Nike Announces Plan to Cut $2B in Costs
Nike on Thursday unveiled plans to cut costs by about $2 billion over the next three years as it warned about a “softer” revenue outlook for the second half of the year. The athletic brand plans to simplify its product assortment, increase automation and its use of technology, streamline the overall organization, and leverage its scale “to drive greater efficiency,” according to its fiscal second quarter earnings call. Nike plans to reinvest the savings it gets from those initiatives into fueling future growth, accelerating innovation and driving long-term profitability.
Total Retail's Take: Nike is moving cautiously into the new year, with headwinds expected to intensify in the second half of 2024. In fact, the brand has already taken actions to cut costs, including laying off employees, which have resulted in earnings gains. Those actions have been necessitated by a slowdown in sales, with Nike reporting for the second quarter in a row that it fell short of sales estimates. While recognized as the leader in the athletic footwear and apparel market, Nike isn't immune to the economic challenges that have beset some of its competitors, including Adidas and Under Armour. Taking steps to control costs in an uncertain environment is a prudent action by Nike. It will be interesting to see if any of its competitors follow suit.