Nike Q2 results top Wall Street estimates, but warns of softer H2 revenue outlook

Investing.com - Nike reported Thursday second-quarter results that beat analysts' expectations, but the sportswear giant tempered expectations, warning of a softer second-half outlook for revenue as it looks to streamline operations targeting up to $2 billion of cost cuts over three years.

Nike Inc (NYSE:NKE) shares fell 5% in after-hours trade following the report.

Nike announced EPS of $1.03 on revenue of $13.4 billion. Analysts polled by Investing.com anticipated EPS of $0.84 on revenue of $13.39B.

The beat was driven by an improvement in margin, underpinned by "strategic pricing actions and lower ocean freight rates, partially offset by unfavorable changes in net foreign currency exchange rates and higher product input costs," the company said.

Gross margin for the fourth quarter increased 170 basis points to 44.6%.

North America revenue fell 4%, but was up 2% in Europe, the Middle East and Africa. In China, a key market for the company, revenue rose 4% to $1.86B in Q2 year-on-year.

Nike brand digital sales increased 4% from the prior-year period. 

The company also detailed cost-cutting plans, targeting up to $2B in cost savings over three years that will be driven by simplifying product assortment, increasing automation and use of technology, and streamlining operations. 

The cost-cutting efforts are expected to result in $400-450M in pre-tax charges, primarily related to job cuts, that would mostly be recognized in the third quarter of fiscal year 2024.

Looking ahead, the company warned of a softer second-half revenue outlook, and said it would provide revised guidance on the conference call.

The company previously forecast full-year revenue guidance in the mid-single digits and gross margin growth of 140 to 160 basis points.