Nike Inc (NYSE:NKE) stock fell nearly 11% in extended trading Thursday after the footwear retailer said it expects weak second-half revenue following its fiscal second-quarter results.
The company expects full-year revenue to improve about 1% year-over-year, compared to a previous estimate of mid-single-digit growth. For the third quarter, revenue is expected to fall from the prior-year quarter.
“As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management,” CFO Matthew Friend said in a statement.
To do that, Nike said it plans to slash $2 billion in costs over the next three years. However, that means incurring $400 million to $450 million in pre-tax restructuring charges in its current quarter largely due to severance costs.
In the longer term, the plan involves “simplifying our product assortment, increasing automation and use of technology, streamlining our organization, and leveraging our scale to drive greater efficiency,” according to a statement.
The murky outlook comes after Nike has been quietly letting employees go in recent weeks, according to reporting from The Oregonian. The cuts affected multiple divisions, including brand, engineering, recruitment, innovation, human resources and others.
One bright spot for Nike is inventory, which fell 14% year-over-year thanks to a prolonged effort to sell old styles in order to clear space for new ones. Sales and promotions over the past year have hurt Nike’s margins, but inventory progress indicates margins could improve going forward.
Nike posted diluted earnings of $1.03 per share on revenue of $13.39 billion, compared to expectations of $0.85 per share on revenue of $13.43 billion.