By Sabela Ojea
Nike cut its revenue outlook for the year amid concerns that consumers around the world are becoming more cautious with their spending.
The sneaker and apparel company on Thursday said it anticipates softer sales for the second half of the year. It also plans to shave up to $2 billion in costs over the next three years through streamlining the organization and shedding employees among other moves. Shares plunged nearly 11% in after-hours trading.
For the fiscal year ending in May, Nike now expects revenue growth of about 1% from the prior year, down from its prior forecast of revenue rising by a mid-single-digit percentage.
Nike dealt with soft demand outside of heavy shopping moments like those tied to back-to-school shopping and Black Friday, Chief Financial Officer Matt Friend told analysts on a conference call. The company also experienced weaker traffic to its digital platforms and competitors offered higher levels of promotions, he said.
Nike executives said the company remains committed to simplify its product assortment while leaning into new products that are responsive to what consumers want.
“In this competitive environment, we need to accelerate our pace of innovation, elevate our marketplace experiences, maximize the impact of our storytelling, and increase our speed and responsiveness,” Friend said on a conference call.
The company expects to book $400 million to $450 million in charges as a result of its restructuring, much of which will be recorded in the current quarter. The savings will be used to invest for its women’s and running divisions as well as the Jordan brand. It also plans to increase the use of technology and automation across its business.
Excluding the restructuring costs, Nike maintained its full-year earnings outlook, helped by price increases, supply-chain efficiencies and lower ocean freight rates.
The Beaverton, Ore.-based company has been dealing with higher levels of competition from rival brands and concerns from customers about its ability to deliver innovative products.
Nike Chief Executive John Donahoe said early reorganization efforts have already paid off and it has big product plans tied to the 2024 Summer Olympics and the innovation in its basketball and performance-based shoes.
In the quarter ended Nov. 30 Nike sales rose 1% from the prior year, which company executives described as strong based on the spending environment. Overall sales were $13.39 billion, which was on par with Wall Street expectations. Profit climbed 19% to $1.58 billion, or $1.03 a share.
Write to Sabela Ojea at sabela.ojea@wsj.com