Nike announced it will cut costs by $2 billion over the next three years on Thursday, including layoffs, amid a “softer second-half revenue outlook” for early 2024.
The shoe manufacturer said it anticipates weaker consumer demand in the coming months, despite continuing positive signs from a U.S. economy which has drastically exceeded the expectations of economists.
Nike CFO Matt Friend placed blame on the global economy in the company’s earnings call, saying slowing sales in China and Europe are cause for lowered expectations.
The company reported little change in Q2 revenue on Thursday overall, up about 1 percent, but said the next quarter could bring a downswing of negative revenue growth.
Friend also announced $400- to $450 million in expenses “primarily related to severance costs” in the upcoming quarter. It is unclear how many employees will be laid off or from which facilities.
Year-long fears of a looming recession in the U.S. have faded in recent months as inflation continues to fall and unemployment remains low. Consumer spending remained high through the early parts of the 2023 holiday shopping season.
But globally, other economies are lagging behind the United States. In China, lowered consumer spending is a warning sign for potential future economic stability.
Friend closed the conference call with a motivational plea to investors. Following earnings, Nike stock fell 11 percent on Friday.
“While we expect the operating environment to remain dynamic, we have been here before, and we know that moments like this are when Nike operates and executes at its best,” he said. “We will stay on the offense, manage risk, optimize opportunity, and leverage our strengths to create even further competitive separation.”
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