Nike says it will cut $2 billion in costs in a major warning for consumers

Nike, a bellwether for the global economy, sounded a warning sign Thursday as the sneaker giant sees consumers becoming more cautious.

Nike slashed its revenue outlook for the year and announced cost cuts amid growing concerns that consumers are slowing their spending around the world. The company said it’s looking for as much as $2 billion in cost savings in the next three years, which includes laying off employees.

Shares of Nike (NKE) tumbled as much as 14% Friday.

Customers are switching their behavior, passing up discretionary purchases — like expensive sneakers and athletic wear — for basics and experiences like concerts and travel. Nike is also facing tough competition from upstart brands like Hoka and On Cloud.

Nike finance chief Matt Friend said Thursday in the company’s conference call that the new outlook reflects “indications of more cautious consumer behavior around the world.” He pointed to sluggish sales in China and the company’s segments in Europe, the Middle East and Africa.

Nike saw soft demand outside of key holiday events like back-to-school shopping and Black Friday. The company’s e-commerce sales slowed and rivals offered higher promotion levels to entice shoppers.

While fears of a recession in the United States have faded, European economies are slowing down.

China, the world’s second largest economy, is also facing deepening troubles, with weak consumption a major drag.