Nike Inc. said it will implement cost cutting measures over the next three years to "fuel further growth." File Photo by Stephen Shaver/UPI |
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Dec. 21 (UPI) -- Nike on Thursday said it plans to cut costs by about $2 billion over the next three years and forecasted a "softer" revenue outlook for the second half of 2024.
The company in its fiscal year 2024 second quarter statement said it is looking for opportunities to deliver as much as $2 billion in total cost savings over the next three years. Potential areas for cuts included a simplified product assortment, increasing automation and use of technology, streamlining the organization, and "leveraging ... scale to drive greater efficiency."
A majority of these savings would be invested to "fuel further growth, accelerate innovation at speed and scale and drive greater long-term profitability," the company said.
Nike said its efforts to streamline the organization will result in pre-tax restructuring charges of approximately $400 million to $450 million that will largely be recognized in Q3 of FY2024. The company said this is primarily associated with employee severance costs.
Nike has quietly laid off employees over the past several weeks, the Oregonian reported earlier this month. Various divisions saw cuts to staff, including human resources, recruitment, sourcing, brand, engineering, digital products and innovation.
During Nike's Q2, the company posted strong earnings, indicating its cost cutting measures were already underway.
"Our Q2 results demonstrated how we are getting back on our front foot in our key areas of innovation and growth," said John Donahoe, president and CEO of Nike. "This quarter showed strong execution by our team as we focus on our winning formula of innovative product, distinctive storytelling and differentiated marketplace experiences."
Revenues for Nike Inc. increased 1% to $13.4 billion compared to the prior year and decreased 1% on a currency-neutral basis.
Revenues for the Nike Brand were $12.9 billion, up 1% compared to the prior year and flat on a currency-neutral basis.
Revenues for Converse were $519 million, down 11% compared to the prior year and down 13% on a currency-neutral basis, due to declines in North America and Europe, partially offset by growth in Asia, the company said.
Selling and administrative expense increased 1% to $4.1 billion, according to the Q2 results. Demand creation expense was $1.1 billion, up 1%, reflecting an increase in marketing expense. Operating overhead expense was $3 billion, flat compared to the prior year as increases in Nike Direct variable costs were offset by lower technology spend and wage-related expenses.
Nike reported its net income was up 19% to $1.6 billion, and diluted earnings were up 21% to $1.03 per share.
The company's stock fell about 7% after hours, according to CNBC finance reports. Nike shares were up 4.7% so far this year through Thursday's close, lagging far behind the S&P 500's gains for the year. Retailer Foot Locker, which leans heavily on Nike products, fell 4% after hours.
