After 'Messy' Quarter, Nike Vows To Cut Costs And Step Up Its Run Game

The Motiva sneaker is key to Nike’s plan to better compete in running.

Nike, sounding the alarm about slowed consumer spending, lowered its forecasts for the year. The company, often regarded as a growth juggernaut, is increasing its attention to cost-cutting, revealing plans to whack $2 billion in spending over the next three years.

As Nike looks to reignite growth heading into the Paris Summer Olympics, it is increasing its focus on women’s products, the Jordan line and the running category.

That running segment has been closely watched by observers. As running continues to gain popularity, competitors like Hoka One One and On Running have been moving up fast.

For the second quarter of Nike’s fiscal year, revenues squeaked up 1% to $13.4 billion from $13.3 billion in a comparable period in 2022. On a currency-neutral basis, revenues declined by 1%. Sales of the Nike brand rose 1% to $12.9 billion, while Converse sales dropped 11% to $519 million.



Net income rose 19% to $1.6 billion, compared to $1.3 billion in the year-ago period.

While both sales and profits came in as expected, Nike’s revenue outlook spooked investors. Nike expects sales to rise just 1% in the second half. Wall Street analysts had predicted that number would be closer to 4%.

Brian Nagel, an analyst who follows Nike for Oppenheimer, called the results “messy,” adding that signs of incremental weakness are “disappointing.”

Still, he writes in his report, “We continue to view the underpinnings of the company’s unique and powerful model as intact.”

David Swartz, an analyst who covers Nike for Morningstar, agrees. “In the long run, we still expect the company can generate mid-single-digit annual sales growth and build to high-teens operating margins,” he writes in his report.

In a conference call webcast for investors, John Donahoe, Nike’s president and chief executive officer, elaborated on focus areas. Boosting sales of women’s products is still high on its list, as the company continues to lose share to Lululemon.

Donahoe says sales of Nike’s “statement” bras and leggings, priced over $100, are doing well. “More and more women are joining our brand by purchasing these leggings,” he says. “Statement leggings fueled our fitness apparel growth, and women's for the quarter,” adding that women are also responding well to the Motiva shoes, selecting them for walking, running and streetwear.

He also fielded questions about adjustments to the running shoe portfolio. While Nike still excels in the category, sponsoring many elite runners, “we're very focused on building our ground game with everyday runners and being present where there are everyday races.”

That includes the coming relaunch of the Pegasus 41, a staple in its run portfolio, and expanding offers below $100. “We’re making steady progress toward our goal with product offerings coming to market in the coming quarters that will enable us to get back on our front foot.”

Donahoe added that trail running is the fastest-growing category within running, up 20%. “That’s partly because trail running is growing, but increasingly, trail shoes are becoming lifestyle shoes.”

The Beaverton, Oregon-based company plans to achieve the $2 billion cost-cutting goals by simplifying product assortment, increasing automation and streamlining the organization. Some of those layoffs are imminent and likely to result in charges of $400 million to $450 million in employee severance costs.

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