Sportswear giant Nike has started the new financial year with a continuing decline in sales, prompting a plan for widespread job cuts.

The struggling retailer saw its revenues fall 4 per cent in its fiscal first quarter compared to the previous year, while the bottom line also fell by 2 per cent. It marks the second consecutive quarter of declining sales for Nike.

But the company CEO said it is making “measurable progress” in its transformation strategy, citing an overhaul of its operating model that is expected to bring $2.5 billion in cumulative savings through fiscal 2031.

“The ‘Sport Offense’ is driving measurable progress across our performance business, and we introduced ‘Pace’ to help us accelerate and scale that momentum across Nike,” said Elliott Hill, president and CEO. 

The savings are expected to primarily come from job cuts, Nike said, with around $300,000 in severance costs expected in the current fiscal year.

“We have more work to do in Nike Sportswear, Jordan Brand and Greater China, and we’re taking deliberate actions to strengthen those businesses the right way for the long term,” Hill added.

Sales in Greater China declined by 22 per cent in the quarter; sales in Europe, the Middle East and Africa declined by 5 per cent. No region yielded an improvement in sales year-on-year.

“We delivered first-quarter results consistent with our expectations, supported by improved gross margin and disciplined cost management,” CFO Dave Denton said.

“As we move forward, we remain focused on strengthening the health of our product portfolio, improving productivity across the enterprise, and allocating resources with discipline to support long-term shareholder value.” 

Neil Saunders, the MD of data intelligence firm Global Data, said Nike is starting to recognise the challenges it faces.

“One of the central problems is that Nike is a sprawling enterprise and far too many parts of it remain on the back foot,” he added. “Management hopes that the new organizational structure, which includes reducing the number of geographical regions, will aid the stabilization efforts and eventually produce a return to growth.

“There is nothing inherently wrong with the plans, but they do rather suggest that Nike’s current model is not really fit to deliver, which, in turn, raises a question as to why changes have not been made sooner. It is all a bit like rearranging deckchairs on the Titanic before dealing with the fundamental issues causing Nike to sink.”