Ok, seriously - is there another round of layoffs coming in the near future?

I’d like to say “No” but my gut is telling me ”Yes”. The earnings report revealed some structural problems that aren’t going to resolve in a quarter or two. As I see it some of the biggest issues that could lead to layoffs are:

As a percentage SG&A expenses (labor, mostly) are higher than sales. That’s a significant problem most easily solved by cutting labor costs.

Nike’s China sales just saw the 3rd consecutive quarter of decline. That is, or was, Nike’s biggest growth driver. The big question is whether that’s a short term macro problem or a longer term brand problem. I honestly don’t know. I just know it IS a problem.

For a company that sells physical goods margins are critical. Margins are arguably the single most important factor in analyzing the fundamental health of a business. Nike’s margins are heading in the wrong direction and I think the extent of decline was unexpected. The 44% inventory creep definitely won’t help.

US, EMEA and Digital sales were healthy. The question here is, how long will that remain the case? Consumers really are starting to retrench as the full impacts of inflation are being more broadly felt. To-date consumers have mostly been robust with their spending but I don’t see that trend continuing much longer. For starters credit card debt is again reaching pre-pandemic highs. Many consumers are over-leveraged with their debt. Second, the “wealth effect” of the stock market is real and as 401K balances decline people will start analyzing more critically how and where they spend their money.

The macroeconomic climate is obviously shaky. The Fed absolutely flooded the economy with too much “free money” over the last few years and is now trying to unwind that mistake by increasing interest rates and thus softening consumer demand. It’s a risky move because every time the Fed raises rates it takes 3 to 6 months to fully see the impact. And as history shows us the Fed DOES mess this up with some regularity. Their actions could send the economy into a fairly steep recession before they realize that has happened. Obviously people cut back spending when jobs start disappearing.

Nike is in decent shape overall but storm clouds are brewing. As much as we complain about management, over the years FINANCIAL management of the company has been pretty solid. That’s also due to the fact that Nike is conservative and proactive with financial matters.

Nike does need to cut costs and it needs to do that sooner rather than later. My prediction is that JD will serve as a sacrificial lamb and will preside over a fairly good sized layoff in the next year or so. In some ways it will be better managed than the last layoffs but the impact may still be brutal in terms of numbers cut. After that JD will sail off into the sunset, no doubt on a luxury yacht paid for by the $250M+ he will have extracted from Nike during his relatively short tenure. A Nike lifer will then take over the reigns as new CEO and life will go on.

The above is all just one dude’s opinion, worth exactly what you paid for it.

Thread regarding Nike Inc. layoffs

Ok, seriously - is there another round of layoffs coming in the near future?

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