C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
NIKEINC(NKE)EarningsReport:Q12016
ConferenceCallTranscript
ThefollowingNIKEINC conferencecalltookplaceonSeptember24,2015,05:00PMET.Thisisatranscript
ofthatearningscall:
Co mpanyPar t ic ipant s
KelleyHall;NIKE,Inc.;VPofC orporateFinance,Treasurer
MarkParker;NIKE,Inc.;President,C EO
TrevorEdwards;NIKE,Inc.;PresidentoftheNIKEBrand
AndyC ampion;NIKE,Inc.;C FO
Ot he r Par t ic ipant s
BobDrbul;NomuraSecurities;Analyst
KateMcShane;C iti;Analyst
O marSaad;EvercoreISI;Analyst
C hrisSvezia;SusquehannaFinancial;Analyst
RobbieO hmes;BofAMerrillLynch;Analyst
LindsayDruckerMann;GoldmanSachs;Analyst
MichaelBinetti;UBS;Analyst
JimDuffy;StifelNicolaus;Analyst
MANAGEMENTDISC USSIO NSEC TIO N
O perator:Goodafternoon,everyone.WelcometoNIKE'sFY16firstquarterconferencecall.Forthosewho
needtoreferencetoday'spressrelease,you'llfinditatinvestors.nike.com.Leadingtoday'scallisKelley
Hall,VicePresidentC orporateFinanceandTreasurer.
BeforeIturnthecallovertoMissHall,letmeremindyouthatparticipantsonthiscallwillmakeforwardlookingstatementsbasedoncurrentexpectations.Andthosestatementsaresubjecttocertainrisksand
uncertaintiesthatcouldcauseactualtodiffermaterially.Theserisksanduncertaintiesaredetailedin
thereportsfiledwiththeSEC ,includingForms8-K,10-Kand10-Q .
Someforward-lookingstatementsconcernfutureordersthatarenotnecessarilyindicativeofchangesin
totalrevenuesforsubsequentperiods.Duetomixoffuturesandat-onceorders,exchangerate
fluctuations,ordercancellations,changesinthetimingofshipments,discountsandreturnswhichmay
varysignificantlyfromquartertoquarter.Inaddition,it'simportanttorememberasignificantportionof
NIKEInc'scontinuingoperations,includingequipment,NIKEGolf,C onverseandHurleyarenotincluded
inthesefuturesnumbers.
Finally,participantsmaydiscussnon-GAAPfinancialmeasures,includingreferencestowholesale
equivalentsales.Referencestowholesaleequivalentsalesareonlyintendedtoprovidecontextasto
theoverallcurrentmarketfootprintofthebrandsownedbyNIKEInc.Andshouldnotberelieduponasa
financialmeasureofactualresults.
Participantsmayalsomakereferencestoothernonpublicfinancialandstatisticalinformation,andnonGAAPfinancialmeasures.Discussionofnonpublicfinancialandstatisticalinformationandpresentations
ofcomparableGAAPmeasuresandquantitativereconciliationscanbefoundatNIKE'swebsite,
© 2014TheStr eet,I nc.Al l R i ghtsR eser ved
Page1of15
C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
investors.nike.com.
NowI'dliketoturnthecallovertoKelleyHall,VicePresidentC orporateFinanceandTreasurer.
KelleyHall:Thankyou,operator.Hello,everyone,andthankyouforjoiningustodaytodiscussNIKE's
FY16first-quarterresults.Astheoperatorindicated,participantsontoday'scallmaydiscussnon-GAAP
financialmeasures.Youwillfindtheappropriatereconciliationsinourpressrelease,whichwasissued
aboutanhourago,andatourwebsite,investors.nike.com.Joiningusontoday'scallwillbeNIKEInc's
PresidentandC EO ,MarkParker,followedbyTrevorEdwards,PresidentoftheNIKEBrand.Andfinally,
you'llhearfromournewC hiefFinancialO fficer,AndyC ampion,whowillgiveyouanin-depthreviewof
ourfinancialresults.
Followingtheirpreparedremarks,wewilltakeyourquestions.Wewouldliketoallowasmanyofyouto
askquestionsaspossibleinourallottedtime.Sowewouldappreciateyoulimitingyourinitialquestions
totwo.Intheeventyouhaveadditionalquestionsthatarenotcoveredbyothers,thesefeelfreetorequeueandwewilldoourbesttocomebacktoyou.Thankyouforyourcooperationonthis.NowIwill
turnthecallovertoNIKEInc'sPresidentandC EO ,MarkParker.
MarkParker:Thankyou,Kelley,andhello,everyone.BeforeImoveintoadiscussiononourbusiness,I
wanttotakeamomenttointroduceournewC hiefFinancialO fficer,AndyC ampion.
Asyouknow,DonBlairretiredfromtheC FO roleasofJuly31.I'mhappytoformallywelcomeAndyintohis
newrole.AndyhasbeenakeymemberoftheNIKEleadershipteamforthepasteightyears.Andbringsto
hisnewrolebothapassionforthebrand,andacommitmenttodrivingshareholdervalue.You'llhear
fromAndyattheendofthecalltodiscussourresultsindetail,butletmestartwithafewofmythoughts
aswebeginthenewfiscalyear.
Lastyearatthistime,Italkedaboutourfocusonthreekeyareas.Thedepthofourrelationshipswithour
athletesandconsumers,ourfast-pacedcultureofinnovation,andthepowerofourportfolio.We
strengthenedalloftheseareasthroughoutlastyear,andwedeliveredtremendousresults.InQ 1,we
carriedthatmomentumforwardwithanoutstandingstarttoFY16.
Let'stakealookatthehighlightsfromthefirstquarter.NIKEInc.revenuesgrew5%to$8.4billion,
despitesignificantFXheadwinds.O nacurrencyneutralbasis,NIKEInc.revenuesgrew14%.Grossmargin
expanded90basispointsto47.5%,andearningspershareincreased23%to$1.34.
Ultimately,NIKEcontinuestosucceedbecauseofthedeeprelationshipswehavewiththeathletesand
theconsumer.Relationshipsweknowwemustearneveryday.Andwehaveathoughtfullong-term
growthplanwhichwecontinuetoexecuteatthehighestlevel.Weinvestinourbiggestopportunities,
andwehavebuiltadiversifiedportfoliotogiveustheflexibilitytopulltherightleversattherighttimeto
maximizegrowth.O urpowerfulportfolioofcategories,geographies,brandsandchannelsacrossmen's,
women'sandyoungathletes,isoneofourgreatestcompetitiveadvantages.Andwecontinuetoseenew
waystounlockgrowthallovertheworld.Whilewearenotimmunetothemacroeconomicchallenges
thatallbusinessesarefacing,wearebestpositionedandbestresourcedtonavigatetheshort-termand
thriveforthelong-term.
NIKEisonarelentlesspace,andwehavenointentionofslowingdown.Leveragingourportfolioisone
waywesustainedgrowth.Theother,ofcourse,isthroughinnovation.Weshowedthepowerofourscale
thisquarterasweshareourtechnologiesfromonecategorytoanother.Andfromonebrandtoanother.
Thisishowinnovationcancreateseparation,andthisissomethingonlyNIKEcando.
Justacoupleofquickhighlights.Infootwear,welaunchedthePegasus32inJune2015,whichfeatured
high-performanceZ oomAirtechnology.Itdelivershighlyresponsivecushioningandlightweightsupport
© 2014TheStr eet,I nc.Al l R i ghtsR eser ved
Page2of15
C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
tohelpathletesachievetheirfastestruns.IntheJordanbrand,weintroducedtheSuperFly4,with
FlightSpeedtechnology,offeringlightweightcomfortandimpactprotection.
Inperformanceapparel,wejustannouncedtwonewtechnologiesthatsolvefortemperatureregulation
incompletelynewways.Therma-SphereMax,acompositematerialdesignedforlightweightwarmthand
mobilityforoutdoortraining.AndthenAeroReact,anadaptivematerialthatreactstotheheatand
moistureofthebody.Thefibersofthefabricopenupwhentheygetwetandtheycloseasthedryout
again,offeringbothactivecoolingandwarmthallinonelayer.Goingforward,youcanexpecttosee
furtheraccelerationinourinnovationagendaforperformanceapparelaswelookaheadtotheSummer
O lympicsinRioandbeyond.Sostaytunedformoreonthatlaterintheyear.
Insportswearapparel,wedeliveredourlatestsilhouettesofTechFleeceformenandwomen.O verthe
pastseveralseasons,NIKETechPackiscreatinggreatdemandforpremiumlifestyleapparelwith
technicalperformanceinnovation.Agreatexampleofleveraginginnovationacrossmultipledimensions
ofourbusinessisreflectedinHurley,Jordan,andC onverseutilizingNIKEtechnologytocreateexciting
newconceptsoftheirown.
Hurleyonceagainappliedafootwearinnovationtotheirindustry-leadingPhantomEliteboardshort.This
timeusingNIKEMAGwire,adynamicstabilitysupportsystemforalockdownfitinthewaistband.
TheJordanbrandcontinuedtobringitsuniqueperspectivetotrainingwiththeFlightFlexTrainer2,and
itsNIKEFreeinspirednaturalmotionmid-sole.Lookingahead,weseetremendousopportunityforthe
Jordanbrandtotranscenditscorebasketballpositioningintonewareasofgrowth.
Andfinally,thelegendaryC huckTaylorAllStarreceivedaperformanceinnovationboost.AddingaNIKE
LunarLaunchsockliner,apaddedcollarandbreathablelinertotheC onverseclassic.TheC huckTaylor
AllStar2broughtnewcomfortdetails,butstaytruetothesilhouettethatC huckfansknowandlove.The
potentialforC onversehasneverbeengreater,aswecontinuetoexpandgloballyandfurtherdiversify
thisgreatbrand.Thesearejustafewoftheexamplesthatshowhowwetakeourbestideasand
acceleratethemacrossourcategoriesandbrandstoserveourconsumersanddrivegrowth.
Asyouhaveheardmesaymanytimes,innovationatNIKEgoesbeyondproduct.Anddigitalisagreat
example.DigitalisanacceleratorthroughoutNIKE.It'saplatformthatenablesnewwaysofworking,and
newmethodsofmanufacturing.Itdriveshowweconnectwithconsumers,howweservethem,andhow
weengagewithoneanother.Ithelpstofuelourgrowthbyservingourconsumerswhenevertheywant
NIKEproductsforanysportallovertheworld.
O urdigitalecosystemdeliversaconnectedgrowingcommunity,personalreal-timeengagement,and
easieraccesstotheproducttheyloveheadtotoe.Westandalonebecauseweconnectallthreetogive
themostholisticpremiumexperiencetotheconsumer.Andwhenweservetheconsumerbetterthrough
digital,wedrivegrowth.Justtolookatthisquarter'srevenueforeC ommercebusiness.It'supan
incredible46%onaconstantcurrencybasis,withrobustgrowthacrossallofourgeographies.Wealso
sawastrongconversionandincreasedtrafficparticularlyonmobile.
O urQ 1resultsclearlydemonstrateourabilitytocontinuetodrivesustainableprofitablegrowth.And
whilewefeelgreataboutthelast90days,weremainlaserfocusedoncontinuingthismomentumover
thebalanceofthefiscalyearandbeyond.TherestofFY16isfilledwithimportantsportsmoments.The
SuperBowl,theNBAAll-Starweekend,EuroC hamps,andofcoursetheleaduptotheRioO lympics.Every
oneofthemisanopportunityforNIKE.Anopportunitytoinnovatefortheathlete,toinspirethe
consumer,andtogrowthebusiness.Andjustliketheathletesweserve,theseopportunitiescompelusto
keepraisingthebar.Becauseintheend,thepowerofNIKEnotlikenotonlyinourabilitytoseethe
future,buttocreateit.Andyoucanexpectustocontinuetodojustthat.
© 2014TheStr eet,I nc.Al l R i ghtsR eser ved
Page3of15
C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
Thanks,andnowhere'sTrevor.
TrevorEdwards:Thankyou,Mark.
It'sanewfiscalyear,butthestrongresultscontinuefortheNIKEBrand.Q 1provedyetagainthe
sustainedpowerofthecategoryoffense.Aswehavesaid,thecategoryoffensedrivesdeepand
meaningfulrelationshipswithconsumers.Thisprovidesuswithgreatinsightstocreateinnovative
products,richservices,andinspiringexperiencesthatourconsumerslove.
Forthequarter,onaconstantcurrencybasis,NIKEBrandrevenuegrew15%,withdouble-digitgrowth
acrossnearlyeverygeography,andmostkeycategories.NIKEBrandDTC revenueincreased21%,driven
bynewstoreexpansion,continuedstronggrowthinonlinesales,up46%,andcompstoregrowthof7%.
Weareverypleasedwithglobalfuturesupastrong17%.C learly,thecategoryoffensecontinuestodrive
growtharoundtheworld,anditremainsthefoundationofourstrategyaswelookahead.
Asalways,weusepowerofourvastportfoliototargetthebestgrowthopportunitiesforthebrand.And
whatgivesusthatflexibilityisthebreadthanddepthofourcategoryexpertise.Toseethesedynamicsin
action,let'sfirsttakealookatrunning.O urobsessionwithspeedhasdrivenusforyears,sowenever
settle.Alwayslookingtoshaveoffthatextrasecond.Thisrelentlessfocusoninnovationcanbeseenin
themomentumofourZ oomAirtechnology.Propellingtherunnerforwardwithanultra-responsivestep,
Z oomAirtechnologydriveskeyproductstyleslikeourPegasus32,Vomero10andtheElite8.
InQ 1,Z oomhelpedigniteourglobalcommunityofrunnersthroughaspecialeventwecalledtheFastest
DayonEarth,inwhichwechallengedrunnerstoruntheirfastestmileever.Theeventconcludedwith
NIKEcelebratingeachrunner'sfastestmilewithapersonalizedvideothatincludedtherunnersname,
miletime,andclipsfromtheirrouteusingGoogleStreetView.Thisstorytellingsawexcellentresponse,
reachingmillionsofconsumersacrosssocialmedia.
Lookingatperformanceapparel,wecontinuetobuildonthegrowthmomentumofNIKEDri-FIT.We
launchedtheC ontourrunningtop,whichfeatureszonedbreathabilityforincreasedcomfortand
mobility.Andtofurtherexpresstherunnersloveofthesport,ourrunninginspiredsportswearstylesalso
continuedtoresonate.Twodecadesafteritsintroduction,wecelebratedtheAirMax95byreleasingthe
originalsilhouette.AndwehaveboughtintothefuturewithnewtechnologiesintheAirMax95Ultra.
AnotherstronggrowthdriverinQ 1wasourwomen'sbusinesswithrevenuegrowingdoubledigits.We
launchedthehighlyanticipatedtrainingshoe,theMetC on1forwomen,whichoffersjustahintofwhat's
tocomeintraining.WecontinuedtoleadwithkeyapparelstylessuchastheDri-FITknitbras,andNIKE
protights,allofwhichareimportantdriversforthisbusiness.Andsportsweardeliveredstronggrowth,
withfootwearstylesliketheRosheandtheentireAirMaxplatformwhichcontinuestotheverypopular
withwomen.
Inadditiontodeliveringinnovativenewproducttothemarket,wealsoremainedfocusedoncreating
compellingretailexecutionsforher.BoththroughourownDTC ,andwithourwholesalepartners.The
rolloutofpremiumandelevateddoorsthroughouttheglobecontinuestodrivethisimportantbusiness,
ashighlightedbytheongoingsuccessofFootLocker's602executionsandthelaunchoftheC helsea
C ollectiveDoorswithDick'sSportingGoods.
Thesuccesswe'reseeinginwomen'sistrulycomprehensive,asallfacetsofthebusinesscontinuedto
excel.Fromproductstoservices,fromfootweartoapparel,andacrosssportsandthroughouttheentire
athlete'slife.Weareexcitedaboutthefutureofthewomen'sbusiness,withtheglobalshifttowardsthe
healthandfitnessaspartofherlifestyle,weseetremendousopportunityforyearstocome.
Nowlet'sshiftontoafewofourkeygeographies.NorthAmericahadanothergreatquarter,with
© 2014TheStr eet,I nc.Al l R i ghtsR eser ved
Page4of15
C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
revenuesup9%andfuturesup15%.Thisgeographycontinuestodrivestronggrowthacrossnearlyall
keycategoriestimeandtimeagain.Eventhoughthisisourmostdevelopedmarket,NorthAmerica
provesthattherightstrategiescandriveconsistentprofitablegrowth.
TheenergyofourbrandinNorthAmericaisclear.Withcontinuedstrongdemandacrossourexecutions
withwholesalepartnerssuchasDick'sSportingGoods,FootLocker,andTheFinishLine.Wecontinueto
servethisconsumerthroughouramplifiedstrategy,deliveringbothperformanceandlifestyleproducts.
Atthesametime,wecontinuedtoworktoeffectivelymanagetheflowofinventoryinNorthAmerica,
includingtheimpactsoftheWestC oastportcongestionfromearlierthiscalendaryear.Whiletheflowof
productfromtheporthasnowreturnedtonormal,weareworkingtoefficientlyclearexcessinventoryto
keepourin-linechannelhealthy.
Inaddition,wehaverecentlyexpandedourNorthAmericandistributioncenter,andareworkingtobring
thisnewcapacityfullyonline.WeexpectboththeseeffortstobecompletebytheendofQ 3,and
inventorylevelsinNorthAmericatonormalizeatthattime.Ultimately,ourconfidenceinthecategory
offenseinNorthAmericagivesustheroadmaptocontinuetounlockgrowthopportunitiesboththisyear,
andfarintothefuture.
Nowlet'sturntoWesternEurope.Q 1revenuegrew14%,drivenbygrowthinallterritoriesandnearlyall
keycategories.Thisgrowthcontinuestobefueledbythetransformationofthemarketplacealongthe
categoryoffense.ThisworkincludeselevatedexecutionsatIntersport,thenewO xfordStreet'slocation
withJDSportsinLondon,andtheexpansionoftheHouseofHoopsatFootLockerinBerlin.Andourown
DTC continuestoperformverywell,delivering31%growthinQ 1.Bybeingbothdeliberateand
aggressive,weleadthemarketasWesternEurope'smostdesiredsportsbrand.We'reexcitedaboutwhat
thefutureholds,asweexecuteourcompleteoffenseinWesternEurope.
Nowontotheemergingmarkets,whichdeliveredstrongQ 1resultswithrevenueup19%,drivenbystrong
growthinMexicoandmostkeycategories.Theimprovementwe'veseeninMexicocontributed
significantlytotheoverallresultsinthegeography.Asweseethebenefitofinvestinginandelevating
ourdistribution.Forexample,welaunchedtheHouseofHerinMexicoC ity,aproductshowcase
supportedbygreatservice,experience,andcommunity.Also,prominentmarketplaceexecutionswith
partnerssuchasLiverpool,whichisMexico'slargestdepartmentstore,andInnovasportarealso
performingwell.Asthesenewdoorsprovebyelevatingthemarketplace,wegrowthemarketinkey
geographiesandterritories.O verall,webelievewearenowwell-positionedtodriveprofitablelong-term
growthinMexico.
InBrazil,revenuewasflat,animprovementintrendandmarketshare.Butstillreflectiveofthecontinued
challengesinthemacroeconomiclandscape.Thatsaid,wecontinuetofocusonourstrategyofresetting
themarketplacealongthecategoryoffense.Byfocusingondifferentiatingourpointsofdistributionand
creatingmorecompellingconsumerexperiencesatretailandonline,wedriveincreasedproductivityand
profitabilityforNIKEandourwholesalepartners.O verall,wecontinuetoseetremendousgrowth
potentialfortheemergingmarketslong-term,andareconfidentthatweareexecutingtheright
strategiestorealizethatpotentialinthisimportantgeography.
Finally,ingreaterC hina,revenuewasupanamazing30%.Tremendousgrowththatagainprovesmore
thaneverthesuccessofourstrategies.Thesegainsweredrivenbystrongperformanceacrossnearlyall
keycategories,includingsportswear,runningandbasketball.Forourwholesalepartnerslike[BaiLi],the
doorsthathavebeenre-profiledcontinuedtooutperformtherestofthefleet,drivingexpanded
productivityandprofitability.WealsosawstronggrowthfromourDTC business,drivenbycompstore
salesincreasesandanaccelerationinoureC ommercebusiness.
ItwasaveryactivequarterforC hinainsport,asBeijinghostedtheTrackandFieldWorldC hampionships
© 2014TheStr eet,I nc.Al l R i ghtsR eser ved
Page5of15
C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
inwhichathleteswearingNIKEfootweardominated,takinghomethemajorityofmedalsawarded.
Andthroughoutquarter1,athleteslikeLebronJames,Kobe,AnthonyDavis,andPaulGeorgeall
participatedinNIKEbasketballeventsthroughoutC hina,connectingwiththousandsofconsumers
throughtheirsharedpassionofthesport.Andjusttwodaysago,weannouncedthatMichaelJordanwill
traveltoShanghaiinmid-O ctobertocelebratethe30thanniversaryoftheAirJordanfranchise.Alltold,
theincrediblegrowthwesawinC hinathisquarterreflectsourongoingeffortstoalignthemarketplaceto
thecategoryoffense,astrategythatweexpectwilldrivegrowthinthiscriticalgeographyformanyyears
tocome.
Intheend,theNIKEBrandstartedthenewfiscalyearwithenergythroughouttheentireportfolioof
geographiesandcategories,andweexpecttoleveragethisenergygoingforward.BecauseatNIKE,the
opportunitiesofferedbyourcompleteoffensearelimitlessacrossmen's,women'sandyoungathletes,
andacrosscategories,geographies,producttypes,andalsomarketplaces.FY16promisestobeanother
yearwherethechoicesandinvestmentswemakepropelustoservetheathletewithevenmorepremium
products,servicesandexperiences.Whilewemaybejustoutoftheblocksinquarter1,wearealreadyin
fullsprinttowardsayearofcontinuedgrowthforthisbrandandthisC ompany.
Thanks.Andnowonhisfirstearningscall,isNIKE'snewC FO ,hereisAndy.
AndyC ampion:Thankyou,MarkandTrevor.Andhellotoourstakeholdersonthecall.I'vehadthe
pleasureofmeetingmanyofyouoverthelastseveralyears,andIverymuchlookforwardtodeeper
engagementovertime.Withthisbeingmyfirstearningscall,I'dliketotakeamomenttoreinforceafew
ofourlong-standingguidingprinciples.Andalsobrieflytouchonhowwewillcontinuetoevolveand
innovate.
O urprimaryfinancialobjectivehasbeenandwillcontinuetobedeliveringextraordinaryvaluetoour
shareholders.Deliveringvaluetoshareholdersisfirstandforemostafunctionofcreatingvaluefor
consumers.Asconsumerexpectationscontinuetoaccelerate,NIKEwillevolveandinnovatetoexceed
thoseexpectations.AtNIKE,innovationisinourDNA.Thatappliestoalldimensionsofourbusiness,from
theproductsandservicesthatwedelivertoconsumers,totheoperatingandbusinessmodelsthatwe
employ.Thatiswhatwecallbeingontheoffensealways.
Aswecreatevalueforconsumers,wewillcontinuetocapturethatvaluethroughdisciplinedand
consistentfinancialmanagement.NIKEknowshowtogrow.Wearealsodeeplycommittedtoensuring
thatourgrowthisprofitable,sustainable,andcapitalefficientoverthelongterm.Wedothatthrough
robustgrossmarginmanagement,continuallyenhancingtheproductivityofourresources,andinvesting
surgicallyandstrategicallyinthoseopportunitieswiththehighestpotentialforreturn.Finally,aswe
createvalueforconsumersandwecapturethatvaluefinancially,wewillalsodeliverthatvalueto
shareholdersthroughcapitalmanagement,riskmanagement,andconsistentlyincreasingourcash
returnsthroughbothsharerepurchasesanddividends.
HavingworkedverycloselywithMark,Trevor,andmypredecessorDonsincejoiningNIKEin2007,Iam
deeplyinvestedinthestrategiesthathavefueledourstrongperformancetodate.And,Ibelievewe
havetremendouspotentialtogrowandcreatevalueforbothconsumersandshareholdersoverthelongterm.AswesayatNIKE,thereisnofinishline.O urQ 1financialperformanceandoutlookforthebalance
oftheyearreflectboththevaluewearecreatingforconsumers,andtheprinciplesthatweapplyto
financialmanagement.SoIamverypleasedtoshareourresultsinmoredetail.
Q 1reportedrevenueforNIKEInc.increased5%,andgrew14%onacurrencyneutralbasis.TheNIKE
Brandgrew15%onacurrencyneutralbasis,andC onversegrew3%.GrowthintheNIKEBrandwas
broad-basedandstrongacrossallgeographies,andnearlyallcategories.Alsoonacurrencyneutral
© 2014TheStr eet,I nc.Al l R i ghtsR eser ved
Page6of15
C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
basis,NIKEBrandfuturesordersgrew17%,drivenbyan11%increaseinunitsanda6%increasein
averagesellingprices.O urfuturesgrowthreflectscontinuedstrongdemand,andhealthy[poll]markets
acrosstheNIKEbrandportfolio.Allgeographiesgrewdoubledigits,exceptemergingmarkets,whichgrew
6%.O nareportedbasis,futuresgrew9%,reflectingastrongerUSdollaragainstnearlyallinternational
currencies.
Q 1dilutedEPSgrew23%to$1.34,despitesignificantFXheadwinds.O urEPSgrowthwasdrivenbystrong
toplinegrowth,andeffectivefinancialmanagementacrossallleversofthebusiness.Grossmargin
expanded90basispointsto47.5%,primarilydrivenbyhigheraveragesellingpricesandcontinued
stronggrowthinourhighermargindirect-to-consumerbusiness,partiallyoffsetbyhigherproductinput
costsandwarehousing.
Q 1demandcreationdeclined7%,reflectingfavorablecomparisonsagainsthigherinvestmentinthe
WorldC upinthefirstquarterofFY15.O peratingoverheadincreased10%forthequarter,drivenby
variablecostsassociatedwithcontinuedstronggrowthinourDTC businessandtargetedinvestmentsin
consumer-focuseddigitalcapabilitiesandoperationalinfrastructure.
O ureffectivetaxratewas18.4%forQ 1.Lowerthanprioryear,primarilyduetoanincreaseinthe
proportionofearningsfromoperationsoutsideoftheUSwhicharegenerallysubjecttoalowertaxrate.
Aswellascertainnonrecurringitemsthatwererecognizedinthefirstquarter.
AsofAugust31,inventorieswereup10%.Primarilytosupportstrongdemandacrossourbusiness.
O verall,inventoriescontinuetobehealthyaroundtheglobe.However,asTrevordiscussed,wedo
expectinventoriesinNorthAmericatobesomewhatelevatedforthenexttwoquarters.Andwe
anticipatetherewillbeanimpactongrossmarginintheneartermasweworktoclearexcessinventory.
Nowlet'stakealookatourperformancebysegment.NorthAmericadeliveredanotherstrongquarter
with9%revenuegrowthonacurrencyneutralbasis,drivenbystrengthinnearlyeverykeycategory,led
bysportswear,basketball,men'straining,andrunning.AndconsumerdemandforNIKEremainsstrongin
NorthAmerica.Withfuturesgrowthof15%onacurrencyneutralbasis.O nareportedbasis,North
Americarevenuegrew8%andEBITgrew7%,duetoslightlylowergrossmargin,partiallyoffsetby
SG&Aleverage.
WesternEuropealsohadagreatquarterwithQ 1revenueup14%onacurrencyneutralbasis,drivenby
growthin(technicaldifficulty).TheseresultsandourcontinuedmomentuminWesternEuropereflectour
broaderanddeeperexecutionofthecategoryoffense.Nearlyallkeycategoriesdeliveredstrong
growth,fueledbysportswear,basketball,andrunning,whileglobalfootballdeclinedduetotough
comparisonstohigherWorldC uprevenuesintheprior-year.O nareportedbasis,Q 1revenuedeclined
4%duetoweaknessintheeuro;however,EBITincreased20%,drivenbygrossmarginexpansionand
SG&Aleverage.
IncentralandEasternEurope,Q 1revenuegrew26%onacurrency-neutralbasis,drivenbydouble-digit
growthineveryterritoryexceptGreece.Anddouble-digitgrowthinnearlyeverykeycategory.O na
reportedbasis,Q 1revenuegrew2%,reflectingsignificantlyweakercurrencies,inparticulartheruble
andtheTurkishlira;however,EBITgrew42%,dueprimarilytostronggrossmarginexpansionand
SG&Aleverage.
NowturningtoC hina,whererevenuegrewanimpressive30%forthequarter,onbothareportedand
currency-neutralbasis.WhileweareverymindfulofthemacroeconomicvolatilityinC hina,ourbrandhas
neverbeenstrongerandourmarketplacehasneverbeenmorehealthy.Wehavemomentumacross
nearlyallkeycategories,aswellascontinuedstrengthinourDTC business.EBITforC hinagrew51%in
Q 1,duetoverystrongrevenuegrowth,grossmarginexpansion,andSG&Aleverage.
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C ompanyTicker:NKE
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EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
Inouremergingmarketsgeography,Q 1revenueincreased19%onaconstant-currencybasis.Asnearly
allterritoriesdeliveredstronggrowthinthequarter,drivenbyMexico,[SoC o]andPacific.Nearlyevery
keycategorygrewforthequarterledbysportswear,actionsportsandbasketball.
AsTrevordiscussedinhisremarks,Mexicoreturnedtostronggrowthasaresultofoureffortstooptimize
inventoryandresetthatmarket.AndwhilerevenuewasflatinBrazil,ourbrandisstrongandwecontinue
togainshare,whilealsoinvestingtoresetthatmarketplacealongthelinesofthecategoryoffense.O na
reportedbasis,emerging-marketsrevenueincreased3%forthequarterandEBITrose65%,reflecting
grossmarginexpansion,andSG&Aleverage.
AtC onverse,Q 1revenuegrew3%onaconstant-currencybasis,drivenprimarilybydouble-digitgrowth
intheUS,partiallyoffsetbydeclinesincertainEuropeancountries,primarilytheUK.TheC onversebrand
remainedstrong,andwasfurtherenhancedbythelaunchoftheC huck2inthefirstquarter.However,
quarterlyyear-over-yearcomparisonswillbesomewhatunevenaswetransitiontoamoredirect
operatingmodeloutsideoftheUS.
O nareportedbasis,C onverserevenuedeclined3%primarilyduetotheweakereuro.AndEBIT
decreased21%forthequarter,drivenprimarilybylowersalesintheUK,aswellasSG&Ainvestments
ininfrastructureandC onverseintellectualpropertyenforcementefforts.
NIKEInc.deliveredstrongfinancialperformanceinthefirstquarter,despitesignificantFXheadwinds.And
wehavehealthymomentumacrossourglobalportfolio.O uroutlookforthebalanceoftheyearreflects
thatmomentum,aswellascontinuedinvestmentinourgrowthstrategiesandoperationalcapabilities.
Specifically,forQ 2,weexpectreportedrevenuegrowthatamidsingle-digitrate,generallyinlinewith
thegrowthrateforQ 1,reflectinglowteensgrowthonacurrency-neutralbasis,largelyoffsetbythe
impactofthestrongerdollar.
O urexpectationsforQ 2revenuealsoreflectthefactthatourfuturesgrowthismoreheavilyweighted
towardsthebackhalfofthefutureswindow.Forthefullyear,ouroutlookhasslightlyimproved.Butwe
continuetoexpectthatreportedrevenuegrowthwillbesquarelywithinthemid-single-digitrange.
WeexpectgrossmarginforQ 2toexpandabout25basispoints,reflectingoureffortstoexpeditiously
clearexcessinventoryinNorthAmerica,andkeeptheinlinechannelfresh.Forthefullyear,wecontinue
toexpectgrossmargintoexpandbyabout50basispoints,includingourstrongerthanexpectedactual
performanceinQ 1,combinedwithourcurrentexpectationsforQ 2andthebalanceoftheyear.
FortotalSG&A,weexpectQ 2andthefullyeartogrowatahighsingle-digitrate,reflecting
continuedinvestmentsinDTC ,consumerfacingdigitalcapabilitiesandinfrastructure,aswellaskey
brandeventsasweleaduptotheEuroC hampsandtheSummerO lympicsinRio.
WecontinuetoanticipateotherincomewillhaveamoremeaningfulimpactonourFY16resultsthanwe
haveseenhistorically,asaportionofourexpectedFXhedgegainsarereportedinthislineitem.Absent
significantchangesinFX,wecontinuetoexpectotherincomewillbeabout$50millionforeachofthe
nextthreequarters.
Wenowexpectoureffectivetaxratewillbeapproximately22%forthefullyear,includingthelower
actualrateinQ 1andanaveragerateofabout24%forQ 2throughQ 4.
Withthat,wewillnowopenupforquestions.
Q UESTIO NS&ANSWERS
O perator:(O peratorInstructions)
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C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
BobDrbul,NomuraSecurities.
BobDrbul:Goodafternoon.Greatstarttotheyear.IfI'dliketofocusononearea,MarkorTrevor,could
youguysaddress--inC hina,theresultswereoutstanding.There'sjustbeenalotofheadlinenews
aroundtheC hineseconsumer,C hinaeconomy,thecurrencypieces.Iwaswonderingifyoucouldjust
elaboratealittlebitintermsoftheputsandtakesthatyouareseeingintheBusinessfromafinancial
perspective,andreallyhowyouareseeingsuchgreatdemandwiththefuturesandthecurrentquarter
revenues?
TrevorEdwards:Yes,Bob.It'sagreatquestion.Thepiecethatwecontinuetolookatisthebrandin
C hinaisextremelystrong.Andthat'sapiecethatwehaveknownforawhile.
Aswewentthroughtheresetstrategy,wewantedtobereallyfocusedonhowtomakesurethatwe
coulddrivetheBusiness.So,we'reverymindfuloftheeconomic--themacroeconomicvolatilityinthe
marketplace.Butwecontinuetoreallyfocusonthethingsthatwecancontrol,whichishowwecontinue
tobringexcitementtothemarketplace.Andalsocontinuetoalignthemarketplacearoundourcategory
offense,andwe'reseeingsuccessfromthatperspective.
So,wesawgrowthinreallyallkeycategoriesfromsportswear,torunning,tobasketball;wesawitinour
wholesaleandalsoinDTC .InDTC ,ourbusinessactuallygrew46%inDTC .Andinourwholesalepartners
accounts,thestoresthathavebeenre-profiled,thosedoorsactuallycontinuetooutperformtheactual
entirefleet,increasingbothproductivityandprofitability.So,wefeelvery,verygoodabouttheBusiness.
Andwestayreallyfocusedondelivering,asIsaid,greatproductintothemarketplaceandreallydriving
thecategoryoffense.
BobDrbul:Great.Andjustafollow-upquestiononthat:Intermsofgaugingindustrywholesale
inventories,canyoujustcommentonthatalittlebitintermsofwhatyou'reseeinginthemarketplace
from--yourownproductseemsreallygoodatwholesale,butjustcompetitively?
TrevorEdwards:Iwillspeaktoours.Wehaveaveryhealthypositionininventory,sowefeelgoodabout
that.AsIsaid,wecontinuetoreallymonitorthat,andweputalotofdisciplineinplaceaswewent
throughthereset.AndwecontinuetoemploythatdisciplineacrosstheO rganization.So,weareingood
shape.
BobDrbul:Great.Thankyouverymuch.
KelleyHall:Thanks,Bob.
O perator:KateMcShane,C iti.
KateMcShane:Thankyou,goodafternoon.MyfirstquestionisonNorthAmericainventories.Ijust
wonderedifyoucouldgivealittlebitmoredetailonthecompositionoftheinventoryelevationby
categoryandbychannel?Andhowlongdoyouexpectthistoputsomepressureongrossprofitmargin?
TrevorEdwards:AsIthinkwediscussedinthepreparedremarks,thebrandagaininNorthAmericaisvery
strong.Anddemandforourproductscontinuestobeverystronginthemarketplace.
Whatwe'reworkingthroughistheimpactofthewestcoastportcongestionfromearlierthisyear.And
whatwehavedoneiswehaveseentheactualflowofproductfromtheportnormalize.Atthesametime,
we'reworkingtoefficientlycleartheexcessinventorytokeepthein-linechannelhealthy.
WealsoputonourownNorthAmericandistributioncenter,andwe'reworkingtoactuallyputthat
capacityinplace.Thatwillbefullyonline.Weexpectbothofthoseeffortstobecompletebytheendof
Q 3,andthatisreallywherewearearoundit.So,again,wecontinuetofeelveryconfidentaboutthe
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C ompanyName:Nike Inc
C ompanyTicker:NKE
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EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
BusinessinNorthAmerica,andthisisobviouslyaverywell-developedmarketwherewehavetheability
toefficientlycleartheinventory.
MarkParker:AndallI'dadd,Kate,isthatasweworktoexpeditiouslyclearthatinventory,youdoseethat
impactingourQ 2grossmarginguidance.Thatisjustanear-termimpact.
KateMcShane:O kay,thankyou.That'sveryhelpful.
Mysecondquestionisonthesupplychain,andalsoagrossmarginquestion.Withalltheinvestmentthat
you'vemadeintothesupplychainandtheefforttomaketheprocessmoreautomatedwithyourfactory
partners,whendoyouexpecttoseecostbecomelessofameaningfuloffsettogrossmargin?
MarkParker:Kate,fromasupplychainperspective,obviouslyourmanufacturingrevolutioninitiativeswe
believewillcreatetremendousvalueforusoverthelongterm.Thoseinitiativesrangefrominitiatives
thataremoreevolutionarysuchasoptimizingproductcosts,reducingwaste,gettingproductivity
enhancementsthroughLean,andthenasyoutouchedon,automation,tothemorerevolutionary
initiativeslikenewmethodsofdesignandmake,andFlyknitisagreatexampleofthat.We'rebeginning
toseesomeofthebenefitsofthoseinitiativesinmargin,butit'searlystages.Wearestillveryoptimistic
aboutthosebenefitsoverthelongterm.
KateMcShane:Thankyou.
O perator:O marSaad,EvercoreISI.
O marSaad:Thankyou.Amazingresults,guys.WantedtoaskaquestiononSG&Ademandcreation.
Ithinkitwasdown6%or7%thisquarter,andIthinkyouwereexpectingittobedown.Wonderifthere's
anyunderlyingchangeintrendorattitudetowardsdemandcreation?Iknowyou'vegotsomeevents
comingup.
Andthen,broaderpictureondemandcreationinvestment,SG&Ainvestment--wetakeoutthe
currencyoutoftheequation,andyoulookatjustthetotalgrossprofitdollargrowthisatsuchahigh
ratelookingforwardandintheBusinessrightnow.Arethereampleinvestmentopportunitiestokeepthe
SG&Ainvestmentlevelinlinewiththatrevenueandgrossprofitdollargrowththatyou'reseeing?It
justseemslikeareallybignumbertokeepupwithontheinvestmentside.Thanks.
AndyC ampion:O mar,Iwillhitthatquestion.First,intermsofdemandcreation.Q 1,thebiggestdriverof
whatyousawinQ 1wascomparisonstoWorldC upinvestmentintheprioryear.Aswehavespokenabout
inthepast,therearesomedynamicsinSG&Aacrossdemandcreationandoperatingoverheadthat
havechanged.Thosearen'tdriversofsomeoftheimpactinQ 1.That'smorealongthelinesofhowwe
engagewithconsumers.Ithinkwe'vespokentoyouaboutthatovertimethat--howweengagewith
consumersnowexpandsintothingsthatfallintothatlineitemoperatingoverhead.
IntermsofSG&A,asyouknow,welooktodelivermodestSG&Aleverageoverthelongterm.But
inanygivenperiod,ouractualinvestmentmaybehigherorlower.O urguidanceforthisyearreflects
continuingtomakeinvestmentsinconsumerengagementthatwebelievedrivegreatreturnsfroma
revenueandmarginperspective.O neexampleofthatwouldbeinnike.com.
We'realsocontinuingtomakeinfrastructureinvestmentsthatwebelievearerequiredtosupportthe
growththatwe'redelivering,andwe'redeliveringonaconsistentbasis.Andatthesametime,enhance
theefficiencyandeffectivenessofouroperations.Wearealsoincreasingtheproductivityofourexisting
resourcesandinfrastructure.So,wedoseegreaterproductivitygoingforward,andcurrently,fromour
existingresources.Thatdoesadd,asyounoted,potentiallytoprofitexpansion;italsogivesusgreater
capacitytoinveststrategically.
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C ompanyTicker:NKE
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Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
O marSaad:That'sgreat.Thanks.
O perator:C hrisSvezia,SusquehannaFinancial.
C hrisSvezia:Goodafternoon,everyone,andnicejob.Andy,aquestionforyou:Whenyoumentioned,
withregardtotheguidanceontheyear,aboutfeelingbetterabouttherevenuegrowthrate,yetyou're
stilllookingforreportedmid-singledigits,justmaybeyoucouldwalkthroughthat.It'sjustbasedona
currency-neutralbasis,youfeelbetterabouttherevenuegrowth,orjustmaybeyoucanwalkthrough
thatalittlebiteventhoughyou'reup9%onthefuturesnumberonareportedbasis.
AndyC ampion:Yes,acouplethings.Theheadlinefromarevenueperspectiveiswedoseestrong
demandaroundtheglobe.Youseethatreflectedinourfutures.Ididnoteinmyremarks,andIwill
reiterateit,thatourfuturesareweightedmoreheavilytowardthebackhalfofthewindow.Asforourfullyearexpectations,IthinkIalsonotedbutjusttoreiterateit,ouroutlookisslightlyimproved.It'sjustthat
fromareportedbasis,ourguidanceisstillsquarelywithinthatmid-single-digitrange.
C hrisSvezia:O kay,fairenough.AndthenI'mcurious,westernEuropecontinuestoputupreallygood
performance.AndIjustreallywanttogoalittlebitfurtherintothemarginperformance,whichwasreally
strong,evenagainstatoughcomparisonfromlastyear.Isitjustafunctionoftheexecutiononthe
categoryoffense,theproduct,thepricing?Maybejusttalkalittlebitmoreaboutthat,andmaybethe
sustainabilityatthatlevelifyoucould?
KelleyHall:C hris,areyoutalkingaboutoperatinglikeEBITmargin?
C hrisSvezia:Revenuegrowthabit--yes,alittlebitofboth.Revenuegrowth,andIguessmore
specificallytheoperatingmarginbeingatthatlevel,whichwehavenotseeninsometimeandthe
sustainabilityaroundthat.
TrevorEdwards:Justjumpingintherejusttosay,again,asyoupointedout,weareseeinggreatresults
outofwesternEurope.Itreallygoesbacktotheworkthatwedidtoresetthemarketplacealongtheline
ofthecategoryoffense.
We'reseeinggreatgrowthintheterritories.So,whetherit'sAGS,whichisAustria,Germanyand
Switzerland,southernEurope,UKandIreland,aswellasFrance.Allofthoseterritoriesareperforming
well.
We'realsoseeingstronggrowthacrossthecategories,fromsportswear,basketball,torunning.So,when
youlookatitfromdifferentdimensions,whatweareseeingisjuststrongdemandinthemarketplace.And
thenwealsocontinuetoworkwithourwholesalepartnerstodeliverthecategoryoffenseinthe
marketplace.Andthat'sworkingrealwell.So,allthedimensionsthatwe'reseeingcontinuetopointto
justreallystrongdemand,reallystrongpositioningwithourconsumers,andwe'vebeenabletoreally
translatethatintotheBusiness.
MarkParker:Iwilljustquicklyadd,we'reseeingincrediblebrandstrength,too,acrossthemajorcities
acrossEurope.AndIthinkthatishelpingaswell.Theproductthatwe'vebeenintroducingtothemarket
hasresonated--sell-throughsarestrong.WesternEuropeisagreatexampleofacompleteoffense,not
justthecategoryoffenseworking,butthecompleteoffense.So,wereallyfeelgoodaboutexecuting
acrossthecategoriesupanddownthepricepointspectrum,andacrossthemajorchannelsaswell.
C hrisSvezia:O kay.Thankyouverymuch,andlookforwardtoseeingyouguysnextmonth.Thanks.
O perator:RobbieO hmes,BankofAmericaMerrillLynch.
RobbieO hmes:Thanksfortakingmyquestion.Trevor,IwashopingyoucouldtalkabouttheJordanbrand
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C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
--mayberemindushowbigitis.Andthen,IthinkthecommentaryonthenewareasfortheJordanbrand
isreallyinteresting.C anyougiveussomeinsightonwhattheseareascouldbe?Howsoonwecouldsee
thingshappening?Howthat'sgoingtoplayoutforyouwithpartnersatretailandinyourownstores?
Anythingyoucangiveusonthatwouldbegreat.
TrevorEdwards:TheJordanbrandcontinuestobea--obviously,akeypartofourbasketballstrategy.
Andasyouknow,wedon'tactuallyreportspecificallythesizeoftheJordanbusinesstoday.ButwhatI
cansayisthatwecontinuetoseetremendoussuccessinthemarketplace.
So,thissummer,inParisforexample,theteamwastherereallyexecutingtheanniversaryoftheJordan
businessthere.Michaelactuallywentoverthere,ashe'sgoingtogooverintoShanghaialso.So,it'sa
senseofaglobalphenomenonthatweareseeingasreallyjustdrivinggreatsell-through,andjustgreat
demandfortheproductsandthebrand.
Atthesametime,weseeanopportunityaroundthetrainingbusiness,whichiswhere,asIthinkMark
spoketo,whichisweareexpandingtheBusinessbeyondbasketballintothetrainingsegment.Andso,
that'sanotherareathatwecontinuetoseeopportunityandpotentialgrowtharoundtheworld.
MarkParker:Iwanttoadd,Jordanisatremendousbrandglobally.It'snotjustasubsetofNIKEbasketball.
It'sastand-alonebrandwithtremendouspotentialtoresonatebeyondbasketballasacategory.So,it's
largelybeenbasketball-based,andthatwillalwaysbethecoreoftheJordanbrand.Withthatthough,we
seetremendousopportunitytoexpandthatbrand,notjusthereinNorthAmerica,butaroundtheworld.
RobbieO hmes:Great.Andjustmysecondquestion:TheNorthAmericaapparelgrowth,whatchannels
areleadingyourapparelgrowthinNorthAmerica?IsD-to-C acceleratinginNIKEapparel,orisit
departmentstores?Iwouldjustlovetogetasenseofhowyouguysaredrivingsuchgreatgrowth.
TrevorEdwards:Again,ourapparelbusinesscontinuestostrengthen.Andwe'reseeinggrowthreally
acrossdifferentsegmentswithinthecategoryoffense.So,forinstance,ourrunningbusinesscontinuesto
beagreatgrowthdriver.O ursportswearbusinesswithourTechPackproductsjustcontinuetobereally
successful.
Asyoupointedout,we'realsoseeinggreatgrowththroughourownDTC doorsandalsoonline,which
arereallyjustkeyelements.Andtheotherpartthatwedotalkalotabout,whichisthewomen'sbusiness
--youareseeinggreatgrowthcomefromwomen'sbusiness.So,again,dimensionally,throughthe
categoryoffense,weareabletoreallygrowourapparelbusiness,reallyacrossabroadspectrumofthe
marketplace.Butit'sdrivenbyourabilitytodriveacompleteoffensethroughthecategoryoffense.
RobbieO hmes:Great,thankssomuch.
O perator:LindsayDruckerMann,GoldmanSachs.
LindsayDruckerMann:Thanks.Goodafternoon,everyone.Iwashoping,aswethinkabouttheO lympics
ahead,ifyouguyscouldputintocontexthowyouthinkabouttheO lympicsasaplatformtointroduce
newproductsandmaybejustgiveusanhistoriccontextforwhereyouhadparticularsuccess?
MarkParker:C learly,theO lympicsareagreatsportmomentfortheworld,butcertainlyforNIKE.These
globaleventsatthisscale--theO lympicsandtheWorldC upreallystandaboveandbeyondallsports
events.Andforus,there'sanopportunitytoreallybringourbestproduct,thebestinnovation,ourbest
storytellingout,servetheathletesatthehighestlevel.TheexpectationsIthinkonNIKEare
extraordinarilyhigh,astheyshouldbe.Ithinkthisyearwewillnotdisappoint.
Ifeelincrediblyconfidentandexcited,frankly,abouttheinnovationpipeline,what'sintheworks,excited
aboutsharingsomeofthatlaterinthefiscalyearwitheveryone,butIthinkthisO lympicswillbeoneof
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Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
thebest,ifnotreallythebesteverforNIKE.I'veneverseenaninnovationpipelinesofull,andwewillbe
ready.Firstandforemost,fortheathletes,butalsotheconsumerandtheshareholder.Ithinkeverybody
isgoingtobenefitfromourperformanceattheO lympics.
LindsayDruckerMann:Great.Maybejustafollow-uponpricing:C anyouupdateusonhowmuchpricing
youwereabletotakethisquarter,andhowweshouldbethinkingaboutyourapproachtopricingover
thenextfewquarters?
AndyC ampion:Sure,I'lltakethatone,Lindsay.Inthefirstquarter--wedonotreportthatnumberatthis
stage.Butinthefirstquarter,ourpricingincreaseswereaboutwhatyouhaveseenovertherecent
quarters.
So,wecontinuetoseeaveragegrosssellingpricegrowinginthelow-tomid-single-digitrange.Yousee
thatinourfutures.So,thatisalsoaproxyforthatrate.
Thewaywethinkaboutpricing,Ithinkwestartfirstwiththeconsumer.O urapproachistoenhancethe
pricevalueequationforconsumerswithinnovation,design,inspiration,andincreasingly,service.That
expandsthataveragegrosssellingprice.
Wehavenotseenanyresistancetothatfromconsumersoverall.C ertainlywithinourbroadportfolio
therearegreateropportunitiesthaninotherareas.Butwe'veseenconsumersdemonstrateawillingness
totradeupfortheinnovation,design,inspirationandservicethatwe'rebringing.
LindsayDruckerMann:Great,thankyou.
O perator:MichaelBinetti,UBS.
MichaelBinetti:C ongratsonagreatquarter.
KelleyHall:Thanks,Michael.
MichaelBinetti:Imighthavemissedit.Didyougivethecomp-storesalesinNorthAmerica?AndI
apologizeifIdidmissthat.
AndyC ampion:I'mnotsurethatwedid.Butcomp-storesalesinNorthAmericawerelow-singledigitsin
thequarter.
MichaelBinetti:O kay.AndI'mtryingtocorrelatethatIguesswithitwasa--theEBITmarginintheUSwas
alittlelower.Andyoutalkedusthroughsomeoftheinventory.I'mtryingtothinkifthat'srelatedtosome
oftheinventoryclearingactivities,theslightdecelerationinthesame-storesalesnumberinNorth
America.Andif--IguessmaybeifyouthinkthattheEBITmarginswillstillexpandafteryouguysfinish
gettingtheDC upandrunning,andgetthroughsomeofthisWestC oastinventory.
AndyC ampion:Ithinkyoudefinitely--yourinferenceiscorrect.Theflowofinventorycanimpactrevenue
growthoutatthestorelevel,certainlyinthenearterm.O bviously,asweworktoexpeditiouslyclear
someinventory,thatwillalsoimpactmargin.
MichaelBinetti:Gotit.O kay.Andthenjustaquestionon--aswethinkaboutyourdirectbusinessand
youreC ommercebusiness,obviouslyit'sbeenagreatgrowthbusinessforyou.Butifwelook--maybeif
youlookatasinglecategory,runningorbasketballjustasanexample,canyoutalkalittlebithowyou
balancethestrategythereasfaraswhatproductyouwantpresentedonyourowneC ommercesite
versuswhatyouchoosetohavepresentedonyourwholesalepartners'site?Evenifyouthinkabout
someofyourpinnacledistribution,whichisIknowabigfocusforyouonyourownsites.Howdoyouthink
aboutthedifferenceandwhatproductisbestrepresentedwhere?Andhowweshouldthinkaboutthe
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C ompanyTicker:NKE
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Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
overlapbetweenthetwo?
TrevorEdwards:Ithinkaswesaidanumberoftimes,wereallyviewourselfasbeingabetterretailerso
wecanbeabetterwholesalepartner.So,whatwedoisweactuallydrivewhatwecallourintegrated
marketplacestrategy.Andthatisasenseofworkingtodifferentiatethepointsofdistributionthrough
someofourwholesalepartners,throughsomeoftheconceptsthatwehave,whetherit'sHouseofHoops
withFootLocker,orit'stheC helseaC ollectivewe'redoingwithTheFinishLine.Allofthoseare
opportunitiesforustoprovide--withDick's,sorry--areopportunitiesforustoprovidereallygreat
differentexperiencesthere.
Whenyougoonline,ourBusinesscontinuestogrowreallyatanacceleratedrate.Andcertainly,we're
seeingadimensionoftheBusiness,particularlythewomen'sbusiness,isgrowingatafasterratethanour
overallbusinessandalsoourmen'sbusiness.That'sreallywherewereallyseejusttremendousgrowth,
andthat'showwedifferentiate.It'sactuallythroughtheconceptsthatweactuallydointhemarketplace.
MichaelBinetti:O kay,thanksalot.Andcongratsagainonagreatquarter.
KelleyHall:O perator,wehavetimeforonemorequestion.
O perator:JimDuffy,Stifel.
JimDuffy:Thanks.Hello,everyone.Andy,questionforyou:Thegrossmarginexpansioninoverseas
regionsisimpressivegiventheFXheadwinds.C anyoutalktosomeofthefactorssupportingthat?Is
pricingakeyvariablethere,orarethereotherdynamicsbehindit?
AndyC ampion:Yes,you'respeakingspecificallytogrossmarginortooperatingmargin?
JimDuffy:Speakingtogrossmargininoverseasmarkets.Youmentionedinyourpreparedremarks,
expansioninEurope,inC hinaandinemergingmarkets.GiventheFXheadwinds,Ifindthatimpressive.
AndyC ampion:Weareactuallyseeingverycommontrends.AndbytrendsIdon'tmeanfleeting,Imean
long-termtrends,acrosstheglobe.Weareproudofthegrossmarginexpansionthatwehavedelivered
consistentlyoverthepastseveralyears.Andwebelievewecansustainthoselongerterm.Andthat'snot
onlywithrespecttoselectmarkets;that'sreallyareflectionofourstrategy.
O urstrategyistobringinnovationtotheproduct,andtobepremiumoverallandpremiumateveryprice
point.So,no,therearenotuniquefactorsrelativetoanyparticularmarket.We'recontinuingtosee
greatdemandattheseprices,whichwefeelgreataboutbecauseit'sreflectiveofwhatwe'rebringingto
theproduct.
JimDuffy:Andtobeclear,haveyoutakenanyadjustmentstopricesinoverseasmarketstotrytomanage
thegrossmargin?
AndyC ampion:Inreactiontowhat'sgoingonfromaforeign-exchangeperspective,notdirectly.Theway
wethinkaboutitis,weareverywellpositionedtodelivergrowthandprofitability,allin,underawide
rangeofcircumstances,includingFXvolatility.
Wehaveaverysophisticatedforeignexchangeriskmanagementprogram,andatradingcompany
structurethataffordusthetimetoplanfullyandstrategicallyexecutethesamewaywewouldabsentthe
volatility.Itgivesustimetodothat,andtostayonstrategy.So,notdirectlyrelated.O fcourse,incertain
inflationarymarkets,thatcanhaveanimpactonprice.Butno,notdirectlycorrelatedtoforeign
exchange.
JimDuffy:Thanksforthat.Ilookforwardtoseeingyouguysinafewweeks.
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C ompanyName:Nike Inc
C ompanyTicker:NKE
Sector:Co ns ume r Go o ds
Industry:Co ns ume r No n-Dur able s
EventDescription:Q120 16Ear nings
Call
MarketC apasofEventDate:78 .25B
PriceasofEventDate:124.22
KelleyHall:Thankyou,everyone.Appreciateyoujoiningusonthiscall,andwewilltalktoyounext
quarter.
O perator:Thisconcludestoday'sconferencecall.
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