Nike Restructuring Winds Amid 'Sales Slump'... After-Hours Down 10%

[Image source=AFP Yonhap News]

Nike announced on the 21st (local time) that it is undergoing a restructuring to cut costs by $2 billion (approximately 2.6 trillion KRW) over the next three years amid a forecast of sluggish sales.

According to U.S. financial media CNBC and others, Matthew Friend, Nike's Chief Financial Officer (CFO), stated during a conference call after the Q2 (September-November) earnings announcement that "sales will slow further in the second half of the year."

He said the company plans to simplify product lines, increase automation, and downsize the organization to reduce costs. He explained that one-time costs of $400 million to $450 million (approximately 600 billion KRW) related to workforce reductions were reflected in the Q2 results.

On the same day, Nike disclosed that Q2 sales reached $13.39 billion (approximately 17.4 trillion KRW), a 1% increase compared to the same period last year. This fell short of the market expectation of $13.43 billion. Earnings per share were $1.03, exceeding the market estimate of $0.85.

By region, sales in the Greater China area increased by 4%, showing a slight slowdown compared to the previous quarter's 5% growth. Nevertheless, the gross profit margin rose by 1.7% to 44.6%, supported by restrictions on promotional activities, lower transportation costs, and inventory management.

Following the forecast of worsening performance and the restructuring announcement, Nike's stock price fell more than 10% in after-hours trading. Nike's stock price has only risen 4.7% this year (based on the closing price on the day), significantly underperforming the S&P 500 index's average increase of 23.6%.

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