What happened?
Nike (NKE +0.09%) is retrenching its business, in a move that will result in a series of job cuts. The athletic-gear giant has a new "alignment" that it's calling the "consumer direct offense," which will see it focus on customers in a series of key markets, lean more heavily on digital sales, and consolidate its product selection.
Nike is also shaving its regional structure, dividing its business into four geographical areas -- North America; Europe, Middle East, and Africa (EMEA); Greater China; and Asia Pacific and Latin America. This is down from the previous count of six regions.
IMAGE SOURCE: NIKE.
The 12 key markets targeted by the company are New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan. Nike projects that more than 80% of its anticipated growth through 2020 will come from these cities.
Nike said that this shift in strategy will lead to a reduction of around 2% of its worldwide workforce, or roughly 1,000 people.
Does it matter?
Although still quite profitable, Nike has had its share of challenges lately. The first, of course, is the rise of online shopping, and the fall of numerous sports-apparel brick-and-mortar store chains -- traditionally an important sales channel for the company.
The second is the increasing competitiveness of determined rivals, notably still-hungry Under Armour and the resurgent Adidas. We can see the effects of this in the recent slowdown of Nike's future orders, the company's key measure of upcoming success.
Hence, the consumer direct offense. The emphasis on digital sales, key markets, and a trimming of the product selection feels like sensible, well-conceived moves (although job losses are never happy news). Nike could very well regain its mojo with this new initiative, and if I were a shareholder, I'd consider it a reason to hold on to my stock.
