Nike Aims to Achieve a Substantial $2 Billion in Cost Savings Over a Span of Three Years

Nike, the world's largest sportswear company, has announced plans to cut $2 billion in costs over the next three years as part of an effort to regain lost momentum and spark the company's innovation engine. The company expects to incur as much as $450 million in restructuring charges in the quarter that ends February 28, mostly from severance costs, suggesting that Nike is in the process of parting with a significant number of employees.

The cost-cutting measures are expected to simplify the business, and Nike's CEO, John Donahoe, and Chief Financial Officer, Matt Friend, have mentioned that the company will eventually be stronger and more efficient. However, the process of cost reduction will likely involve a painful period of corporate belt-tightening.

During a conference call with stock analysts, Donahoe and Friend did not provide details about the number of workers who will be impacted by the layoffs, but Donahoe stated that the process would be "led with respect and thoughtfulness". Matt Powell, a senior adviser for BCE Consulting, noted that recent talk about Nike possibly scaling down its presence in golf, including maybe splitting with Tiger Woods, could be an example of where Nike might cut costs.

In a quarterly earnings report, Nike reported $13.4 billion in quarterly sales, a 1% increase, and $1.03 in profits per share, a 21% increase. The company was roughly in line with Wall Street's sales forecasts and beat profit expectations. As part of the earnings report, Nike also lowered its sales guidance to roughly 1% growth for the full year.

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