Nike is laying off thousands of employees, as consumers’ ongoing financial pressures make it harder for them to justify nonessential purchases, such as adding more sneakers to their collections.
The footwear company announced its decision to reduce its workforce by approximately 2%, equating to over 1,500 jobs, in a move aimed that comes amid the company’s broader restructuring plan to cut costs in the face of weakening demand for its shoes, CNBC reported Friday (Feb. 16).
“This is how we will reignite our growth,” Nike CEO John Donahoe reportedly stated in a memo viewed by the news outlet. He later added, “We are not currently performing at our best, and I ultimately hold myself and my leadership team accountable.”
For some time now, Nike has been seeing its customers’ spending negatively impacted by ongoing financial pressures.
“We are seeing indications of more cautious consumer behavior around the world in an uneven macro environment,” CFO Matt Friend told analysts on the company’s last earnings call in December. “Total retail sales across the marketplace fell short of our expectations, with softer demand outside of the key consumer moments.”
The PYMNTS Intelligence study “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which drew from a survey of more than 2,000 U.S. consumers, found that 69% have reduced nonessential spending on retail products because of high inflation. Moreover, 41% of retail shoppers said this has been the most significant change to their shopping habits.
Plus, consumers are also trading down to lower-cost brands. The same study found that 58% of consumers now buy from merchants with lower prices for at least one retail product, and clothing and accessories are the most common category for this kind of trade-down.
These behaviors are unlikely to lessen by much any time soon. PYMNTS Intelligence’s recent study “New Reality Check: The Paycheck-to-Paycheck Report: The Pessimism About Pay Rises Offsets the Effect of Falling Inflation,” which drew from a census-balanced survey of more than 4,300 U.S. consumers, found that 83% are at least somewhat concerned about current and near-future economic conditions.
Granted, there is some reason for retail brands to be optimistic. The latest edition of the PYMNTS Intelligence “Consumer Inflation Sentiment” series, “Consumers Cautiously Spend More Amid Lower Inflation,” revealed that the share of consumers anticipating ongoing inflation in retail prices in the next 12 months has decreased from 64% in January 2023 to 57% in January 2024.
As it stands, consumers still cut some room out of their budgets to splurge on items that they enjoy. PYMNTS Intelligence’s “New Reality Check – The Paycheck-to-Paycheck Report: The Nonessential Spend Deep Dive Edition” found that 70% of consumers buy “nice-to-have” retail items at least sometimes.
Nike’s decision to lay off thousands of employees reflects the ongoing challenges posed by consumers’ constrained finances. While there are signs of optimism with decreasing expectations of ongoing inflation, consumer habits indicate a continued prioritization of essential spending over nonessential retail purchases.
As brands navigate these challenging conditions, it is possible that more major players could follow in Nike’s footsteps.
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