Retail shocker: Nike warns on soft sales, high promotional activity (NYSE:NKE)

Nike (NYSE:NKE) fell in postmarket trading on Thursday after posting a mixed FQ2 earnings report and issuing cautious guidance for the second half of the fiscal year. The FQ2 report included a decline in North America revenue from a year ago.

The athletic apparel giant guided for FQ3 reported revenue to be slightly negative and for FQ4 reported revenue to be up at a low single-digits rate, which were both below the prior expectation of analysts. Nike (NKE) said the forecast reflects increased macro headwinds, particularly in China and EMEA, as well as some supply chain disruption.

Nike (NKE) also outlined its streamlining efforts that will include reducing management layers, simplifying the product assortment, increasing automation and use of technology, streamlining the organization, and leveraging scale to drive greater efficiency. Overall, Nike (NKE) thinks it can find about $2B in cost savings. The company will take pretax restructuring charges of between $400M to $450M.

Shares of Nike (NKE) fell 10.75% in after-hours trading to $109.39 after gaining about 15% in the month ahead of the earnings report. Retail peers are also lower after CFO Matthew Friend warned on a “highly promotional” retail environment. Retail names that moved lower included Under Armour (UAA) -5.75%, Lululemon (LULU) -1.90%, Foot Locker (FL) -7.15%, On Holding AG (ONON) -3.48%, Crocs (CROX) -2.99%, Deckers Outdoor (DECK) -2.15%, and Dick’s Sporting Goods (DKS) -3.67%. The soft Nike (NKE) print was enough to send the S&P Retail ETF (XRT) down 1.58% in the late session.