Nike cuts sales outlook and unveils $2 bn savings plan amid global economic uncertainty

Sportswear giant Nike has revised its annual sales forecast downward, citing cautious consumer spending, weaker online business, and increased promotional activities.

According to Reuters, the company plans to implement a $2 billion savings initiative over the next three years, involving measures like supply chain adjustments, management layer reductions, and enhanced automation.

These moves come as Nike faces persistent pressure in its wholesale business due to reduced retailer orders amid fluctuating demand, with online sales impacted and promotions heightened. The announcement led to an 11 per cent drop in Nike's shares.

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Nike's finance chief, Matthew Friend, highlighted the challenges, stating, "We are seeing indications of more cautious consumer behaviour around the world."

The company now projects a 1 per cent increase in full fiscal-year revenue, down from its earlier forecast of mid-single-digit percentage growth. Analysts, expecting a 3.8 per cent increase, expressed concerns over the global economic landscape affecting Nike's performance.

The savings plan includes supply chain adjustments, with Nike seeking to cut the supply of certain products. Analyst David Swartz noted, "Nike's talking about reducing the number of products ... perhaps the company feels there are too many products that are not high-margin and not really generating significant sales."

However, Nike emphasized its commitment to innovation, launching new styles like the Sabrina 1, LeBron 21, and Tatum 1 basketball shoes to attract consumers in a challenging market.

While Nike did not specify the product franchises facing supply cuts, the company assured that its iconic lines, including Air Force 1, Dunk, and Court, continue to perform well. The fiscal second quarter's total revenue of $13.39 billion fell slightly short of estimates, but per-share earnings of $1.03 surpassed expectations, benefiting from lower freight costs and inventories.

Nike's shares have seen modest gains this year compared to a significant rally in the S&P 500 index and its rival, Adidas.

(With inputs from Reuters)

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