Nike will cut about 2 per cent of its total workforce, or more than 1,600 jobs, the sportswear giant said late on Thursday to lower expenses as demand for its shoes and sneakers comes under pressure.

Higher rental and interest rates have led customers to cut back spending on high-priced goods, resulting in sportswear companies such as Nike and Adidas warning that retailers are lowering their orders through wholesale channels.

Nike had in December outlined a $2 billion savings plan over the next three years, which included tightening the supply of some products and reducing management layers. The cost cuts would include about $400 million to $450 million in employee severance costs in third quarter, it had said. Nike had about 83,700 employees as of May 31, 2023.

The job cuts are Nike getting out in front of the fear that demand “could soften still further”, said GlobalData managing director Neil Saunders.

Nike has also lost some retail shelf space to newer brands like Decker Outdoors’ Hoka and On Holding as their running shoes resonate with customers looking for catchy and innovative styles.

“Nike also wants to invest more in areas like running so it can gain market share, to do that it needs to balance the additional expenses with some reductions elsewhere,” Saunders said.