News Summary
Nike’s shares fell after the sportswear company cut its full-year revenue forecast, citing a decline in demand, especially abroad. Nike indicated that increasing macroeconomic factors are affecting sales. The company is also planning to cut costs by $2 billion over the next three years.
Nike’s Forecasts Downgraded and Plans Cost Cuts
Nike (NKE) underperformed in the Dow Jones and S&P 500 as its shares dropped by more than 10% in trading on Friday after the sportswear company reduced its full-year forecast due to “softer” sales in the second half. The company also announced plans to slash costs, which may include employee layoffs.
Revenue Forecast for Fiscal Year 2024
CFO Matt Friend clarified that the new guidance reflects “increased macroeconomic factors,” particularly in Greater China, Europe, and the Middle East and Africa. He added that Nike has adjusted its growth plans based on recent digital declines, increased market promotional activities, management of key product life cycles, and the strong US dollar.
Cost-Cutting Plan
Friend added that the company plans to cut costs by $2 billion over the next three years, noting that savings will come from across the business, not just from selling and general administrative expenses. He noted that some examples will include “streamlining our product assortment, improving supply chain efficiency, leveraging our size to reduce operational costs, increasing automation and speed through data and technology, streamlining our organizational structure, reducing layers of management, and enhancing our procurement capabilities.”
Impact of Restructuring on the Company
Friend indicated that the restructuring will result in costs ranging from $400 million to $450 million in the second half, “primarily related to severance costs that will be recognized largely in the third quarter.”
Second Quarter Results for Fiscal Year 2024
In the second quarter of the fiscal year, Nike reported earnings of $1.03 per share, beating expectations. Revenues increased by 1% from the previous year to $13.4 billion, in line with forecasts.
Impact of the News on Nike’s Shares
Nike’s shares fell by 10.6% to $109.56 per share around 11:30 AM ET on Friday after the news, and were in negative territory for the year.
Trending Video Summary
Nike’s shares fell due to the cut in full-year revenue forecast, citing a drop in demand, especially abroad. The company is also planning to cut costs by $2 billion over the next three years.
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reports, and interviews with industry experts. We also cite original research from other trusted publishers when appropriate.
Source: Nike. “Nike Q2 Fiscal Year 2024 Earnings Report.”
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Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reports, and interviews with industry experts. We also cite original research from other trusted publishers when appropriate.
Source: Nike. “Nike Q2 Fiscal Year 2024 Earnings Report.”
Account Comparison
Advertiser Disclosure: The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
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