Tuesday, February 27, 2024

Nike to streamline operations, misses quarterly sales estimates on weak demand

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Nike to streamline operations, misses quarterly sales estimates on weak demand © Reuters. FILE PHOTO: A bicyclist wearing Nike shoes rides along the Charles River in Cambridge, Massachusetts, U.S., March 18, 2019. REUTERS/Brian Snyder/File Photo

(Reuters) -Nike said on Thursday it was seeking $2 billion in savings over the next three years by streamlining operations, after it missed quarterly sales estimates due to a weak North American wholesale business and feeble recovery in China.

The company’s shares fell 6% after the bell.

Nike (NYSE:) CFO Matthew Friend said the sportswear giant was looking ahead “to a softer second-half revenue outlook”.

The company’s wholesale business has been under persistent pressure as retailers keep a tight lid on product stocks and cut back on orders, hurting sales, despite strength in the brand’s own stores and online business.

Nike’s wholesale revenue fell 2% to $7.1 billion in the reported quarter.

The company is also undertaking a restructuring aimed at delivering up to $2 billion in cost savings over the next three years, including simplifying its product assortment, increasing automation and technology and streamlining its organization.

As part of the streamlining, the company expects about $400 million to $450 million in pre-tax restructuring charges, primarily associated with employee severance costs, in the current quarter.

Sales in Greater China rose 4% in the second quarter for Nike, slowing from the 5% jump seen in the previous quarter, in a sign that demand was yet to stabilize.

Still, limited promotions, strategic price increases, lower freight charges and a cleaner inventory helped boost Nike’s gross profit margins, which increased 170 basis points to 44.6% in the three months ended Nov. 30.

The company’s total revenue rose to $13.39 billion in the second quarter from $13.32 billion a year earlier, compared with analysts’ estimates of $13.43 billion, according to LSEG data.

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