Just weeks after Nike Inc. confirmed that nearly 800 jobs were on the chopping block, more employees are set to exit, this time at Converse.
In a Monday memo sent to employees from Aaron Cain, Converse’s chief executive officer, Bloomberg News reported that Converse brand staff were instructed to work from home this week as the sportswear giant makes strategic changes to recapture sales growth. The changes include new roles, and team moves for some staff, the report stated.
When reached by FN, a representative from Nike declined to comment on the news.
The move to reorganize the struggling footwear brand comes one month after BNP Paribas Equity Research senior analyst Laurent Vasilescu suggested in a note that Nike may be considering a sale of its Converse brand – indicating that the “underlying health” of the brand is “more precarious” than first thought.
To justify this potential move, the analyst pointed to challenges Converse has seen of late, including a 28 percent decline in revenues in the first quarter and with sales dropping another 31 percent in Q2 – leading to EBIT (Earnings Before Interest and Taxes) of Converse “dipping into the negative territory” for the second quarter.
“We think the underlying health of Converse is more precarious as the average selling price pressure would suggest sell in into off-price and therefore sell in into key accounts could be down more than 30 percent,” Vasilescu wrote. “A potential divestiture would not be Nike’s first. Rather, it would cap off a long history of divestitures from Cole Haan, Umbro, Starter, Bauer and Hurley. A divestiture of Converse would finalize the divestiture of Nike’s all acquired brands, a further testament that brand acquisition is hard to pull off.”
While details on the company’s efforts to overhaul Converse were not disclosed on Nike’s Q2 earnings call in December, management made it a point to disclose that it is “resetting the marketplace with new leadership” – referring to 21-year Nike veteran Aaron Cain taking on the Converse CEO role in July, succeeding Jared Carver.
Nike noted in its earnings release that it is expecting Converse to experience continued headwinds for the balance of the fiscal year as revenues for the brand were $300 million in Q2, down 30 percent on a reported basis, due to declines across all territories.
Monday’s memo to employees comes after Nike disclosed in January that it cut approximately 775 jobs as it aims to consolidate its U.S. distribution center operations across facilities in Tennessee and Mississippi.
In a statement sent to FN last month, a Nike representative said the move is part of the company’s “Win Now” strategy, which was laid out on the company’s third quarter earnings call in March.
“To power our ‘Win Now’ actions, we’re taking steps to strengthen and streamline our operations so we can move faster, operate with greater discipline, and better serve athletes and consumers,” the statement said. “We are sharpening our supply chain footprint, accelerating the use of advanced technology and automation, and investing in the skills our teams need for the future.”
