Nike trims sales forecast; to cut $2 billion in costs over next three years

Nike said its revenue in the full year, ending May 2024, is expected to be down by about 1 per cent

Blaming cautious consumer spending, Nike lowered its annual sales forecast on Thursday and said it is planning to save $2 billion in costs over the next three years. According to a report by the news agency Reuters, the savings will be made by tightening the supply of some products, reducing management layers and increasing automation.

The report said that Nike's wholesale business has been under pressure amid fewer orders from retailers. The slowdown is evident in the online sales numbers as well. In a post-earnings call, the company said its revenue in the full year, ending May 2024, will be down by about 1 per cent.

In the quarter ending November 30, Nike posted a total revenue of $13.39 billion, missing the estimates of $13.43 billion. Its per-share earnings of $1.03 topped estimates of 85 cents. Reports suggest this was due to lower freight costs and inventories.

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According to the Financial Times (FT), the company is also worried about headwinds in the economies of China, Europe, West Asia, and Africa. Moreover, the company has witnessed healthy numbers on big consumer holidays like Black Friday, but on other days, the sales are slower than expected.

The company announced it will "streamline" its operations to cut costs. As part of the exercise, Nike expects about $400 million to $450 million in pre-tax restructuring charges, primarily tied to employee severance costs, in the third quarter.

After the announcement, Nike shares fell more than 11 per cent in after-hours trading on Thursday.

On the other hand, Nike also announced that it will launch new styles to attract consumers, building on the success of recent releases like the Sabrina 1, LeBron 21 and Tatum 1 basketball shoes. It will come up with GT Cut, Book 1 and Kobe over the next three months to drive sales, according to Reuters.

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The company has already undergone several rounds of restructuring in the last three years. According to FT, the changes have included a concentrated overhaul of its internal organisation and accelerating a shift towards e-commerce while closing "undifferentiated" retail stores.