On Thursday, Nike Inc (NYSE:NKE) reported its fiscal second quarter results that fell short of Wall Street’s sales estimates for the second quarter in a row. The sneaker giant also lowered its sales outlook and announced it intends to cut costs by $2 billion over the next three years. Nike is considered a leader among industry peers such as Lululemon Athletica Inc (NASDAQ:LULU), adidas AG (OTC:ADDDF) and Under Armour Inc (NYSE:UA), 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 Inc (NYSE:M) and parent of DSW, Designer Brands Inc (NYSE:DBI). Nuke shares plunged upon results, pulling down Foot Locker (NYSE:FL) for the ride as Foot Locker stores depend heavily on its merchandise. Nike shares fell more than 10% on their worst day since September 2022, back when Nike was ran over by inventory gluts, while Foot Locker shares plunged 5%.

As part of its undergoing cost cutting strategy, Nike will be simplifying its product assortment, increasing automation, making more and better use of technology while streamlining the overall organization to increase efficiency. With the savings gathered from those efforts, it will be fueling its future growth that will be built upon accelerated innovation and long-term profitability. The execution of its strategy will cost Nike between $400 million and $450 million in pretax restructuring charges which are mostly related to employee severance costs. The results of these efforts are expected to be seen in the current quarter.

Nike lowered its guidance as a result of increased macro headwinds, particularly in Greater China and EMEA, along with a recent digital traffic softness and other unfavorable factors. Nike guided for full-year revenue growth of 1%, lowering its prior mid-single digits guidance. As for the current, fiscal third, quarter, Nike is expecting sales growth in low single digits due to tough comparisons from last year. Gross margin is expected grow between 1.4 and 1.6 percentage points, but excluding restructuring charges, Nike affirmed its full-year earnings outlook.

Being among the last retailers to release a quarterly report before Christmas, Nike was both cautious and optimistic. Although its second revenue miss and increased focus on cost cuts are a red flag for deeper demand issues, its CEO John Donahoe proudly stated Nike digital had its best Black Friday Ever, along with a record number of consumers shopping in its stores over the Thanksgiving weekend. Nike entered the holiday season by outpacing the industry with growth of almost 10%. But the lowered outlook is a clear warning it cannot keep up the pace for the rest of its fiscal year and even Foot Locker felt that blow.