Sportswear behemoth Nike Inc. (NYSE:NKE) has disclosed plans to lay off employees in its technology division, opting to outsource some of this work to third-party vendors.
What Happened: Nike is downsizing its technology workforce. The company representative confirmed to Reuters that some of this work will be outsourced to third-party vendors. The announcement was made last week.
The move follows Nike’s forecast of a larger-than-expected decline in fourth-quarter revenue. The company is adopting a cautious strategy to recapture consumer interest, which has been drifting towards trendier competitors.
In May, Nike CEO Elliott Hill initiated several changes in the senior leadership team. Hill, who took over as CEO in October, is leading a turnaround for the company, which has been struggling to produce new and innovative footwear.
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Why It Matters: This decision comes amid a series of strategic changes at Nike. In February, Jeffries analyst Randal Konik expressed optimism about Hill's strategic plans for the company, including rejuvenating wholesale partnerships and launching new products.
However, by March, BofA Securities analyst Lorraine Hutchinson noted that while Nike was taking swift action to adjust the market and clear out old inventory, the company was facing margin pressure. Despite a leadership shakeup in May aimed at reinvigorating growth, Wall Street remained cautious. Telsey Advisory Group analyst Cristina Fernandez reiterated a Market Perform rating on Nike’s shares and lowered the price forecast from $80 to $70.
The layoffs in the tech division and the shift to third-party vendors are part of Nike’s ongoing efforts to navigate these challenges and reposition itself in the market.
Benzinga's Edge Rankings place Nike in the 21st percentile for quality and the 23rd percentile for growth, reflecting its weaker performance in both areas. Check the detailed report here.
On Monday, the stock fell 1.63% to close at $62.08. On a year-to-date basis, it declined 15.74%.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
