pushes ahead on a multi-quarter cost-cutting strategy.
Job cuts Nike disclosed Friday are part of a plan to reduce its workforce by 2%.
Approximately 740 employees at Nike’s office in Beaverton, Ore., will be laid off, the company said in a notice mandated by the Worker Adjustment and Retraining Notification Act, or WARN. The layoffs will take effect by June 28 this year, and the positions will be permanently removed.
Lululemon will lay off 128 workers in Sumner, Wash., according to a WARN notice filed with the state Thursday. The layoffs will begin on June 21, according to the notice.
The job cuts Nike filed notice of on Friday are part of the company’s plans to reduce its total workforce by about 1,600 jobs. That amounts to 2% of its total workforce.
“Nike’s always at our best when we’re on the offense,” a Nike spokesperson told Barron’s in an email. “The actions that we’re taking put us in the position to right-size our organization to get after our biggest growth opportunities as interest in sport, health and wellness have never been stronger.”
Meanwhile, Lululemon’s cuts are part of the company’s decision to close one of its smaller distribution centers, a spokeswoman confirmed to Barron’s. Some of those people will be relocated to other facilities, including a distribution center the company recently opened in the Los Angeles area. The decision stemmed from a company review of its current infrastructure and fulfillment strategy.
Nike stock closed 1.3% lower Friday, while Lululemon gained 1.4%. Nike and Lululemon shares have shed 13% and 31%, respectively, this year, pummeled by concern among investors that demand for activewear may be stagnating.
Investors have been downbeat on Nike for some time now. The stock lost 7.2% in 2023 while the broader market gained a little over 20% and Lululemon shares rose 60%. Analysts have pointed to a host of factors affecting Nike’s stock, including slow innovation, inventory snafus, and rising competition in activewear.
The stock extended its decline into 2024 following a warning from management in December that consumers were becoming more cautious about spending, which would take a toll on Nike’s sales growth. Shares fell again in late March after the company reiterated that view during its fiscal third-quarter earnings call, saying sales would decline in the first half of 2024.
The same fears are weighing on Lululemon’s stock. After two consecutive years of increasing annual sales by over 20%, management sees sales growing by between 11% and 12% in the current fiscal year largely thanks to a more “challenging” consumer environment in the U.S.
“There has been a shift in the U.S. consumer behavior of late, and we’re navigating what has been a slower start to the year in this market,” CEO Calvin McDonald said in a March earnings call.
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