The company cited weaker consumer demand as the primary reason behind the decision, despite the positive signs from the overall U.S. economy, which has exceeded economists' expectations.

During the company's earnings call, Nike's Chief Financial Officer, Matt Friend, attributed the lowered revenue expectations to slowing sales in China and Europe, pointing to a challenging global economic environment. Although Nike reported a minimal change in Q2 revenue, with an increase of about 1 percent, the company expressed concerns about negative revenue growth in the next quarter.

As part of the cost-cutting plan, Friend also stated that the company expects to incur expenses of $400 to $450 million, primarily associated with severance costs, in the upcoming quarter. However, there was no specific mention of the number of employees expected to be laid off or the locations affected by the decision.

This announcement comes amidst year-long fears of an impending recession in the United States, which have gradually subsided in recent months due to falling inflation rates and low unemployment figures. Consumer spending has remained robust, particularly during the early stages of the 2023 holiday shopping season.

However, the global economic landscape remains a concern, with economies such as China experiencing a slowdown in consumer spending. The decreasing trend in consumer spending within China serves as a warning sign for potential future economic stability in the region.

Following the earnings announcement, Nike's stock experienced an 11 percent decline on Friday. Despite the drop, Friend closed the conference call with a motivational plea to investors, emphasizing the company's ongoing commitment to adapt and overcome challenges in the market.

In conclusion, Nike's decision to implement a substantial cost-cutting plan highlights the anticipated weaker consumer demand in the coming months. While the U.S. economy has showcased resilience, global economic circumstances, particularly in China and Europe, have contributed to the reduced revenue expectations for Nike in early 2024. The company aims to navigate these challenges by tightening its financial belt and ensuring long-term sustainability in a rapidly changing market.