Nike to Cut $2 Billion in Costs Over 3 Years - Ends Tiger Woods Partnership After 27 Years - Could Cuts in Football Follow?
Update: Confirming the previous rumors, Nike has announced the end of its Tiger Woods partnership after 27 years. This is part of the company's strategy to cut costs by $2 billion over the next 3 years. It remains to be seen if famous football clubs or players will follow. Indeed, Nike has already lost dozens of players and other contracts in the past few years, including Neymar, Grealish, Portugal (from 2025) and the Premier League (from 2025).
Indeed, a possibility for Nike to save more costs would be the early termination of football club contracts, such as the FC Barcelona contract. It would cost Nike money in the short-term but free them up of costs in the long term (which is often liked by stock markets).
Recently, Nike announced that it plans to cut more costs in the future by saving $2 billion over the next 3 years, according to The Oregonian.
The plan to save $2 billion over the next three years is part of an effort to regain lost momentum and spark Nike's sleepy innovation engine.
Nike Only Grew 1%, Shares Fall 10%
According to the report, Nike expects to incur as much as $450 million in restructuring charges in the quarter that ends 28 February, mostly for severance costs, suggesting that Oregon's largest company is in the process of parting ways with a significant number of employees.
To put that cost in perspective, Nike predicted it would incur between $200 million and $250 million in severance costs in 2020 when it eliminated 700 jobs.
With the aim of reducing costs in the coming years, it is understandable that Nike has terminated contracts with many major tournaments, major clubs and major players in 2023.
Recently, Barcelona are said to be unhappy with Nike, despite being one, if not the top-payed club in the world. Puma is said to be making every effort to replace Nike - however, Footy Headlines do not think Puma would/could pay as much as Nike.
At present, Nike executives have not given specific information about the $2 billion savings plan, but they have said the company can do it in any way, from streamlining the organizational chart to reducing the number of products and eliminating layers of management.
Nike may even end its contract with golf legend Tiger Woods in a bid to cut costs over the next three years. Tiger Woods has been signed to Nike since 1996 and has had a partnership with Nike for nearly 30 years. His current contract with Nike expires at the end of this year. We’ll see if Woods will be wearing the Swoosh in 2024.
According to its latest report on 30 November, Nike also lowered its sales forecast for the fiscal year ending 31 May to around 1% growth. Shares were down around 10% in after-hours trading within an hour of the earnings report.
Based on financial reports, analysts have pointed out that Nike's product pipeline is declining and that it is losing market share in running, its legacy category.
On the earnings call, Donahoe said the cost-cutting will enable Nike to invest more in innovation and other growing areas of the company, such as its women’s category, the Jordan brand and running.
Donahoe added that Nike is returning to its "front foot" with early momentum in trail running and basketball.
What do you think about Nike's current situation? Do you think Nike will have even fewer top teams and players in the future? Comment below.
