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Nike (NKE) Shares Slump on Job Cuts, Corporate Restructuring

On Thursday, shares of athletic retail giant Nike Inc. NKE are slumping, down about 2.6% in morning trading after the company announced extensive business changes. Most notably, Nike said that it would be cutting 2% of its global workforce, or about 1,400 employees.

The retailer also introduced a new business structure called Consumer Direct Offense, which it hopes will help it better serve its customers. Nike said that Trevor Edwards, president of the Nike brand, will lead this new division.

With Consumer Direct Offense, Nike will focus on consumers in 12 cities and across 10 countries, like New York, Tokyo, Berlin, and Mexico City, among others. These locations will represent 80% of the company’s projected growth through 2020.

“The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” said Mark Parker, NIKE, Inc. Chairman, President, and CEO. “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”

Nike also said that it’s trying to “improve efficiency” throughout its geographic structure, and will change from six to four reporting segments: North America; Europe, Middle East and Africa; Greater China; and Asia Pacific and Latin America.

The retailer added that it’s cutting 25% of its styles—it wants to focus on core brands like Air VaporMax, Nike React, and ZoomX—and slashing product creation styles in half. Nike is also upping its direct-to-consumer game, with plans to combine Nike.com, its Direct-to-Consumer retail channel, and the Nike+ digital products business.

Currently, Nike is a #4 (Sell) on the Zacks Rank, with a VGM score of ‘D.’ NKE stock has gained a little over 5% year-to-date.

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