Nike sinks 12% after it slashes sales outlook, unveils $2 billion in cost cuts
Nike on Thursday unveiled plans to cut costs by about $2 billion over the next three years as it lowered its sales outlook.

The stock fell about 12% in premarket trading Friday. Nike shares were up 4.7% so far this year through Thursday's close, lagging far behind the S&P 500's gains for the year. Retailer Foot Locker , which has leaned heavily on Nike products, fell about 8% in extended trading.

Nike now expects full-year reported revenue to grow approximately 1%, compared to a prior outlook of up mid-single digits. In the current quarter, which includes the second half of the holiday shopping season, Nike expects reported revenue to be slightly negative as it laps tough prior year comparisons, and sales to be up low single digits in the fourth quarter.

"Last quarter as I provided guidance, I highlighted a number of risks in our operating environment, including the effects of a stronger U.S. dollar on foreign currency translation, consumer demand over the holiday season and our second half wholesale order books. Looking forward, the impact of these risks is becoming clearer," finance chief Matthew Friend said on a call with analysts.

"This new outlook reflects increased macro headwinds, particularly in Greater China and EMEA. Adjusted digital growth plans are based on recent digital traffic softness and higher marketplace promotions, life cycle management of key product franchises and a stronger U.S. dollar that has negatively impacted second-half reported revenue versus 90 days ago."

The company still expects gross margins to expand between 1.4 and 1.6 percentage points. Excluding restructuring charges, it expects to deliver on its full-year earnings outlook.

As part of its plan to cut costs, Nike said it's looking to simplify its product assortment, increase automation and its use of technology, streamline the overall organization by reducing management layers and leverage its scale "to drive greater efficiency."

It plans to reinvest the savings it gets from those initiatives into fueling future growth, accelerating innovation and driving long-term profitability.

"As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management," Friend said in a press release.

The plan will cost the company between $400 million and $450 million in pretax restructuring charges that will largely come to fruition in Nike's current quarter. Those costs are mostly related to employee severance costs, Nike said.

Earlier this month, The Oregonian reported that Nike had been quietly laying off employees over the past several weeks and had signaled that it was planning for a broader restructuring. A series of divisions saw cuts, including recruitment, sourcing, brand, engineering, human resources and innovation, the outlet reported.

The company didn't immediately respond to CNBC's request for comment on The Oregonian's report.

During Nike's fiscal second quarter, it posted a strong earnings beat, indicating its cost-savings initiatives were already underway. But, for the second quarter in a row, it fell short of sales estimates, which is the first time Nike has seen consecutive quarters of revenue misses since 2016.

Here's how the sneaker giant performed compared to what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: $1.03 vs. 85 cents expected

$1.03 vs. 85 cents expected Revenue: $13.39 billion vs. $13.43 billion expected

The company reported net income for the three-month period that ended Nov. 30 was $1.58 billion, or $1.03 per share, compared to $1.33 billion, or 85 cents per share, a year earlier.

Sales rose about 1% to $13.39 billion, from $13.32 billion a year earlier.

Nike is considered a leader among industry peers such as Lululemon , Adidas and Under Armour , but its profits have been under pressure and it has been in the middle of a strategy shift that has seen it rekindle its relationships with wholesalers including Macy's and Designer Brands , the parent company of DSW.