One time expenditure may be as high as 250 million US dollars
On July 23, Nike announced an e-commerce plan called consumer direct acceleration, which it said would lead to a net reduction of jobs and lay off. However, the company did not disclose how many jobs would be reduced as a result of strategic change. According to Nikes annual report, there are about 76700 employees worldwide.
Nike said there would be a one-time cost for layoffs incurred as a result of the implementation of the plan, which is expected to reach between $200 million and $250 million.
A spokesman for the brand said the aim of the layoffs was not to save costs, but to focus resources on investing in fast-growing businesses.
In addition to the layoff plan, Nike will also make a series of leadership changes to focus on digital business and more directly sell products to customers as consumers change their buying habits in the wake of the new coronavirus epidemic.
They will all report to Michael Spillane, who will head the new consumer innovation division.
We announced some changes today to change Nike faster, accelerate our response to our biggest growth opportunities, and expand our leadership, Nike president and CEO John Donahoe said in a statement. Now is the right time to consolidate Nike, upgrade a group of experienced and talented leaders, and help drive our next phase of growth.
Nike lost 5.5 billion yuan in the fourth quarter
Forced to launch online sales
On June 25, Nike (NYSE: NKE) released its financial results for the fourth quarter and the full year of fiscal year 2020 as of May 31, 2020.
The fourth quarter reported revenue of $6.3 billion, a year-on-year decrease of 38%, and a single quarter net loss of $790 million, or about RMB 5.5 billion, was reported in the fourth quarter. In response, Nike explained that most of its owned and partner stores in North America, Europe, the Middle East and Africa and Asia Pacific region were closed due to the covid-19 flu pandemic. In these regions, 90% of Nikes own stores were closed for about eight weeks in the quarter, while the volume of products delivered by wholesale customers fell by nearly 50%, resulting in a drop in total revenue and an increase in inventory.
According to the latest financial report released by Nike group, in the fiscal year up to May 31, 2020, the annual sales volume fell by 4.38% to 37.4 billion US dollars, the gross profit rate was 43.4%, and the net profit dropped 37% to US $2.539 billion. In the same period last year, sales were $39.1 billion.
In the current fiscal year, revenue in Greater China increased by 8% to $6.68 billion, or 11% on a currency neutral basis, the sixth consecutive year of double-digit money neutral growth, despite adverse factors from covid-19 in the second half of this year.
After Nikes earnings report, complex magazine first reported that Nike CEO John Donahoe sent an email to employees announcing that Nike would start layoffs. But according to Donahoe, layoffs have nothing to do with the epidemic and costs, not to save money, but because Nike will reorganize its internal resources to optimize its overburdened matrix.. Nike is expected to start the layoff plan by stages in July, but its not sure how many jobs will be affected by the layoff, and who will be affected specifically.
Business insider later published a similar report saying it had received a statement from Nike, which said: Nike is building a more flat and flexible company to redefine the future market. Build Nikes ability to reinvest in the biggest potential areas by shifting resources.
Matt friend, Nikes executive vice president and chief financial officer, said: Nikes strong digital trend continues with the re opening of physical retail, which demonstrates the strength of our brand and our investment in improving the digital consumer experience. In the face of macroeconomic uncertainty, we will continue to be flexible, focusing on optimizing market supply and demand, cost management, and using our financial strength to drive long-term sustainable profitable growth.
The capital market is still optimistic about Nikes future development
Since the beginning of this year, the U.S. stock market has fluctuated greatly for many times, but the share price of Nike has held on. After a big fall in March, the stock price has risen by 41.1% as of July 23, basically returning to the level at the beginning of the year.
As of last nights close, Nike shares closed at $98.30, with a total market value of $152.9 billion.
In addition, after the release of Nikes results, investment banks did not change the rating of Nike. Among them, JPMorgan maintains Nike rating as overweight with the latest target price of $104.00; Morgan Stanley maintains Nike rating as overweight with the latest target price of $119.00; UBS maintains Nike rating as buy with the latest target price of $127.00; Credit Suisse maintains Nike rating as outperforming the market with the latest target price of $111.00.
Dongxing Securities said that in the future, Nike will continue to maintain consumers love for Nike through the four core advantages of Nike: brand advantage, digital advantage, product innovation and excellent team. It is strongly optimistic about the companys future development. It is suggested to pay attention to the companys excellent partners, including upstream supplier Shenzhou International and channel partners.
By comparing the financial data of Nike and Adi, CSCI said that in terms of growth, ADIs revenue at the company level was faster because of its larger acquisition, but the growth of main brands was similar, and Nike was more stable, and the gap continued to expand in the long run. Greater China led gains. The price band of Nike products is wider, the distribution proportion is larger, and the gross profit rate is lower than ADI. However, under the scale effect and good internal control management, the expense rate is significantly lower than that of ADI, and the net profit rate continues to lead by 4-6 PCT, and the performance advantage is more prominent. At the same time, the inventory turnover is faster, and the days are about one month less than ADI.
According to CSCI, under the strong Matthew effect of the industry, the concentration of global sports footwear and clothing continues to increase, and the share of Nike also fluctuates, especially in the overseas market, which can achieve a growth rate higher than that of the local industry market. In the United States, Nikes share is far ahead of that of Adidas in Europe, while it continues to increase in China, always taking the lead. Nike takes the lead in the sports shoes category with faster growth, basketball shoes have obvious advantages, football shoes catch up, running shoes are in the lead as a whole, leading in specialty, and the progress is remarkable.