Nike lowered its revenue outlook and said it plans to cut $2 billion (€1.8 billion) in costs over the next three years as the world’s largest sportswear maker warned of softening consumer demand, particularly in China and Europe.
Shares of Nike fell more than 11 per cent in after-hours trading on Thursday as it announced a restructuring plan, leading to an expected pretax charge of between $400 million-$450 million (€363 million-€409 million) in the current quarter, largely due to severance costs.
Executives said they had seen a “bifurcation” in performance during the most recent quarter – ending November 30th – with strong sales around big consumer holidays including Black Friday in North America and Singles Day in China, but slower than expected demand for periods in between.
“We know that in an environment like this where the consumer is under pressure and there is a stronger promotional environment, it is newness that causes the consumer to act,” said Matthew Friend, Nike’s chief financial officer. He also pointed to “increased macroeconomic headwinds” in greater China and Europe, the Middle East and Africa.
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He said that under Nike’s $2 billion “save-to-invest” programme, it would streamline its organisation, simplify the products its offers and increase automation. But he warned that the changes might take time to achieve at scale.
For its fiscal 2024 ending in May, Nike expects full-year revenue growth of “approximately 1 per cent”, down from its earlier outlook of mid-single-digit growth.
Net income for the past quarter of $1.6 billion beat Wall Street forecasts, while revenue of $13.4 billion was in line with market expectations.
Over the past three years, Nike has undergone several rounds of restructuring. Since 2020, the changes have included a concentrated overhaul of its internal organisation and accelerating a shift towards ecommerce while eschewing “undifferentiated” retail stores – narrowing down the number of outlets where its premier products are available.
During the most recent quarter, Nike said it saw higher foot traffic at some physical retail stores and slower demand in digital sales. Mr Friend added that Nike would reduce the supply of some of its popular products in order to focus on newer launches.
Chief executive John Donahoe said an example of demand for new products could be seen in the basketball category, such as signature shoes for professional athletes including Sabrina Ionescu of the New York Liberty and LeBron James of the Los Angeles Lakers. Similarly, Nike has experimented with offering new versions of existing products at different price points, including in women’s leggings. – Copyright The Financial Times Limited 2023
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