Major players in the sportswear retail space are experiencing some troubles at the moment, with some warning the industry is in for a rough 2024.
The kingmaker, Nike, recently has taken cost-cutting measures that have recently included cutting 1,700 jobs, or 2% of its workforce. This move came after Nike in December lowered its full-year sales outlook while announcing that it will undergo a $2 billion cost-cutting initiative over the next three years.
- CFO Matthew Friend told analysts on the company’s most recent earnings call that factors such as the US dollar’s effect on foreign currency and lower consumer demand over the holidays are making the equation much more difficult for the brand.
- Outside of layoffs—some of which quietly started at the end of last year—Nike said it’s aiming to simplify its product assortment and lean more on automation and technology to trim the fat.
What’s going on? On a macro scale, retailers—sportswear or otherwise—are dealing with challenges such as disruptions within the global supply chain, shifts in consumer behavior and preferences, and the transition to digital retail platforms, Smirna Kulenović, editor at Next Luxury, told Retail Brew via email. But she said that’s not all that’s at play.
“Despite these broader economic influences, the sportswear industry is also facing intense competitive dynamics and the imperative for continuous innovation, which are essential for maintaining consumer engagement and brand loyalty in a highly saturated market,” Kulenović said.
Adidas has also flagged larger industry struggles on top of dealing with its own. Like Nike, Adidas at the start of the month warned that demand, particularly in North America, would be tricky to navigate in 2024, and the company lowered its sales growth below analyst expectations.
- In a call with analysts, CEO Bjørn Gulden tempered investors’ expectations, saying that Adidas is attempting to be “humble and down to earth,” rather than overly confident.
- That appeared to be the route to go as during its most recent earnings, Adidas exceeded its revenue and operating profit projections after a strong Q4. The company also stuck with its strategy of attempting to sell off its remaining ~$290 million in Yeezy inventory.
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“These brands are navigating both the need to innovate sustainability and the reality of broader economic headwinds, emphasizing the intricate balance necessary to thrive in today’s activewear retail environment,” Steve Pogson, founder of e-commerce growth firm First Pier, told Retail Brew via email.
Zoom out: It’s not just the titans that are feeling the pain. In January, REI also announced its own round of layoffs affecting 357 employees. CEO Eric Artz also said the company will be taking a number of cost-cutting measures, including reducing its senior leadership by 22% this year. And this is coming off a round of layoffs at its corporate headquarters from last February.
- Artz said outdoor specialty retail overall has seen declines in the last year and the industry will continue to struggle through 2024.
“When we plan our revenues down, we must adjust our plans and cost structure accordingly. We must also continue our work to return REI to profitability to set the co-op up for long-term health and success,” Artz said.