Shares of Nike (NKE) are down 10% after the sneaker maker reported mixed financial results and lowered its sales outlook.
Nike reported quarterly earnings per share (EPS) of $1.03 U.S. versus vs. $0.85 U.S. that had been expected on Wall Street.
Revenue in what was the company’s fiscal second quarter totaled $13.39 billion U.S. versus $13.43 billion U.S. that was forecast among analysts. Total sales were up 1% from a year ago.
Nike did report that its gross margin rose for the first time in 18 months, with the company announcing that its margin increased 1.7 percentage points to 44.6%, slightly ahead of analyst estimates.
Also, inventories declined 14% during the quarter to $8 billion U.S. This time last year, Nike’s inventories were up 43% and the retailer was in the middle of an aggressive liquidation.
Nike’s sales in China, an important market for the company, rose 10.1% in the quarter, which was the fastest pace of growth since May 2023.
However, sales in Europe, the Middle East, and Africa fell short of estimates, leading to overall revenue missing expectations.
Sales did top expectations in the regions of North America, Asia-Pacific, and Latin America.
Looking ahead, Nike said that it now expects full-year revenue to grow 1%, compared to a prior outlook of up mid-single digits. For the current fourth quarter of 2023, Nike expects revenue to be slightly negative.
The company also unveiled plans to cut its costs by $2 billion U.S. over the next three years, mostly through staff layoffs.
The cost cutting plan will cost the company between $400 million U.S. and $450 million U.S. in restructuring charges, largely from employee severance payments.
Before today (Dec. 22), Nike’s stock had gained 3% in 2023 and was trading at $122.53 U.S. per share.
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