Shares of Nike Inc. tumbled Friday, dragging down sportswear retailers and rival brands, after the sneaker maker said it will slash jobs and streamline operations in response to weaker sales.

Nike said it’s looking for as much as US$2 billion in cost savings by dismissing workers and simplifying the sneaker company’s product lineup amid a weaker sales outlook in China and around the world. 

Nike’s shares fell as much as 12 per cent as of 9:36 a.m., the most since September 2022, in New York trading Friday, following analyst downgrades. Dick’s Sporting Goods Inc. and Lululemon Athleta Inc. also dropped. In Frankfurt trading, Adidas AG was down as much as 6.6 per cent, with Puma SE falling as much as 6.9 per cent, as investors feared a similar slowdown in sales across the sector.

Nike’s Chief Financial Officer Matt Friend said on the company’s conference call that the new outlook reflects “indications of more cautious consumer behavior around the world.” He singled out Greater China and Europe, the Middle East and Africa. 

The US sportswear giant sees full-year revenue rising about 1 per cent after declines in the current quarter and a modest increase in the subsequent one. The company said it’s also seeing lower levels of growth from e-commerce, which has been a bright spot in the retail industry.

“We’ve taken a more prudent approach to our planning for the balance of the year,” Chief Executive Officer John Donahoe said on the call. 

In its statement, Nike said it expects to incur restructuring charges of $400 million to $450 million in the current quarter, “primarily associated with employee severance costs.” Friend said that the company is looking to eliminate layers of management. 

Revenue in the quarter was $13.4 billion, roughly in line with the average analyst estimate compiled by Bloomberg. Sales in Greater China came in lower than expected, while earnings per share surpassed Wall Street’s estimate.

The regional performance contrasts slightly with Nike’s rivals. Puma in October cited strong demand in Europe and a recovery in China, which offset a weaker performance in the US in the third quarter. Adidas in November flagged continuing challenges in the US, including high inventory levels, though it’s been getting a boost from sales of left-over merchandise from its Yeezy partnership with the rapper Ye.

Nike is looking for savings by simplifying its product lines while increasing automation and boosting technology. “We know in an environment like this, when the consumer’s under pressure and the promotional activity is higher, that it’s newness and it’s innovation which causes the consumer to act,” Friend said.

Investor concerns about China are a key focus for the sportswear company amid fears of a pullback in consumer spending there. Donahoe in September said Nike had “great confidence about the future and the Chinese consumer in our segment.” 

On Thursday, he reiterated his confidence in China, which has seen slower consumption amid growing unease about the nation’s economic prospects. “We feel very good about our position in China and our ability to compete, and that has not changed from 90 days ago,” he said.