- Nike's stock was down Friday after the company lowered its outlook.
- The company said it planned $2 billion in cuts, which could include layoffs.
Nike's stock was down more than 11% Friday after the company lowered its outlook and said it planned $2 billion in cuts, which could include more layoffs.
As part of its three-year cost-cutting plan, Nike said it would simplify its product assortment, improve supply chain efficiency, and increase automation and the use of technology. It also plans to reduce management layers and expects to incur restructuring costs of $400 million to $450 million, primarily related to severance costs.
This suggests the company will lay off employees, even though it didn't explicitly announce layoffs.
When Nike eliminated 700 jobs in 2020, it predicted it would incur between $200 million and $250 million in severance costs, the Oregonian noted.
What's going on at Nike?
Nike on Thursday cut its full-year sales forecast to 1% from a previous forecast of mid-single digits, citing softening digital sales and weaker demand particularly in Europe and China.
"We are seeing indications of more cautious consumer behavior around the world," Nike Chief Financial Officer Matt Friend said on an earnings call.
Overall, sales rose about 1% in the most recent quarter to $13.39 billion, from $13.32 billion a year earlier.
Some analysts and employees have said Nike's problems are due in part to a lack of innovation.
"Innovation at the higher end of its assortment is not resonating at scale while Nike faces disruption from smaller competitors in footwear and apparel," Cohen analysts wrote in a note to investors on Friday.
What's the impact to Dick's and Foot Locker?
The athletic wear market is dominated by Nike, one of the world's biggest companies. So what happens at Nike can signal shifts in the broader market.
"This will probably drag down the sector… given Nike's bellwether status," Wedbush analysts wrote in a note Friday.
Sure enough, shares fell Friday for Dick's Sporting Goods, Puma, Under Armour, Foot Locker, and Adidas.
Companies like Dick's and Foot Locker are more directly impacted because they sell Nike shoes and athletic wear.
But other rivals may feel some impact, as well, if Nike's struggles signal a broader market softness.
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