Nike Inc (NYSE:NKE) stock fell 10.19% (As on December 22, 11:10:35 AM UTC-4, Source: Google Finance) after the company is looking for as much as $2 billion in cost savings by dismissing workers and simplifying the sneaker company’s product assortment amid a weaker sales outlook. Gross margin in the quarter was 44.6%, higher than analysts’ estimates. Management has spent much of the year cleaning up inventory after a glut of merchandise kept new product from hitting store shelves. Inventories fell 14%.
Moreover, 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.
NKE in the second quarter of FY 24 has reported the adjusted earnings per share of $1.03, beating the analysts’ estimates for the adjusted earnings per share of 84 cents. The company had reported the adjusted revenue growth of 1 percent to $13.4 billion in the second quarter of FY 24, beating the analysts’ estimates for revenue of $13.39 billion. The beat was driven by an improvement in margin, underpinned by “strategic pricing actions and lower ocean freight rates, partially offset by unfavorable changes in net foreign currency exchange rates and higher product input costs, as per the company.
The company has also detailed cost-cutting plans, targeting up to $2B in cost savings over three years that will be driven by simplifying product assortment, increasing automation and use of technology, and streamlining operations. The cost-cutting efforts are expected to result in $400-450M in pre-tax charges, primarily related to job cuts, that would mostly be recognized in the third quarter of fiscal year 2024.
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.