Everyone been following recent earnings for Adidas and Under Armour? Both companies got HAMMERED on account of the fact China has essentially been closed for a few months. It’s not just China though. Increased transportation and wage costs are taking a big bite into margins and profitability. Inflation is also reducing consumer appetite for expensive apparel and shoes.
At Nike we tend to navigate these circumstances better than our competitors. But you should still expect to see a notable and negative impact in Q4 and for the rest of the year. Especially if the economy enters into a recession as increasingly looks likely. This means one thing at Nike: people will lose jobs. “Culling the herd” used to be infrequent at Nike but under the JD regime should now be viewed as a more regular thing. U and E band employees should be most worried because that’s where Nike is most likely to trim.
“Nike won’t lay ME off! I perform a valuable service, I do a lot of work and people like me!” Yeah keep telling yourself that if it makes you feel better. Today’s Nike doesn’t care about your tenure, your past accomplishments, the work you perform or other tangibles that in most companies would cause you to be irreplaceable. If anything tenure is now a negative. If you’re above the median pay for your job code that also places a mark on you. The people selecting layoff targets often won’t even know who you are nor will they care. It’s mostly a numbers and data exercise. It has to be for legal reasons. If Nike can say “here’s the quantitative methodology that was used to identify RIF candidates” it’s much harder for anyone to claim they were discriminated against or otherwise targeted illegally. Buckle your seat belts. The next reorg will be starting shortly.