Nike Stock Fell 10% After It Unveiled To Cut Costs By $2bn

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Nike sinks 10% after it slashes sales outlook, unveils $2 billion in cost cuts

On Thursday, Nike said that it is planning to spend $2 billion in costs in the next three years. Apart from that, the company also cut its revenue outlook for the fiscal year. Furthermore, for the second quarter in a row, the company also fell short of sales estimates by Wall Street analysts.

Hours after the report, Nike’s stock fell by 10%. However, after the closure of the market on Thursday, Nike’s shares for the year went up by 4.7%. Despite this increase, Nike is lagging way behind the S&P 500 gains for the financial year. Apart from that, Foot Locker, the retailer that depends heavily on Nike, also fell by 7% a few hours later.

However, Nike expects its full-year reported revenue to grow by approximately 1%. The current quarter consists of the second half of the holiday shopping season. Nike also expects the reported revenue to be slightly negative as compared to earlier years. Apart from that, the company also expects its sales to be up by low single digits in the fourth quarter.

Matthew Friend, the CFO of Nike stated –

Last quarter as I provided guidance, I highlighted a number of risks in our operating environment, including the effects of a stronger U.S. dollar on foreign currency translation, consumer demand over the holiday season and our second half wholesale order books. Looking forward, the impact of these risks is becoming clearer.”

(source)

According to Friend, the new outlook is a reflection of an increase in macro headwinds. This is fully true for EMEA (Europe, the Middle East, and Africa) and Greater China. As Friend explains, the current growth plans of Nike are based on the softness of digital traffic and higher promotions in the marketplace. Apart from that, the stronger US dollar and the lifecycle management of key products are also reasons.

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A passionate writer and an avid reader, Soumava is academically inclined and loves writing on topics requiring deep research. Having 3+ years of experience, Soumava also loves writing blogs in other domains, including digital marketing, business, technology, travel, and sports.

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