Nike (NKE) tumbled 12.2% to $114.93 on Thursday in after-hours trading after the company said it now expects fiscal 2024 revenue to grow just 1%, down from its prior mid-single-digit percentage growth forecast. The lowered outlook reflects “increased macroeconomic headwinds,” the company said, particularly in Greater China and Europe, the Middle East, and Africa (EMEA).
Nike also announced plans to cut $2 billion in costs over the next three years, a move that could include layoffs. The company said it will focus on simplifying its operations and reducing inventory levels.
“We are taking decisive action to accelerate our strategic transformation and deliver sustainable, profitable growth,” Nike CEO John Donahoe said in a statement. “We are confident in our long-term strategy, but we are facing some near-term challenges that we need to address.”
Nike’s stock price has been under pressure in recent months as investors have grown concerned about slowing demand in China and other emerging markets. The company’s fiscal first-quarter earnings, released in September, also missed analyst expectations.
Analysts say that Nike’s lowered outlook is a sign of the challenges facing the broader retail sector.
“This is a wake-up call for the entire industry,” said Neil Saunders, retail analyst at GlobalData. “Nike is a bellwether for the sector, and if they are seeing softer demand, it is likely that other retailers will see it too.”
The retail sector has been hit hard by a number of factors, including inflation, rising interest rates, and supply chain disruptions. These factors have led to weaker consumer spending, which has weighed on retail sales.
Nike’s struggles are also a reflection of the changing competitive landscape in the athletic apparel market. The company faces stiff competition from a number of rivals, including Adidas, Under Armour, and Lululemon. These rivals have been investing heavily in new products and marketing initiatives, which has put pressure on Nike’s market share.
Despite the challenges, Nike remains a strong brand with a loyal following. The company is also taking steps to address its weaknesses, such as by simplifying its operations and reducing costs. Analysts say that Nike is well-positioned to weather the current storm and emerge stronger in the long run.
It remains to be seen how Nike will respond to these challenges in the coming months. The company’s next earnings report is due in March, and investors will be looking for signs of progress on its turnaround plan.
