Dive Brief:

• Alongside Nike’s Q2 earnings, the retailer announced a cost-cutting plan aimed at generating up to $2 billion in cumulative savings over the next three years, according to a company press release. A majority of the savings will be reinvested to drive growth, innovation and profitability. 
• The retailer aims to achieve that by simplifying its product portfolio, increasing automation, streamlining the organization and using scale to drive efficiencies. The company expects pre-tax restructuring charges of $400 million to $450 million as a result, largely taking place in Q3 of fiscal 2024.
• Nike reported revenues of $13.4 billion in the quarter, up 0.5% year over year. The company’s net income was up 18.6%, reaching $1.6 billion. The retailer also lowered its guidance for the rest of the year, expecting Q3 revenue to be down slightly and full-year revenue to be up about 1%. 

Dive Insight:

After a challenging quarter where North America revenue fell 3.5%, Nike is restructuring its organization in pursuit of further growth. 

“Since fiscal ’19, our investments in accelerating Nike’s consumer direct vision have created new operating capabilities, added tens of millions of new members to our member base and delivered a return of more than $12 billion of incremental revenue,” Chief Financial Officer Matt Friend said on a call with analysts Thursday. “However, we have also added complexity and inefficiency. In this competitive environment, we need to accelerate our pace of innovation, elevate our marketplace experiences, maximize the impact of our storytelling, and increase our speed and responsiveness.”

As part of that, the company is “streamlining” its organization, with the majority of the $400 million-plus charges associated with the plan going toward severance costs. A Nike spokesperson did not immediately respond to a request for comment for further details, including how many employees will be laid off. The retailer is also pursuing supply chain efficiencies, reducing management layers and working to improve its procurement capabilities, Friend said.

Nike Direct revenues in the quarter were up 6%, while wholesale fell 2%. The retailer has recently returned to a number of wholesale partners it previously backed away from, including Macy’s and DSW. CEO John Donahoe said the retailer’s decision to restructure the company under Heidi O’Neill and Craig Williams, who took on new positions in May, would help drive innovation. 

“It is making a huge difference in our focus and ability to execute,” Donahoe said of O’Neil and Williams. “And as you know, we're single-mindedly focused on aligning our entire team to drive what Nike does best: innovative product combined with distinctive storytelling, combined with unique marketplace experiences.”

Nike has made a slew of changes to its leadership team this year, naming a new chief technology officer, chief marketing officer, chief design officer, chief innovation officer, chief diversity, equity and inclusion officer, and head of its women’s business in 2023.

As it looks ahead, the company is investing in building out its women’s business with leggings and bras across price points. Donahoe noted the company now has leggings in the $100-plus range, a price point “we were not previously in,” the executive said.