US footwear giant Nike Inc. has cut its annual sales guidance, citing unstable demand, and announced plans to reduce supplies on certain key product lines to control costs.
The Beaverton, Oregon-based company expects revenue for the full fiscal year to climb around 1.0%, lower than its earlier estimates of mid-single-digit percentage increase. That also compared to analysts’ forecast for a 3.8% rise.
Nike also aims to reach $2 billion in savings in the next three years through measures including shrinking the supply of several products, boosting its supply chain, removing some management layers, and adopting more automation.
The company provided no further details on which product lines it would trim supplies, although it noted excellent performance from its popular sneaker lines like the Air Force 1, Dunk, and Court.
Under the reorganization, Nike sees pre-tax restructuring charges for the third quarter at about $400 million to $450 million, mainly accounting for employee severance costs.
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The wholesale business of the athletic footwear and apparel maker has continued to face pressure as it records fewer orders from retailers amid unsteady demand.
The slump is also apparent in the sales of Nike’s online business, prompting the company to carry out more promotional activities as the number of consumers declines.
Its China sales have also lost momentum, weighed by a slowdown in the world’s second-largest economy.
Nike finance chief Matthew Friend stated that they were observing signs of shoppers worldwide being more wary about their spending.
Regarding the company’s move to trim supplies on certain products, senior equity analyst David Swartz said Nike might be seeing an excess of products that do not offer a high-profit level and are not truly bringing in significant sales.
However, Nike also intends to release new designs to draw in buyers, expanding on the success of its recent basketball footwear launches, such as the Sabrina 1, LeBron 21, and Tatum 1.
Friend expects the company to endure through a promotional marketplace by utilizing freshness and innovation, which enables action among consumers.
The upcoming releases in the GT Cut, Book 1, and Kobe lines due in the next three months are also seen fueling Nike’s sales.
