Nike shares tumble as it cut costs amid ‘softer’ outlook
Nike executives described heighten consumer caution as is targets up to $2 billion in cost cuts
New York – Nike promised up to $2 billion in cost savings Thursday involving job cuts and greater use of automation as it eyes “softer” sales in the coming period.
The sports giant reported an uneven performance across major markets in the latest quarter, with revenues declining in North America but rising in China and its Asia Pacific/Latin America regions.
Shares fell heavily in after-hours trading as Chief Financial Officer Matthew Friend described the environment as “highly promotional” during a conferrence call with analysts.
“We are seeing indications of more cautious consumer behavior around the world in an uneven macro environment,” Friend said.
Profits for the quarter ending November 30 jumped 19 percent to $1.6 billion, while revenues edged up one percent to $13.4 billion.
The sports giant’s cost-cutting plan will simplify product offerings, increase automation and institute a “streamling” of the company organization, Nike said in a news release.
The plan anticipates a one-time charge of $400 million to $450 million in the current quarter primarily to cover employee severance costs.
“We see an outstanding opportunity to drive long-term profitable growth,” said Chief Executive John Donahoe. “Today we are embracing a company-wide journey to invest in our areas of greatest potential, increase the pace of our innovation, and accelerate our agility and responsiveness.”
Shares of Nike slumped 7.2 percent in after-hours trading.