‘Woke’ Drama Leads Nike To Lay Off 1600 Employees

Companies undergo restructuring all the time. It’s a common practice in modern business, and is often a necessity when it comes to keeping up with the economy and the stock market. Unfortunately, restructuring often includes layoffs of loyal employees, which can not only impact customer service quality, but also the morale of the company.

A Struggling Economic Situation

Unfortunately for workers, the economy is struggling to provide jobs for the thousands of potential employees that are currently looking for a job. Employment has stayed at historically low levels for months, now, and it is impacting many people’s job searches.

This is a surprising patterns, in the wake of the COVID-19 pandemic. Many economists predicted high unemployment from the pandemic to continue after the country started to recover, in anticipation of a recession. Neither of those projected factors have happened, though.

High Inflation, Low Unemployment

Instead of high unemployment, the country has seen new jobs created every month, and unemployment remaining low. For a while, it was a job searcher’s market, as there were more jobs being listed and filled than there employees to fill them. This obligated potential employers to start raising wages in order to be more appealing to job searchers.

This, in part, is what has caused the significant inflation that Americans have been dealing with for the last several years. More money in the economy, unfortunately, is one of the primary driving factors behind high inflation, and low unemployment has had a hand in keeping inflation as high as it has been for so long.

The Cost Burden on Companies

Efforts to cut inflation have resulted in a significant cost burden on companies, as the Fed has raised interest rates and kept them high in order to stamp down on costs to everyday Americans. Unfortunately, this has also led to companies having to make challenging decisions regarding where their money will go.

These decisions have led to some companies making the choice to lay off employees, rather than swallow the cost of the higher wages that were offered when potential recruits were thin. This choice has been made, in part, to preserve profits, and also to maintain the quality of merchandise, business, and American craftsmanship that many of these companies are known for.

Nike: The Latest Casualties

Nike, the massively popular sports brand, is the most recent of these companies to announce layoffs. This announcement comes from CEO John Donahoe, who explained that the performance of the company has not been its best.

The CEO took full responsibility for this unfortunate announcement. The decision to downsize the workforce was made due to declining demand for Nike products, which has been driven, in part, by economic factors such as higher rental costs and interest rates.

Raising Costs

Nike is not the only company to suffer due to the higher costs of living that are plaguing Americans right now. High costs due to inflation and the prices of materials rising means that many companies have raised their prices.

Some inflated items, such as gas and groceries, are necessities that Americans cannot go without. They’re taking the hit to their wallet, which can be seen in the increasing levels of credit card debt and personal debt in the country. Unfortunately, these higher levels of debt and lower incomes mean that there’s less money for luxury items such as Nike sportswear.

Layoffs Announced

This pattern is what has led to the announcement of layoffs at the company, which will total 1,600 employees. This is about 2% of the global workforce of the company, and is part of a $2 billion cost-cutting strategy.

In his announcement, Donahoe said, “This is a painful reality, and not one that I take lightly. We are not currently performing at our best, and I ultimately hold myself and my leadership team accountable.”

Challenges for Nike

He continued, “Nike has a proud history where the most challenging moments bring out the best in us, individually and as a team. I know we will come together to respond once again, and I am confident in our future.”

The first round of layoffs took place on Friday, and will continue on through the end of May. The first location hit by the layoffs was Nike’s Oregon headquarters. Nike is one of the largest employers in the Pacific Northwest, and has more than 15,500 workers in the Portland, Oregon, and Southwest Washington State area alone.

A Drop in Nike Stock

Donahoe has been quick to reassure both news outlets and consumers that the layoffs will not impact store, or distribution center employees. Customer service is touted as one of the leading principles of the sportswear brand, and they don’t want to do anything to impact their customers negatively.

The announcement of layoffs in December had an unfortunate, unintended effect on the company’s stock price. Nike stock dipped approximately 10% in December after the announcement of cutting costs aired, leading many to question the future of the sportswear brand.

Former Employees Supporting Each Other

This is not the first time that the sportswear brand has endured layoffs, and former employees of Nike have come together to co-create support groups for those who have been laid off by the company.

Jana Panfilio, a 29-year Nike veteran, said, regarding the support groups, “We are here to support as a landing place for those people as they leave the brand to make their transition from Nike to the next. There is a disproportionate number of former Nike people that start their own companies. They are looking for talent, and they are looking for clients.”

Tiger Woods Leaving Nike

The news of layoffs comes in the wake of news that professional golfer Tiger Woods was also ending his 27-year contract with Nike. The golfing giant made this decision in order to launch his own line, as Panafilio implied is a common practice for ex-employees and clients of Nike.

The loss of a high-profile client such as Tiger Woods could be one of the reasons that Nike has been seeing the dip in sales and profits that it has been recording. Likely, though, it’s a pattern that is part of a bigger economic problem that many companies are currently seeing due to reductions in wholesale purchases.

Hyper-Woke Company Policies

There are some who have also theorized that the profit dip for Nike is due to the company’s “hyper woke” policies that have been implemented in the last several years. Conservative pundits have looked at the sportswear brand’s marketing and brand partnership choices, and accused the company of “going woke.”

One of the choices that was particularly lambasted by the public was Nike’s decision to partner with transgender social media personality, Dylan Mulvaney. Nike signed Mulvaney in April of 2023 under a contract to model sports bras and leggings, a choice that was heavily criticized by conservative media personalities and consumers across the country.

Other Sportswear Companies Suffering As Well

The initiative to cut $2 billion from their expenses will take place over the next three years, and signals Nike’s commitment to optimizing its cost structure and operational efficiency. The strategy encompasses measures such as tightening the supply of certain products and streamlining management layers.

This reflects the company’s proactive approach to addressing economic headwinds, and an attempt to align its operations with evolving market dynamics. Reducing its workforce, though an unfortunate decision to have to make, represents a pivotal component of the company’s cost-cutting strategy, and underscores the company’s commitment to realigning its structure and optimizing its workforce.

A Hopefully Positive Future

Nike is far from the only company to be suffering business difficulties in the current economy. Many other companies in the sportswear industry are currently grappling with heightened competition from emerging brands, as well as shifting consumer preferences and emerging market trends.

It is undeniable that competition is a good thing in the United States. More options means better choices for consumers, even as it requires companies to make shifts in order to stay relevant in a changing market. Nike’s decision to lay off employees might end up hurting it in the short term, but as a long term strategy, it will hopefully pay significant dividends.