(New York) Sportswear and equipment group Nike announced Thursday that it has identified up to $2 billion in savings over three years, with more automation, an overhaul of its ranges and a reduction in its workforce the extent of which is not specified.
On the occasion of the publication of its results for the second quarter of its staggered financial year, the group specified in a press release that the majority of these savings would be “invested to finance future growth, accelerate innovation at pace and in scale, and generate superior long-term profitability.”
Implementation of this cost-cutting program is expected to result in a pre-tax charge of approximately $400 million to $450 million, much of which will be incorporated into its third-quarter results.
It will above all be about severance pay, he simply indicated.
“We see an exceptional opportunity to generate long-term growth in profitability,” commented John Donahoe, CEO of Nike, quoted in the press release.
“Today, we are putting the company as a whole on a path to invest in our businesses with the greatest potential,” he added.
In the second quarter, ended November 30, Nike reported revenue of $13.39 billion (up 1%) and net profit of $1.58 billion, a jump of 19% year-over-year.
Reported per share and excluding exceptional items – benchmark for the markets – the profit came to 1.03 dollars, when the consensus was counting on 84 cents.
But the group reported a “softer environment” regarding its revenue forecast for its second half.
In electronic trading after the New York Stock Exchange closed, Nike shares lost 10.68%.
“We are seeing indications of more cautious consumer behavior around the world and an uneven macroeconomic environment,” commented Matthew Friend, chief financial officer, in an audio conference with analysts, indicating that retail sales were below expectations.
Footfall in stores continued to increase, but online sales were “soft” and the volume of promotions was higher, he continued.
“Therefore, we are adjusting our growth forecasts for the remainder of the year,” he said.
Turnover for the third quarter should be “slightly down” year-on-year and that for the fourth quarter to increase by less than 5%, Mr. Friend said, specifying that over the financial year, it should increase “by approximately 1%.”
In the second quarter, the group reported lower sales for the Nike brand in North America and the Europe/Middle East/Africa region, and for the Converse brand in North America and Europe, partly offset by a increase in Asia.