Nike cuts revenue forecast, announces 2 billion dollars saving plan

For its second quarter, Nike, Inc. revenues were 13.4 billion dollars, up 1 percent on a reported basis compared to the prior year and down 1 percent on a currency-neutral basis.

Cutting its outlook for the year ahead, the sportswear company said it expects revenue to rise 1 percent, down from its previous forecast of mid-single-digit percentage growth.

“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 & CEO, Nike.

Nike brand Q2 revenues remain flat

Revenues for the Nike brand were 12.9 billion dollars, up 1 percent compared to the prior year and flat on a currency-neutral basis, as currency-neutral growth in APLA and Greater China was offset by declines in North America and EMEA.

Revenues for Converse were 519 million dollars, down 11 percent compared to the prior year and down 13 percent on a currency-neutral basis, due to declines in North America and Europe, partially offset by growth in Asia.

Nike direct revenues for the quarter were 5.7 billion dollars, up 6 percent on a reported basis and up 4 percent on a currency-neutral basis. Nike brand digital sales increased 4 percent on a reported basis and 1 percent on a currency-neutral basis.

Wholesale revenues were 7.1 billion dollars, down 2 percent on a reported basis and down 3 percent on a currency-neutral basis.

Second quarter gross margin increased 170 basis points to 44.6 percent, while net income was 1.6 billion dollars , up 19 percent and diluted earnings per share were 1.03 dollars, up 21 percent.

Nike initiates cost saving strategy amid softer outlook

The company said that Nike is identifying opportunities to deliver up to 2 billion dollars in cumulative cost savings over the next three years.

The company added that the areas of potential savings include simplifying product assortment, increasing automation, use of technology, streamlining organisation, and leveraging its scale to drive greater efficiency.

As part of this strategy, the company’s streamlining of the organisation is expected to result in pre-tax restructuring charges of approximately 400 million dollars to 450 million dollars, primarily associated with employee severance costs.

Commenting on the outlook, Matthew Friend, executive vice president & CFO, Nike said: “As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management.”

In the second quarter, Nike returned approximately 1.7 billion dollars to shareholders, including dividends of 523 million dollars, up 9 percent from the prior year.