Dec 21 (Reuters) - Nike said on Thursday it was seeking $2 billion in savings over the next three years by streamlining operations, after it missed quarterly sales estimates due to a weak North American wholesale business and feeble recovery in China.
Nike CFO Matthew Friend said the sportswear giant was looking ahead "to a softer second-half revenue outlook", sending the company's shares down about 10% after the bell.
The company's wholesale business has been under persistent pressure as retailers keep a tight lid on product stocks and cut back on orders, hurting sales, despite strength in the brand's own stores and online business.
Nike's wholesale revenue fell 2% to $7.1 billion in the second quarter.
The company is also undertaking a restructuring aimed at delivering up to $2 billion in cost savings over the next three years, including simplifying its product assortment, increasing automation and streamlining its organization.
"Nike's talking about reducing the number of products ... perhaps the company feels there are too many products that are not high-margin and not really generating significant sales," David Swartz, senior equity analyst at Morningstar, said.
"It does kind of indicate that the sales growth is not going to be what Nike originally expected."
As part of the streamlining, Nike expects about $400 million to $450 million in pre-tax restructuring charges, primarily associated with employee severance costs, in the third quarter.
Sales in Greater China rose 4% in the second quarter, slowing slightly from the 5% increase seen in the first quarter, signaling that demand was yet to stabilize in the market.
Still, limited promotions, lower freight charges and a cleaner inventory helped boost Nike's gross profit margins by 170 basis points to 44.6% in the three months ended Nov. 30.
The company posted total revenue of $13.39 billion in the quarter, missing analysts' estimates of $13.43 billion, according to LSEG data.