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5,500 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Thank you, Paul. Good afternoon, everyone. I'll start by saying I'm proud of the progress we made against the key actions we committed to 90 days ago. While we met the expectations we set, we're not satisfied with our overall results. We can and will be better. For the quarter, the big takeaway for me was clear. When we lead with sport, we create impact for NIKE. We told inspiring athletes stories, we brought more energy to sports biggest moments, and we introduced performance product across an integrated marketplace. We delivered something new to the consumer week after week and that's exactly the kind of sustained pace we need to strengthen our business. Last quarter, I shared my initial observations and where we need to focus. The last 90 days only reinforced my early assessment of the areas that are most important. Since our last call, I continued to meet with wholesale partners to discuss the distinct role each can play with NIKE. I also had an incredibly inspiring trip to visit factory partners and NIKE teammates in Asia to see how we're executing in our supply chain with a focus on production for our new innovation. Most importantly, I continue to spend meaningful time with our NIKE teammates. We focused in two areas: strengthening our culture; and committing to our top priorities. In fact, right after my first call with you in December, we met with our teams and shared the five priority actions we outlined on the call, with a sharp focus on five fields of play, three countries, and five cities. We call these strategic priorities Win Now. We have a clearer picture on our path forward, and despite the global economic uncertainty, I believe our priority actions will continue to drive progress. The first action is to ignite our winning culture. As I mentioned, our teams are building momentum. We're hustling and being opportunistic. The next action is shaping our brand for distinction. This is about lining up storytelling power of NIKE to celebrate the passion and emotion of sport. In February, |
5,501 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | for distinction. This is about lining up storytelling power of NIKE to celebrate the passion and emotion of sport. In February, I attended the Super Bowl and the NBA All-Star weekend to see firsthand the kind of impact we make when we line up all of our advantages towards one moment. Our third action is to accelerate a complete product portfolio. We're fully committed to creating a more breadth and depth season after season. While we added innovation across our five key fields of play this quarter, it's not enough to offset the continued headwinds of our classic franchises. Elevate and grow the marketplace, the fourth action is a balanced approach where we're supporting wholesale partners to drive healthy growth and returning NIKE Direct to a premium destination. We're in the early stages of repositioning NIKE Digital and we're restoring our sales organization and go-to-market processes. The final action, Win on the Ground, is where we celebrate local athletes, make cultural connections, and support grassroots communities. A big reason for our running product success this quarter was the resources we put into building energy through the ground game. Of all the priority actions, we knew we could move quickest on investing in our brand. You saw that in several defining moments this quarter. I'll start with the Super Bowl in New Orleans. It was a course. It starts with our close partnership with the NFL and our high performance uniforms, cleats, and gloves that everyone sees on the field. Our product visibility goes well beyond four quarters. From Jalen Hurts wearing his red and black unbannable Jordan cleats during warm-ups, to Kendrick's halftime show wearing Deion Sanders' Retros, and Serena Williams and SZA wearing Chuck Taylors. Our three iconic brands were front and center. We, of course, also debuted So Win, our first Super Bowl ad in 27 years where we celebrated the winning mindset of the top athletes in the world. We also showed up on the ground in New Orleans to support flag football with a sharp focus on |
5,502 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | of the top athletes in the world. We also showed up on the ground in New Orleans to support flag football with a sharp focus on girls and a commitment to increasing their participation in the game. We created pop-up retail spaces across the city with partners like Dix, Sneaker Politics, and Hibbett, and built NIKE and Jordan houses to connect with athletes, influencers, partners, and wholesale retailers. After the win, we followed up with strong, reactive campaigns. The NIKE brand created it’s Good to Be Green for the Eagles win, and for Jaylen's MVP, the Jordan brand aired its first Super Bowl ad in history, Love Hurts. That is how we create impact and that is NIKE being NIKE. We transitioned from one amazing weekend right into another for the NBA All-Star weekend in the Bay area. Our brands, in one word, dominated. On both sides of the Bay, NIKE, Jordan, and Converse owned performance and the culture of the game, connecting with young athletes and fans through unique experiences. NIKE celebrated the future of basketball, hosting games with top high school prep stars. At the Alameda Navy Yard, the Jordan Fam Fest celebrated the brand's biggest moments for its 40th anniversary with thousands of fans. And Converse unveiled the first signature shoe for Shai Gilgeous-Alexander, the Shai 1, designed by Shai himself as the new creative director for Converse basketball. His shoe will launch this fall. All told, NIKE Inc. lit up the marketplace on the ground. Our NIKE San Francisco flagship store had its best commercial day in 10 years. And just down the street, we created energy and buzz with our wholesale partners, Foot Locker and Shoe Palace. One thing it was great to see, for the right product drops, like the NIKE Black Label collection, the Kobe Protro’s, Jordan Red Wands, and Jordan [Forest Cements] (ph), the passion of sneaker culture is alive. I saw lines down the block all weekend. An important part of our strategy moving forward will be to harness the full power of our portfolio of brands. We made significant |
5,503 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | important part of our strategy moving forward will be to harness the full power of our portfolio of brands. We made significant progress in elevating the voices and distinct position of our brands at the Super Bowl and All-Star weekend. Shifting to products, we're beginning to drive a more diversified portfolio. It will take time to reach the volume to replace the handful of classic franchises we over-indexed on. But our approach is simple. Help consumers fall in love with something new from NIKE, and that something is not replacing one icon for another. It's about building a supporting cast of multiple styles, some that are gaining interaction with men and others with women's. Segmenting and differentiating our wholesale partners across the integrated marketplace, investing in the presentation of our products at point of sale, digital and physical, and having an intentional ground game in influential cities. And we will lead with performance, with a disciplined approach that balances product that's seeding with product that's scaling. Running with the standout field of play for the quarter, growing mid-single digits, the PEG-41 is continuing to drive healthy volume in all geos. And two innovations that have just begun to seed are the Pegasus Premium and the Vomero 18. The Peg Premium is NIKE bringing something totally unique to the market, a full, visible air zoom unit that, for the first time, we sculpted to the foot so it springs back for better energy return. It's a great ride and a beautiful looking shoe. Early seed pairs nearly sold out across the North America marketplace, and the Peg Premium will scale through fall 2025. This quarter, we launched the Vomero 18, created for the everyday runner. We aligned the storytelling of the Vomero 18's big foam and maximum cushioning across over 1,800 doors in the integrated marketplace, RSG, sporting goods, NIKE Direct, the results have been outstanding. We plan to build on the momentum and double the distribution of a Vomero 18 by mid-April, supported by a |
5,504 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | have been outstanding. We plan to build on the momentum and double the distribution of a Vomero 18 by mid-April, supported by a large-scale running campaign. You can expect new additions to the franchise to release in our next fiscal year. In running, we're on the path to meeting our high standards of execution end-to-end. Turning to sportswear, our life's largest icons, NIKE and Jordan Streetwear, are in different states of transition. With Air Force 1, Donk, and Air Jordan 1, it's about right sizing, not sun setting. Each franchise will always have a place in our stable of products. They're timeless staples with loyal fans. Our best example of healthy diversification in sportswear, footwear right now is our look of running. The Vomero 5 doubled its revenue this quarter. NIKE Shox has grown its revenue by over 10 times in the last three quarters. And while in the seeding stage, recently released shoes like the Air Superfly and the LD1000 are getting a lot of positive interest in the media and on social channels. Air Max, a brand in itself, is a platform that consumers expect us to reinvent. This quarter we brought fresh energy with the new DNA, which is resonating well with consumers in Japan and Korea, and women's silhouette in the Air Max Muse. Look for another new innovation platform with Air Max in FY 2026. Diversifying our sportswear apparel offense is equally important. We want to minimize our reliance on fleece and push the edges to build new businesses. And that doesn't have to fit neatly into the sportswear category either. This quarter's new 24/7 collection brings performance materials to high-style training apparel. The new impossibly soft and perfect stretch fabrics gave us the opportunity to tell a deep technical apparel story. The first month of sales in 24/7 had exceeded our expectations and were ramping up capacity to meet the demand. We also made some noise with the announcement of a new brand this quarter, NIKESKIMS. Together we identified a consumer need and are creating a new market of |
5,505 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | announcement of a new brand this quarter, NIKESKIMS. Together we identified a consumer need and are creating a new market of style-led product that sculpts and performs. Our first comprehensive collection launches next quarter in North America through both NIKE and SKIMS Direct channels and we will scale globally over multiple seasons. The apparel space is right for fresh thinking, and I've asked our team to keep innovating across the spectrum of performance and style, and to seek out white space in the market to complement our brands and product portfolio. Our responsibility is to grow the overall market, and one of the most powerful ways we do that is through a relentless flow of coveted and innovative product through our powerful brands in both performance and sportswear for men, women, and kids across footwear, apparel, and accessories, and up and down price points. We're moving with focus and urgency to get back into a rhythm of delivering across all dimensions. The final topic I'd like to discuss in detail is the integrated marketplace, where we create consumer-led experiences across NIKE Direct or our wholesale partners, physical or digital. In the almost 190 countries in which we do business, we have over 40,000 points of distribution and a digital business with massive reach. Our footprint is an unbeatable competitive advantage. That means that a lot of change is in motion, because we want to be great at all touch points. And I'm playing an active role in this one, leveraging my years of experience and relationships in the marketplace. Here's what we're going to prioritize. First, I mentioned, we're restoring our sales organization and go-to-market processes. Partnering with NIKE must feel like a world-class experience. That means, building growth plans together, creating distinct consumer positions and consumer-right assortments, engaging way earlier in the process and asking for product feedback, delivering our assortments at the right time, right place, and at the right depth. Educating their teams |
5,506 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | for product feedback, delivering our assortments at the right time, right place, and at the right depth. Educating their teams on new innovations, providing marketing support, and making certain their NIKE presentation is premium so we capitalize on every sale opportunity. In NIKE Direct, Digital will feel the changes more quickly. We're already reducing the promotional days and discounting at lower rates. In fact, comparing last year's January and February to this year's, NIKE Digital in North America went from over 30 promotional days to zero. In our ecosystem, the consumers are already seeing a more elevated content and storytelling with a greater focus on our performance fields of play. Now that I've had the opportunity to visit each geography, we're clear where we will focus to make an immediate impact. Through our Win Now strategic priorities, we'll start with three key countries, the United States, China, and the United Kingdom, and five key cities, New York, Los Angeles, London, Beijing, and Shanghai. We'll invest to make sure each has innovative and coveted products, a loud and proud locally relevant brand voice, a consumer-led and balanced integrated marketplace, and passionate NIKE teammates on the ground. Each country has unique dynamics and is in a different state of development. China specifically is where we're being the most proactive and cleaning up the marketplace. And we'll get back to inspiring the Chinese consumer in a more meaningful way. To close, our consumers and partners felt a different pace from NIKE this quarter. We're off to a solid start. And where we are making progress in our five priority actions, it's mostly through serving athletes, through the lens of sport and performance. That's exactly where we want to be. The bottom line is we are looking for opportunity on all fronts. Now, it's up to us to be consistent. Some of the bigger shifts I have covered will take multiple seasons of excellent execution. Our teams are moving with focus and urgency and are up to the challenge of |
5,507 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | will take multiple seasons of excellent execution. Our teams are moving with focus and urgency and are up to the challenge of writing the next great chapter for NIKE. I'll pass it to Matt to provide initial thoughts on the building blocks to return to sustainable and profitable growth, and I'll be back to close out the call. |
5,508 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Thanks, Elliott, and hello to everyone on the call. The team is moving aggressively to reignite brand momentum through sport and stabilize our business. Our third quarter financial results reflect the headwinds from the Win Now actions we identified for you last quarter. Today I will review our third quarter results and provide context on the progress we have made. Then I will share additional insight for how we expect our Win Now actions to shape our business performance over the near term. This quarter, revenues were down 9% on a reported basis and down 7% on a currency neutral basis. The quarter benefited from strong holiday results in December, including a non-comp benefit from Cyber Monday, followed by double digit declines in January and February. NIKE Direct was down 10% with NIKE Digital declining 15% and NIKE Stores declining 2%. Wholesale was down 4% largely due to declines in Greater China. Gross margins declined 330 basis points to 41.5% on a reported basis, due to higher markdowns on NIKE Direct, higher wholesale discounts, inventory obsolescence, and product costs and channel mix headwinds. SG&A was down 8% on a reported basis, as increased investments in brand marketing and sports marketing were more than offset by declines in operating overhead. Our effective tax rate was 5.9% compared to 16.5% for the same period last year, primarily due to a onetime tax benefit from US tax regulations related to foreign currency gains and losses. Earnings per share was $0.54. Now let me provide additional insight into our progress against our Win Now actions this quarter. Let's begin with our product portfolio. Our performance business grew in the third quarter, led by improving brand and business momentum in training and running, with new product launches, strong sell through of innovation, and a more complete offense across price points in footwear and apparel. This momentum is encouraging since these two sports represent our largest performance businesses. For Q3, this momentum was more than |
5,509 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | is encouraging since these two sports represent our largest performance businesses. For Q3, this momentum was more than offset by declines in NIKE sportswear and the Jordan brand, led by a double-digit decline in our classic footwear franchises. These franchises again decelerated faster than the overall business, with a more pronounced impact on NIKE Digital. Turning to our marketplace, our teams have taken the initial steps to reposition NIKE Digital as a full-price business. We remained competitive and promotional in December, finishing with strong holiday results. However, in January and February, we significantly reduced days of promotion in North America and EMEA. This resulted in a several percentage point improvement in demand at full price. With regards to wholesale, since Elliott has returned, we are working as closely with our partners as ever. We are creating confidence through the investments we are making in product engagement, commercial terms, and rebuilding the scale, talent, and capabilities of our sales organization. Within our fall order book in North America, EMEA, and APLA, we see the declines in classic footwear franchises almost being offset by growth in performance dimensions of our portfolio, such as running, training, and basketball, as well as newness in sportswear. Now let's talk about the health of our brands. Elliott mobilized our teams this quarter to go bigger and bolder in sports biggest moments. As a result, we supported several new product launches across all three brands. And also delivered outsized brand impact with emotional storytelling in the air and on the ground in key cities. And you felt it. To support this action demand creation expenses grew high single digits versus the prior year. Last, let's discuss inventory. Inventory declined 2% versus the prior year. But as I said last quarter, inventory remains elevated across all geographies as we implemented our Win Now actions after inventory was purchased and in transit. While we are seeing some increases in customer |
5,510 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | we implemented our Win Now actions after inventory was purchased and in transit. While we are seeing some increases in customer cancellations, the larger driver of our inventory is the buys for NIKE Direct. In addition, across the marketplace, we are beginning to see Air Force 1 inventory stabilized with current retail sales, while Air Jordan 1 and Dunk remain elevated with continued actions planned ahead. With that, let me turn to our operating segments. I will focus my commentary on the progress we have made in each of our geographies on our Win Now actions. In North America, Q3 revenue declined 4%. NIKE Direct declined 10%, with NIKE Digital down 12%, and NIKE Stores down 6%. Wholesale increased 3%, due primarily to favorable shipment timing and increased shipments to our value partners in the third quarter. EBIT declined 21% on a reported basis. Throughout the quarter, we delivered bold and inspiring storytelling and key sports moments, as Elliott mentioned, which drove heat and energy for our brand. Training led performance growth this quarter, and running grew high single digits. In Q3, we hosted dozens of key partners for product engagement and future growth planning, including a summit for partners serving core price points. We have taken initial steps to expand distribution to support our expanded core product offering, which is a meaningful market opportunity for NIKE. In EMEA, Q3 revenue declined 6%. NIKE Direct declined 12%, with NIKE Digital down 25%, and NIKE Stores up 9%. Wholesale declined 3%. EBIT declined 35% on a reported basis. In Q3, performance dimensions continue to build momentum, fueled by the Mercurial and Global Football and new product launches in running. We celebrated Zinni Jr's Best FIFA Men's Player Award with a short video, Can't Stop the Dance, featuring the Chrome Mercurial, and we amplified the Peg Premium launch with a unique activation at the London Eye featuring NIKE athletes. In the marketplace, in addition to taking steps to reposition NIKE Digital, we also started a |
5,511 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Eye featuring NIKE athletes. In the marketplace, in addition to taking steps to reposition NIKE Digital, we also started a journey with JD Sports, Sports Direct, and [indiscernible] to elevate our brand physical retail with improved product positioning and visual merchandising. In Greater China, Q3 revenue declined 15%. NIKE Direct declined 11%, with NIKE Digital down 20%, and NIKE Stores down 6%. Wholesale declined 18%. EBIT declined 42% on a reported basis. In Q3, traffic declined double digits, and retail sales underperformed our plan. While the macro environment is challenging, sport is growing in China, and we must accelerate our pace. The market continues to be promotional, especially in consumer moments and in the digital channel. And we are taking aggressive steps to clean up the marketplace, with the priority being the health of our partners. These steps had a negative impact on our revenue and gross margin this quarter. At the same time, our team is focused on creating brand distinction through sport and serving consumers with new innovation and hyper local product. We saw strong consumer response to the Peg Premium and Vomero 18 in running. And in basketball, we launched the year of the Mamba with strong growth in Kobe Protro. We continue to see locally designed Express Lane product resonate with strong sell-through of our Chinese New Year product. The opportunity in Greater China continues to be significant for NIKE, notwithstanding the highly competitive and fast-moving dynamics in this marketplace. Our brand remains strong, but our actions to energize the marketplace will take some time. In APLA, Q3 revenue declined 4%. NIKE Direct declined 4%, with NIKE Digital down 8% and NIKE Stores up 1%. Wholesale was down 4%. EBIT declined 27% on a reported basis. While we saw mixed performance across territories in APLA, Japan and Latin America each returned to growth this quarter. In Q3, we created energy on the ground in running communities. We launched the After Dark Tour with incredible response from |
5,512 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | In Q3, we created energy on the ground in running communities. We launched the After Dark Tour with incredible response from female runners and executed disruptive race takeovers at the Hakone Ekiden in Japan, the Mumbai Marathon, and the Thailand Marathon. This fueled continued momentum in running with growth across footwear and apparel. Now let's look forward. Elliott said earlier that we are even more confident that the five Win Now actions are the right moves to create better balance in our business and reignite brand momentum. So as we begin to have greater clarity and confidence in the steps that we are taking, I will provide some additional thoughts on our path forward over the next several quarters. First, we are accelerating our product portfolio transition. We expect sport performance dimensions to lead our growth with a relentless flow of newness across each field of play. We are focused on increasing the contribution of newness as a percentage of our overall seasonal assortment, including new models, new colors, and new materials. At the same time, we are moving fast to right-size the contribution of our classic footwear franchises. In regards to this transition, we are making progress. In the last quarter of this fiscal year, we expect our classic footwear franchises will be down by more than 10 points as a percent of our total footwear mix. We intend to drive this mix lower in fiscal 2026 with total units planned down double digits with the most aggressive actions on the Dunk. Second, we are repositioning NIKE Digital within an integrative marketplace. To do this, we are reducing promotional days, reducing markdown rates, and shifting closeout liquidation to our NIKE factory stores. Due to these actions, and as we continue to reduce investment in paid media, we expect digital traffic to be down double digits in fiscal 2026. Gradually, we expect organic traffic to stabilize and grow with new product launches and our increased brand marketing investments. Third, we are cleaning up the marketplace. |
5,513 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | and grow with new product launches and our increased brand marketing investments. Third, we are cleaning up the marketplace. For NIKE Digital, we are tightening our buys to support a full-price business model. For NIKE factory stores, we are increasing markdowns to drive velocity of higher volumes of closeout inventory. And for our wholesale partners, we are making investments in sales-related returns, reducing forward supply, and providing higher wholesale discounts to liquidate aged inventory. We expect these actions will continue through the first half of fiscal 2026. Last, when we get back to a steady flow of new product at scale, improve brand engagement, reposition our NIKE Digital business to complement our wholesale partners, and return to a healthy and clean marketplace. We expect our wholesale business to return to growth. Each of our geographies have made varying levels of progress on each of these actions, and as a result are working against different timelines. But when taken all together, these are the building blocks for NIKE to return sustainable, profitable growth. Now, I'll turn to our fourth quarter guidance. Our second half plan is in line with what we communicated last quarter, with some shifts occurring between Q3 and Q4. Looking ahead, we believe that the fourth quarter will reflect the largest impact from our Win Now actions and that the headwinds to revenue and gross margin will begin to moderate from there. We are also navigating through several external factors that create uncertainty in the current operating environment, including geopolitical dynamics, new tariffs, volatile foreign exchange rates, and tax regulations, as well as the impact of this uncertainty and other macro factors on consumer confidence. Our fourth quarter guidance includes our best assessment of these factors based on the data we have available to us today. We expect Q4 revenues to be down in the mid-teens range, albeit at the low end. This includes several points of unfavorable shipment timing in North America, |
5,514 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | in the mid-teens range, albeit at the low end. This includes several points of unfavorable shipment timing in North America, as well as 2 points of negative impact from foreign exchange headwinds. We expect Q4 gross margins to be down approximately 400 basis points to 500 basis points, including restructuring charges during the same period last year. We have included the estimated impact from newly implemented tariffs on imports from China and Mexico. We expect Q4 SG&A dollars to be up low to mid-single digits, including restructuring charges in the prior year. We will continue to tightly manage expenses, while we increase investment to fuel our win now priorities, most notably demand creation. We expect other income and expense, including net interest income, to be $45 million to $55 million for Q4. And we expect the tax rate for the full year to be in the mid-teens range. We are focused on what we can control. And for NIKE at this moment, serving athletes with new product innovation and reigniting brand momentum is what matters most. Our collective experience, as well as the early signals we are seeing with consumers, gives us confidence in the path ahead. With that, I'll turn it back over to Elliott. |
5,515 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Thank you, Matt. I'll close by taking a minute to talk about my teammates at NIKE. Look, it's been a tough couple of years. We've been through a lot of change, but what's encouraging is that in the 150 days since I've been back, we've reclaimed our identity. We know who we are. NIKE Inc. is a sports company. We inspire through iconic brands and create innovative products for all athletes. It may seem like an obvious direction, but we needed to say it out loud to reawaken the fire in our teams and I have been unrelenting in that message. One of the things that makes it special to work at NIKE is we invite athletes, coaches, and teams to our business meetings to spend time with our teammates. One conversation that stirred something up in me this quarter was with Coach Ryan Day, coach of the National Champions, the Ohio State Buckeyes. He had an answer to the question that really connected with how I'm thinking about our team right now and the tone we're setting. The question to him was, how do you stay on the offense and what's the key to keeping your program moving forward? His answer was that Ohio State applies pressure constantly in all three phases of the game, no matter who he's playing. Get vertical down the field on offense. Play suffocating man coverage so no throw is easy, go after punts, and have his best athletes returning kicks. He just painted this picture of a team that is relentlessly pushing and challenging, being aggressive and making it uncomfortable to play against. I love that attitude. And that's how I think about NIKE when we're at our best. Success for NIKE has never been about protecting our turf. We force others to play our game. We drive trends, grow markets we lead. Coach Day made it clear that it takes complete buy-in to be a championship team. That's exactly what we're asking of our teammates right now, to keep up the intensity, to move with focus and urgency, to have passion and take pride in all that we do, and to win as a team. With that, I'll turn it over for |
5,516 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | focus and urgency, to have passion and take pride in all that we do, and to win as a team. With that, I'll turn it over for questions. |
5,517 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Operator: Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Lorraine Hutchinson with Bank of America. Your line is open.
Lorraine Hutchinson: Thank you, good afternoon. Elliot, can you provide a timeline on when you think classic shoe inventories will be clean in the wholesale channel? And then same question for the direct channel as well. |
5,518 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Thanks for the question Lorraine. Before I dive too deeply into the specific question, I do want to start really quickly because I think it's important to set the tone here on the call for these types of questions, that 90 days ago, we declared five actions to return to growth. And what we'll say 90 days later, I'm even more convinced that these are the right actions to move our brand and business forward. And these Win Now actions really start with our culture, our product portfolio, which is a question that you're asking here, and I'll dive into that here in just a second, shaping our brand for distinction, elevating and growing the marketplace, and winning on the ground. And what we did add to our teams after coming off the call was providing them a sharp focus on which sports. We have five sports, running, basketball, football, training and sportswear, three key countries I outlined for you, and then the five cities. So the teams are really rallying around this Win Now priorities and even calling it the [5535] (ph). So now let me let me jump more specifically into product for you and I will also start a little higher level before I dive into the specific question around the key franchises. We are going to run a balanced and complete portfolio. I want to make sure everybody on the call hears that. We're going to run that through all three brands, NIKE, Jordan, Converse, across performance and sportswear, men's, women's, kids' footwear, pair of accessories, and up and down price points. And we're going to be sharper on specific sports. And I've touched on those already, so I won't dive too deeply on those five sports, but we have set teams up against each of those, sport times gender, and we have small teams, cross-functional teams taking the insights from those sports and those consumers and driving innovative products. So I feel good about where the team's heading on the performance side of the business. And we're starting to see some great success and I'm sure we'll hit on that here in a |
5,519 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | on the performance side of the business. And we're starting to see some great success and I'm sure we'll hit on that here in a moment. What I'd say about franchise management to answer your question specifically is that, we have decade long experience of managing franchises. And I will also say this, we have the three, Air Force 1, Dunk, A.J. 1, they are still beloved silhouettes. So it's not about sun setting these, it's about right sizing them. And we asked our teams to accelerate our actions, as Matt spoke to in his prepared remarks of right sizing that inventory so that we can get back to running that complete and balanced portfolio. And so we're confident that we're making the right moves from a performance perspective and we're seeing some wins there, running and training that Matt touched on. And we're right sizing the three key franchises. And at the same time, starting to plant some newness in the sportswear side of our business with the Vomero 5, P6000, Shox. We touched on some of these Superfly, Air Max Muse, and Air Max 95. So, I feel like the teams are taking all the right actions against those key footwear franchises, right sizing the inventory, and getting back to running a relentless flow of innovative and coveted products. |
5,520 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Hey Lorraine, I'll just add that what I said in my prepared remarks was that, we intend to drive -- we've made really good progress over the past year and as Elliott came in, he challenged the teams to increase the pace at which we reduce the supply of those three franchises in the marketplace. And as a result of that, it had some impact on our Q4 headwinds that we talked about, but it will continue to be a headwind in fiscal year 2026. By the time we execute Q4, we expect that we will have reduced the contribution of those franchises by 10 percentage points as a percent of our overall footwear mix. And we intend to drive that down more in fiscal year 2026. When I think about it through the lens of channels, what I would say to you is that on the NIKE Direct side and the Digital side in particular, we're already taking action, as Elliott and I both outlined, to reduce the number of promotional days and to reducing the discounts that we see in the marketplace. The challenge we have in the near term is that, we were buying against a different plan. And so we've tightened the buys against NIKE Digital, but we really did that towards the end of summer and heading into fall. That inventory will not end up in the digital channel. We will directly transition it to our factory stores and we will clean it in a value channel like we typically do as we clean up the season. On the wholesale side, we're making investments and I talked about us needing to use the first half of fiscal year 2026 in order to be able to clean up the marketplace. And what I would tell you there is that, the combination of the actions that we're taking in digital, plus the actions that we've communicated and worked through with our partners, we're already starting to see fruit. And what I mean by that is, one, inventory of Air Force 1 is beginning to stabilize with retail sales for Air Force 1. But secondly, when you look at the order book in wholesale for our partners in North America, Maine, and APLA, we're seeing growth in the |
5,521 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | when you look at the order book in wholesale for our partners in North America, Maine, and APLA, we're seeing growth in the performance dimensions of our business plus newness in sportswear almost offset the declines we're managing in the classic footwear franchises. And that gives us a lot of confidence that our partners are coming behind us and that we are moving down the right path to affect the cleanup. |
5,522 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Operator: And our next question comes from the line of Brooke Roach with Goldman Sachs. Your line is open.
Brooke Roach: Good afternoon, and thank you for taking our question. Elliot, I was hoping to get your latest thoughts on innovation within NIKE. How do you feel about the strength of your innovation team and the pipeline ahead? And how are you thinking about innovating into some of the sportswear franchises as we look into fiscal 2026? Thank you. |
5,523 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yes, thank you, Brooke. Let me first start on innovation. When we think about innovation, we think about it really in two forms. We have long term, let's call it three to plus five years, and we have a dedicated team against that over at our LeBron James NIKE Sports Research Lab and what I would say a really confident in the team that we have there and not only the team but the work that they are doing long-term creating new innovation for our team. So that's a little longer term. I spent a lot of time with [John Hoke] (ph) and his team over there and excited about some of the products that are coming through the NIKE Sports Research Lab. Shorter term and more near term, again, I touched on it in my first answer and it's really coming back to driving newness and freshness against Performance and sportswear, men's, women's, kids, footwear, apparel, and accessories, not just footwear. We've got some really interesting innovation coming from apparel. I touched on it briefly in my prepared remarks around 24/7. And it comes out of our training line, but it is also viewed as sportswear. And there's some innovation there. And I'm really pleased with the sell through on 24/7 and the reorders that are coming on that from an apparel perspective. And then on a footwear perspective, we'll continue to right size the three franchise that I touched on. We still believe all three of them are meaningful products. And then you'll see us continue to invest in innovation around sportswear. And I touched on some of those products. The Vomero 5, P6000, Shox. Shox is having a really built into momentum. Air Max 95, etc. And I'll just close out here, Brooke. This week we had our Spring 26 product review where we bring all of our Geo partners here to the campus to go through our Spring 26 line. And what I'll tell you is, we are all excited about the products that are coming for Spring 26. We're starting to see our Win Now focus on accelerating our product portfolio against these five sports, running, basketball, football, |
5,524 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | to see our Win Now focus on accelerating our product portfolio against these five sports, running, basketball, football, training, and sportswear, paying dividends. I'm really excited about the work I saw there. And while I have you, I'll just add one other thing that I saw that I was excited about. We are also working on elevating the marketplace and the retail team's done some phenomenal work around elevating our presentation at both wholesale and physical retail. And so excited about some of that work. So overall, I'm confident that our innovation pipeline is there. We just now have to flow through it to get back to building the brand and the business. |
5,525 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Operator: And to our next question comes from the line of Aneesha Sherman with Bernstein. Your line is open.
Aneesha Sherman: Thank you so much. Elliot, I just want to follow up on the comment that you just made about the Spring 26 product review. Based on some of the comments earlier from Matt around performance growth almost offsetting classic declines, do you expect that inflection point to be in Spring 26? I know you don't have the orders yet, but is that when you expect performance growth to more than offset classics in your total wholesale order book to grow? And then, Matt, a follow-up on your comments on gross margins. You talked about wholesale liquidations at H1. I know you're not giving margin guidance for next year, but are you generally expecting gradual progression of gross margins through the year as some of those liquidations roll off and then you get a stronger order book in the second half? Thank you.
Elliott Hill: Let me -- here's -- we're absolutely gaining confidence in the product pipeline. In the fall, Matt already touched on some of the order book on fall in North America, APLA, and EMEA. So definitely gaining confidence around the order book fall holiday and then like I said this sneak peek into 2026. The key here though is how quickly we can clean up the marketplace. That's why you see some of the results that we have in Q4 and then resetting both the digital and physical marketplaces to receive this innovation, making certain that we present it in the way that we believe we need to present the product at point of sale, digital, physical, so that we drive the sell through. And so that's where we have the team's focus right now. The brand, I believe we've already started to invest in, we did that early. I see product coming now and that excites me and so I feel good about that. Now we've got to reset the marketplace and make sure that we get the sell through and it's that sell through that's going to continue to drive the order book and get us back to profitable sustainable growth. |
5,526 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Yes, and I just would add that, last quarter we said that the fourth quarter was going to have the largest, the greatest impact from the Win Now actions that Elliott outlined. And we continue to believe this is true and it's on our plan. But what we can also tell you is that we now expect Q4 to reflect the largest impact from these Win Now actions. And that the headwinds to revenue and margin we expect to moderate from there. And so, how I think you translate that, Aneesha, as you start to look forward is, we've tried to lay out each of these actions and the implications that they have as we start to think about heading into 2026. And we expect that these headwinds will continue in 2026. And as Elliott referenced, while we're going to have positive things beginning vis-a-vis greater full price selling in digital, and we're going to have a clean and full price order book with our wholesale partners, we are going to continue to be liquidating inventory. And we expect that that's going to take us several quarters to work through. But the reason why we're confident in it is because we know we'll be liquidating it through the channels where we're used to liquidating that inventory. So we will continue to be transparent as we've got greater visibility as we get into fiscal 2026. But we're still in the early days of executing against these partnerships. And I'm sorry, we're still in the early days of executing against these priorities. And we remain committed to providing guidance and financial updates every 90 days.
Operator: And your next question comes from the line of Simeon Siegel with BMO. Your line is open. |
5,527 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Operator: And your next question comes from the line of Simeon Siegel with BMO. Your line is open.
Simeon Siegel: Thanks. Hey, everyone. Good afternoon. Elliott, I'm curious, how are you going to balance the promotional, just like as you think about the presentation and bringing out promotions at the same time that it's clear we can hear your excitement around the new product and your amplifying storytelling, just from a consumer's perspective, how do you tell them this exciting story while still clearing the product? So how are you going to protect that and maybe segment that? And then Matt, it seems operating overhead versus demand creation trajectory flipped in recent years. So as you're re-embracing wholesale, as you're re-embracing elevating, any thoughts as to just the right level, long-term of overhead versus demand creation as the rate of sale. Thanks, guys. |
5,528 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yes. Simeon, I think I'd be fairly brief here. Matt touched on some of the headwinds to the P&L, and one of them is us taking products -- we're returning products from our wholesale partners. So we're bringing the product that's not selling out of the market and then we will liquidate that to our value stores, NIKE value stores, to make room for the new innovation. And so -- and it's already starting -- and by the way, we're doing the same thing not only in a physical space, but we're also doing it -- excuse me, we're doing it in a digital space as well. We touched on how we've already moved NIKE Direct, Digital to a full price presentation, really elevating the assortment, the presentation, the user experience. And so, we're moving the -- both digital and physical owned and partnered retail floor sets to full price as quickly as possible. And then we'll use the value channels to move through the excess inventory. I think the last -- I'll just kind of finish here, the best example of that is how we're going to reset running. We've had some great examples of Peg Premium this quarter, Vomero 18 this quarter, both new innovations with great storytelling, great presentation. And we've had wonderful sell-throughs on those. And then you'll see that Simeon continue to flow into fall and holiday of Q1, Q2 of 2026 with a full range of product in running across three different silos of running, Vomero, PEG, Structure, three different price points, trail running, and then of course our racing flats. And that was one of the floor sets that I saw over at the Spring 26, And again, it looks amazing. So we're trying to get our marketplace to full price as quickly as possible and feel like the teams are moving with a sense of urgency. |
5,529 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Yes. And on the SG&A side, I've said for a couple quarters that we continue to manage our expenses and what I meant by that specifically was overhead tightly. While we accelerate investment in demand creation and so our demand creation being up high single digits, 8% this quarter, is truly a reflection of Elliott coming in and challenging the team to elevate our storytelling with impact. And it's the easiest lever for us to pull. And the team mobilized around the Super Bowl and the All-Star weekend and the product launches for Peg and Vomero, but also the way that they executed on the ground those activities in the cities in which we were focused. As we look forward, I think we're going to continue to manage expenses tightly. I think that part of what you're seeing this quarter in the double digit decline in operating overhead is some of the variable expense from Direct coming down, flowing through the P&L. You're also seeing the great work our teams have done from a productivity perspective in managing against some of the productivity goals that we had set several quarters ago. If you look at our operating overhead growth, excluding the restructuring impact in the prior year, it was down 3%. And we're focused on ensuring that we invest behind our sales organizations, our key city teams on the one end and on the other end making sure that we've got the right resources and product and in innovation. And so we'll continue to do that and we'll continue to try to do it while we manage expenses tightly as we look forward to returning to growth.
Operator: And your next question comes from the line of Alex Straton with Morgan Stanley. Your line is open. |
5,530 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Operator: And your next question comes from the line of Alex Straton with Morgan Stanley. Your line is open.
Alex Straton: Thanks so much for taking the question. I just wanted to focus on wholesale here. And maybe for Elliott, as you've kind of returned to that channel and gotten back in the mix, I'm just curious, your biggest learnings there, any surprises of the upside or downside versus how you've historically operated there with all your knowledge? And maybe then for Matt, you just mentioned wholesale discounts as a headwind, which should continue. Are historical wholesale margins still in view? Are those structurally lower? Just curious for your latest thoughts there. Thanks a lot. |
5,531 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yes, thank you, Alex. It’s maybe a surprise. We were probably working probably two siloed, direct versus wholesale. And again, I think to really drive the potential of our brand and our revenue and to meet consumers' needs, it's got to be integrated. It's got to be an aligned approach to both direct and wholesale, digital and physical. It all has to work together in a consistent ecosystem. And so, I'm really driving hard [indiscernible] integrated consumer-led marketplace, let the consumer decide where they want to choose to shop. May 2 moves, Craig Williams and I, we've put in place two new leaders, one in NIKE Direct, Shannon Glass, and then the other one in sales, Erica Bullard, both long-term industry veterans and NIKE veterans. In fact, we put them sitting next to up on our floor together. They have offices right outside of one another and they walk hand-in-hand and making certain like literally almost physically. So I told them those two have got to walk together everywhere they go and make certain that we stay aligned. And I think they're doing a tremendous job of really making certain that we have an integrated approach to the overall marketplace. So I'd say that's probably number one. Number two, we just got out of a rhythm of working closely with our wholesale partners. That was a bit of a surprise, and we are quickly getting back to -- we've got cross-functional teams, we're having key account planning meetings now with our wholesale partners. We're working through unaligned growth plans. We're working on consumer right assortments in the right depth. We're working now to elevate the presentation of our brand. And you know all too well when we have beautiful, innovative product and we elevate the presentation, it really helps sell through the product and marketing support. So again, I'm confident in the progress we're making. It's going to take time to build back all of the teams around the world. And that's why we have the three key countries where we're trying to focus, United States, |
5,532 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | all of the teams around the world. And that's why we have the three key countries where we're trying to focus, United States, China, and the UK, so that our teams know where we're going to focus our investments and resources. So all in all, the wholesale partners, they want and need us to get back to be a NIKE. |
5,533 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: And from a margin perspective, what I would say is that, over the past several years, Alex, the profit pool in wholesale has been relatively volatile. There's been a lot of things that have happened with supply chain disruption, ocean freight rates moving, the supply demand imbalances. And as a result of that, we've all navigated through many things in order to be able to manage the profitability of the channel. I think one of the things that we did a couple of years ago as we were seeing a significant demand versus supply imbalance, meaning an incredible amount of demand and less supply, is we actually lowered our wholesale discount rates in order to offset other headwinds that we were dealing with from a freight and transportation perspective. And so we are investing in commercial terms, but we're putting them back to historical levels. And so -- and we believe that by doing that, we'll be competitive. It will enable us and our partners to have mutually profitable businesses and also have the capacity that we need in order to be able to invest in the presentation of our brand at retail, which is ultimately what wins at the end of the day.
Operator: And your final question comes from the line of Randy Konick with Jeffries. Your line is open.
Randal Konik: Yes, thanks a lot and good evening. I guess Elliott, maybe give us some perspective. I think you spoke about a lot of things you're doing with urgency in China, but maybe give us a progress report on where you see the different geos from all these strategies you're undertaking. Give us some perspective where you're furthest along -- we're furthest along. That'd be very helpful. Thanks. |
5,534 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yeah. I think the key here, Randy, is as we think about our overall portfolio, is that we have 190 countries that all roll up to four different geographies. And we're working closely with the leaders of each of the geos and countries to implement the Win Now strategy. Because again, the strategy works no matter if you're in the United States or in Japan. It all goes back to putting the consumer at the center, right products, storytelling, marketplace. And so, Matt in his prepared remarks touched on APLA, EMEA, and North America being where they are in almost -- in terms of futures in performance and looks of sportswear offsetting. And so, we're, I think, making progress in each of those three geos. In terms of China, here's what I'd say about China. We remain committed to China. We see the long-term opportunity there. There's 1.3 billion consumers, and it's our opportunity. And what we've always done there is to invite and inspire those 1.3 billion consumers into sport, fitness, and the lifestyle of sport. And our team is doing a good job there. We've also made some significant investments in China, whether it's around some of the big teams like the national basketball team, the track and field team, and the football team. So we've made big investments there. We've got now a product creation arm that we call Geo Express Lane in China. So overall, I think we've made the right investments. What I will say, I spent some time over there in December. I hadn't been over there in a while. The competition is a bit more aggressive than I had -- when I remembered it four and a half years ago. And so we've just got to accelerate our pace. Good news is, we're starting still as the number one brand there. We're working closely with Angela and her team to implement these Win Now strategies. We're cleaning up the promotional marketplace just like we're doing everywhere to make room for new innovation. We're getting back to elevating NIKE Direct and Digital, and then working closely with our two big partners to |
5,535 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | new innovation. We're getting back to elevating NIKE Direct and Digital, and then working closely with our two big partners to make certain that we're investing in consumer-led concepts with a focus on performance, running, training, basketball, Jordan, ACG, put the right assortments, depth, presentation, all the things that I've talked a lot about. But in the end, I believe we're taking all the right actions and we're confident in the long-term opportunity in China. |
5,536 | NKE | 3 | 2,025 | 2025-03-20 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: And when you look at the financial performance for China in the quarter, what I tried to highlight was the amount of actions that we took in the quarter between marketplace returns, rebates, and also some investments that we're making to liquidate inventory. And given that it's a mono-brand market, as Elliott mentioned, it's going to take us time to execute the Win Now in China. So we went aggressive because the faster we can clean up the marketplace and create the capacity and the space to present the new product stories, the new product assortments that we're excited about that are coming, the quicker we're going to create energy with consumers, that's when we should see traffic start to improve and we should start to build more momentum in that marketplace. So as we look at that, we just expect it's going to take us some time to be able to execute this.
Operator: And ladies and gentlemen, that concludes our question-and-answer session as well as today's conference call. We thank you for your participation and you may now disconnect. |
5,537 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Operator: Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2025 Second Quarter Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Paul Trussell, Vice President of Corporate Finance and Treasurer. Now, I would like to turn the call over to Paul Trussell. Please go ahead, sir.
Paul Trussell: Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s fiscal 2025 second quarter results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill and our CFO, Matt Friend. Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE's reports filed with the SEC. In addition, participants may discuss non GAAP financial measures and non-public financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website investors.nike.com for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency-neutral, unless otherwise noted. We will start with prepared remarks and then open up for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thanks for your cooperation on this. I'll now turn the call over to NIKE, Inc. President and CEO, Elliot Hill. |
5,538 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Thank you, Paul. Hello everyone and happy holidays. In my first call, I want to start by saying how energized I am to be back at NIKE, working alongside my teammates. I look forward to the journey that lies ahead for all of us. When I retired in 2020 after 32 years, I continued to stay in touch with many of my teammates and cheered them on from the sidelines. Why? Because I have an irrational love for this company. I know NIKE inside and out, take pride in what the brand stands for and want to see the company succeed. And in a moment where our team, brand and business are being challenged, my singular focus is to help get us back on track to get back to winning. Today, I'm going to share what I've seen and heard in my first two months. I will then outline some of the immediate moves we're making to reposition the business. I'll tell you this. We, the entire NIKE team, feel the sense of urgency here. My full leadership team and I went on the road the past few weeks to meet our teammates, partners and consumers to get a firsthand view of our brand and business. We went to LA, New York, Amsterdam, London, Paris, Shanghai, Beijing. Together, we walked the high streets and shopping malls of those cities to see how consumers are experiencing our brand at retail. I met with key wholesale partners in each geography, all of which I already know and have developed deep relationships with over the years. I met with the commissioners of the NFL, NBA and WNBA, MLB and NWSL, the heads of the top NCAA conferences and teams like PSG, and past and present athletes like MJ and Ronaldo to Sabrina, A'ja and Erling. I visited our distribution centers in Memphis in locked on, had calls with our top five manufacturing partners to understand the evolution of our supply chain, as we've grown the business. It was important to me that, I spent my first 60 days personally collecting these deep and direct insights. Across the board, our partners are energized. The people I talk with are rooting for a strong NIKE. Because when |
5,539 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | insights. Across the board, our partners are energized. The people I talk with are rooting for a strong NIKE. Because when Nike is at its best, we bring excitement. We invite consumers into the world of sport and sport culture. And when we do that, we help to grow the overall marketplace. That's good for consumers, that's good for our partners, and that's good for NIKE. The consistent feedback we've heard is pretty simple. Let's see more of NIKE being NIKE. And that starts with leveraging all the advantages that make us great. Three of the world's most iconic brands, a dominant roster of athletes, teams and leagues, unmatched patented innovation, a deep catalog of products at every price point, teams positioned to serve consumers across 190 countries, a full integrated marketplace across multiple channels, strong longstanding relationships with leading suppliers and manufacturing partners and most importantly, passionate, highly talented and committed teammates. Lately, we haven't been maximizing these strengths. From everything I heard and observed, there are clear themes about the recent state of our business and where we need to go. I'll start with a high-level observation. We lost our obsession with sport. Moving forward, we will lead with sport and put the athlete at the center of every decision. The sharpness in each sport is what differentiates our brand and our business and fuels our culture. Another observation is that the reliance on a handful of sportswear silhouettes is not who we are. We will get back to leveraging deep athlete insights to accelerate innovation, design, product creation and storytelling. Sport is what authenticates our brand. I also see that we've shifted investments away from creating demand for our brand to capturing demand through performance marketing for our digital business. We will reinvest in our brands to create stories that inspire and emotionally connect with our consumers during important sports moments and critical product launches. When visiting our teams around the |
5,540 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | connect with our consumers during important sports moments and critical product launches. When visiting our teams around the world, it was clear, centralization has impacted the resources we have in key countries and key cities. We will rebalance resourcing and empowering our teams on the ground to win with the everyday athletes and influencers. My last observation, prioritizing NIKE digital revenue has impacted the health of our marketplaces. We will build back an integrated marketplace. Across NIKE direct and wholesale, our marketplace will be consumer-led, putting our best product and presentation in the path of the consumer, wherever they choose to shop. And ultimately, with SportsStar, North Star, we will reenergize our culture and identity. We believe, we have one of the strongest mission statements of anyone and that is, to bring inspiration and innovation to every athlete in the world. To me, inviting 8 billion athletes into sport is a pretty powerful purpose. One question to know you want to ask me is, if we have the talent at NIKE, and are they motivated? The short answer to both is, yes. I've grown more and more confident as I've traveled around the world and saw our teams engaging with each other, with our consumers and with our partners. It's also been great to see how much expertise we've added since I've been away. In spaces like supply chain, product creation, technology, materials, sports science, you name it, our talent is world-class. Everywhere I've been, the teams are inspired and ready to go. I feel the optimism. We will win and we will do it as a team. What our teams right now need is clear direction and focus. We built this company on the guiding principles of world-class management of product, brand and marketplace. We create innovative and coveted products, tell emotional inspiring stories through our brand and execute in a way that grows the entire marketplace, digital and physical, wholesale and NIKE direct. My leadership team and I have already identified key near-term actions in |
5,541 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | digital and physical, wholesale and NIKE direct. My leadership team and I have already identified key near-term actions in each area and we're going to move fast. First, in product, we're getting sharper on specific sports. We're shifting in shifting into sport-led teams segmented by men's, women's and kids and we call each of them fields of play. And it is a segment to grow approach. Throughout our history, we've utilized inflection points to further segment our businesses to unlock the next wave of growth. We will do this by empowering more nimble cross functional teams to assess the needs of sport-specific athletes by gender. The approach enables the teams to identify new opportunities, fuel innovation and drive incremental growth by sport and by gender. Breadth and depth and how we orchestrate our complete product portfolio have always been strengths of NIKE. We will return to the discipline of franchise management that I was a part of for so many years. We've already started managing the inventory in our marketplaces, and will move faster to return to a pull market for our largest classic footwear franchises. At the same time, the team has been planting the seeds of the next franchises that will fuel growth. In the quarter, some of our most sought after products are franchises that are distinctly NIKE, the Pegasus 41, NIKE Shox and the Kobe lineup. And we're building anticipation for what's ahead, unveiling the Vomero 18 and Pegasus premium to passionate runners at the running event in my hometown a few weeks ago. There's still work to do in rounding out the portfolio, but I'm really encouraged by the innovation coming from our fields of play in the next several seasons, especially in the high volume areas like running, training, sportswear and core product and the Jordan brand lineup. Turning to the NIKE brand, there are moments when we need to create impact that's felt around the world and day-to-day work that connects emotionally with local communities. We will deliver bold creative marketing that |
5,542 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | the world and day-to-day work that connects emotionally with local communities. We will deliver bold creative marketing that leverages our athletes in sport moments and drive the ground game authentically in neighborhoods. To do that, we're going to be much more intentional about investing to move the brand forward. We're already moving in that direction. The marketing team delivered moments this quarter that got us back to owning the conversation in sport. From the Liberty's WNBA championship to the Dodger's World Series win to Saquon Barkley's reverse hurdle, to City Takeovers at the Berlin, Shanghai, New York City and Chicago marathons. We're also going to continue to be aggressive in sports marketing. In just the last 60 days, we've announced the re-signing of the NBA and the WNBA, the Brazil Football Confederation, FC Barcelona and last week, the NFL. We drive growth through sports most iconic partners. Their athletes are the creative fuel for our brand. The power our innovation agenda, our brand voice and our revenue. Inspiring the consumer includes being part of the active communities who run, train and compete locally. It's about showing up and building relationships every day with athletes and influencers. My visits to the GEOs the past few weeks only reinforce my conviction that we need to get back to empowering our teams in key countries and key cities. I know from my years of working in our geographies, they're the ones creating emotional consumer connections in their neighborhood they're the ones identifying the insights that inform our offense. We will resource our key country and key city teams to create stronger consumer connections, build relationships with athletes, influencers and partners and unlock incremental growth for our brand and business. We're optimistic about the actions that are already underway in product and brand but we're still in the early innings of elevating the marketplace, both in NIKE direct and with our wholesale partners. What I've seen is traffic in NIKE direct, digital |
5,543 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | the marketplace, both in NIKE direct and with our wholesale partners. What I've seen is traffic in NIKE direct, digital and physical, has softened because we've lacked newness in product and we're not delivering inspiring stories. The result is, we've become far too promotional. We've moved to a pushed model. Entering the year, our digital platforms were delivering roughly a 50/50 split of full price to promotional sales. The level of markdowns not only impacts our brand but it also disrupts the overall marketplace and the profitability of our partners. We will return NIKE direct digital and physical to premium destinations that lead the sports industry. They'll elevate the consumer experience and be the ultimate representation of the NIKE brand. It's where we'll offer our most complete assortments, tell deep product stories and share our passion for sports. Being premium also means full price. We'll focus promotions during traditional retail moments, not at the consistent levels we are today, and we will leverage NIKE Value Stores to profitably move through any excess inventory. The final action we prioritize is building back and earning the trust of our key wholesale partners. Some partners and channels feel we've turned our back on them and we stopped engaging consistently. I've connected with many of them directly. Ed and Lauren at Dick's, Regis and Mike at JD Sports, More Elliott, Foot Locker, Heinrich at the Deichmann Group, Michael at Sports Direct, Mr. Yu at Top Sports, Mr. Yu and Mr. Wang from Kaohsiung and Juan Carlos at Enova Sport. They're all encouraged by our commitment to delivering new innovative product, telling emotional and inspiring stories and elevating NIKE Direct. Their confidence is building in our product pipeline and they welcome the closer collaboration, as we invest more in their business. We know our sales teams will have to earn every open to buy dollar, but we're investing to make sure our partners feel supported. We'll give them access to our best products and the breadth and |
5,544 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | but we're investing to make sure our partners feel supported. We'll give them access to our best products and the breadth and depth they need, educate their teams on the latest NIKE innovation and provide them with the marketing support both in store and out of home. We'll do more than just sell in our products. We'll actively support mutually profitable sell through. Simply put, we will win what our partners win. Before I hand it off to Matt, I just wanted to say, it's been an incredibly rewarding first two months. It feels great to be back with my NIKE teammates. This isn't going to be easy but we're ready for the challenge. After spending so much time with my team the past few weeks, I'm confident, we are all aligned and focused on the areas that will make the most immediate impact. I'll list the near-term priority actions again, ignite our culture through a focus on obsessing sport and getting back to winning, accelerate a complete product portfolio, driven by athlete insights through sport led fields of play, increase investment in our brand to deliver big, bold marketing statements, invest in and empower our teams in key countries and key cities to win the ground game, elevate the marketplace through a more premium Nike Direct and an unwavering commitment to our wholesale partners. Some of these actions are already underway and some need to move faster. And I will continue to evaluate and assess what is needed. I recognize that some of these actions will have a negative impact on our near-term results. But we're taking a long-term view here. We're making the decisions that are best for the health of our brand and business, decisions that will drive shareholder value. I strongly believe NIKE's path to sustainable, profitable growth will be through sport. And with that, I'll turn it over to Matt to cover some of the specific quarter results and our financial outlook, before we take some questions. |
5,545 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Thank you, Elliott, and hello to everyone on the call. To start, our Q2 financial performance largely met our expectations, as we continue to make progress repositioning our business. Today, I will focus my remarks on our recent performance and outlook. First, I will start by reviewing our Q2 financial results. Then I will go deeper into our performance in the quarter, including marketplace trends, portfolio highlights and operating segments. And last, I will review our near-term outlook, including the strategic actions introduced by Elliott to accelerate our pace in stabilizing the business and reigniting brand momentum. This quarter, revenues were down 8% on a reported basis, and down 9% on a currency-neutral basis, reflecting ongoing headwinds from our franchise management actions. We continue to drive the biggest reductions to our classic footwear franchises on NIKE Direct, which was down 14% with NIKE Digital declining 21% and NIKE Stores declining 2%. Wholesale was down 4%. Gross margins declined 100 basis points to 43.6% on a reported basis, due to higher markdowns on NIKE Direct, wholesale discounts to liquidate inventory and channel mix headwinds, partially offset by lower product costs and strategic pricing actions. SG&A was down 3% on a reported basis. While we increased investment in areas such as sports marketing, this was more than offset by lower wage-related expenses and timing shifts in other demand creation expenses. Earnings per share was $0.78. Now, let me go deeper into the quarter's performance. Q2 marketplace trend largely reflected the challenges that Elliott outlined, with traffic and retail sales across the marketplace falling below our expectations, especially in September and October. In November, we saw momentum build with digital and physical traffic inflecting positive, especially around the quarter's biggest consumer moments. In North America, Black Friday week was our largest demand week ever on NIKE Digital with sales up double-digits. In Greater China, our 11/11 |
5,546 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Black Friday week was our largest demand week ever on NIKE Digital with sales up double-digits. In Greater China, our 11/11 performance exceeded plan. However, on NIKE Digital, our off price mix was up high single-digits versus the prior year with performance marketing increasing over the same period. As Elliott said, NIKE Digital has become a platform where we have been capturing demand and competing with our wholesale partners rather than creating and growing demand for our brands. This is why we must elevate the consumer experience, grow organic traffic and drive full demand. Next, inventory was flat versus the prior year. as elevated supply in North America and Greater China was offset by declines in EMEA and APLA. Footwear inventory declined, while apparel and accessories inventory increased to support marketplace growth. On a year-over-year basis, these trends were partly driven by timing-related factors. That said, inventory levels are higher than we would like, especially given recent sales trends on NIKE Direct. Partner-owned inventory declined versus the prior year. We took some steps this quarter and we plan to accelerate inventory actions in our second half to drive a return to a healthy marketplace. In particular, we are moving aggressively to reduce aged inventory, adjust supply with demand on NIKE Digital and ensure we have marketplace capacity for our newest product assortments. Turning to our portfolio. This quarter showed progress in key areas, especially as our teams get back on the offense and support with consumers. Overall, our sport performance field of play grew year-over-year, offset by a double-digit decline in sportswear. In training, men's was up high teens, women's up high single-digits and kids up high single-digits. In Global Football, men's grew low single-digits and kids grew high teens. In basketball, women's grew strong double-digits and kids grew low teens. And in running, men's was flat and women's up low to mid-single digits. In addition, we took another step forward |
5,547 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | low teens. And in running, men's was flat and women's up low to mid-single digits. In addition, we took another step forward shifting our product portfolio by reducing the proportion of our business driven by our classic footwear franchises. For Q2, these franchises again decelerated faster than the overall business and at a rate greater than the first quarter. As I said last call, we expect the impact of these shifts to continue for the next few quarters. With that, let me turn to our operating segments. In North America, Q2 revenue was down 8%. NIKE Direct declined 15%, with NIKE Digital down 22% and NIKE stores down 3%. Wholesale declined 1%. EBIT declined 10% on a reported basis. Highlights in the quarter included growth in kids with strong momentum in apparel and performance footwear. Men's and women's training drove strong growth. And in basketball, Ja grew double-digits, Kobe became the market's largest signature franchise, with demand far exceeding available supply. And Sabrina 2 made a statement as the NBA's second most worn sneaker this season, behind only the Kobe 6. Throughout Q2, we positioned NIKE as the branded athletes around key sports moments. Our Winning Isn't Comfortable running campaign won Ad Age's Best Ad of 2024, as our ground game built momentum at the Chicago and New York Marathon. As the NFL season got underway, our Kobe release drove our largest cleat shock drop in NIKE history. And when the New York Liberty clinched the WNBA championship and my L.A. Dodgers Won the World Series, our brand storytelling owns the moment. In EMEA, Q2 revenue declined 10%. NIKE Direct declined 20%, with NIKE Digital down 32% and NIKE stores up 3%. Wholesale declined 4% and EBIT declined 10% on a reported basis. We continue to build momentum in sport performance led by strong growth in men's and kids global football. Men's and women's running return to growth, and all three of our top performance franchises in EMEA, Mercurial, Pegasus and Phantom grew double-digits. In sportswear, we are seeing momentum |
5,548 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | top performance franchises in EMEA, Mercurial, Pegasus and Phantom grew double-digits. In sportswear, we are seeing momentum from newer franchises, including shocks, Vomero 5, LD-1000 and P-6000. In addition, we moved first in EMEA to reposition NIKE Digital as a premium platform. This quarter, full price realization improved with a strong double-digit decline in off-price sales. While we are seeing near-term traffic impact as we reduce promotional activity in paid media, we believe these shifts will elevate the total marketplace over time. In Greater China, Q2 revenue declined 11%. NIKE Direct declined 7%, with NIKE Digital down 4% and NIKE stores down 8%. Wholesale was down 15%. EBIT declined 27% on a reported basis. In Q2, we experienced another quarter of retail traffic declines in a difficult macro environment. This quarter also required higher markdown activity to drive sell-through and inventory velocity, which negatively affected gross margins. In a competitive environment, NIKE's focus is on serving consumers with product innovation and brand inflation and fueling the growth of sport in China. This quarter, Ja 2 launched with strong sell-through. Pegasus 41 top sales in women's running and new ACG apparel releases created social bus. We also continue to see strong full price demand with lower markdowns and higher margins for our locally designed Express Lane products. This fall, more than 250,000 runners joined us for the Shanghai marathon. In addition, we hosted marathon, our Eliud Kipchoge for community events, school visits and a run along the Great Wall to inspire the next generation of runners in China. While near-term conditions are challenging, sport continues to grow in China, and we are addressing our current headwinds to reignite brand momentum and a healthy pull marketplace. In APLA, Q2 revenue was down 2%. NIKE Direct declined 4%, with NIKE Digital down 8% and NIKE stores up 2%. Wholesale declined 1%. EBIT declined 12% on a reported basis. Earlier on, we read consumer trends in Korea and |
5,549 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | stores up 2%. Wholesale declined 1%. EBIT declined 12% on a reported basis. Earlier on, we read consumer trends in Korea and Japan and moved quickly to diversify our sportswear footwear portfolio. Our mix of classic footwear franchises in APLA is below our global business and new styles are resonating with consumers. Our look of running franchises are up triple-digits and new releases like City and Air Max Muse drove positive consumer response. In addition, we drove strong growth in men's and women's training and kid’s global football as men's and women's running return to growth in the geography. Now let me turn to our financial outlook. As I said last quarter, we intend to continue providing quarterly guidance during this period of transition. Let me start first by providing some additional color and context. Elliott has now outlined certain strategic actions to reposition our business and reenergize NIKE brand momentum through sport. Some of these actions have been in motion, and we are accelerating the pace. Others are new. More specifically, we are shifting NIKE Digital to a full-price model and reducing the percentage of our business driven by promotional activity. We are also reducing investment in performance marketing, which will reduce paid traffic. This will require short-term liquidation of excess inventory through less profitable channels. We are creating capacity in the marketplace to sell in seasonal newness and innovation for fall and holiday '25. This requires additional investment in marketplace returns, higher wholesale discounts to liquidate excess inventory and to win back shelf space as well as higher promotions to accelerate volume through our NIKE factory stores. We are targeting a significant reduction in weeks of supply of our classic footwear franchises over the next few seasons, with timelines varying by franchise, channel, market and geography. As a result, summer order books will be down versus the prior year. We are increasing brand marketing activity to support key product |
5,550 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | summer order books will be down versus the prior year. We are increasing brand marketing activity to support key product launches and upcoming sports moments. Investment in sports marketing is also increasing with our recent long-term partnership extensions. And we are investing to rebuild our key city offense, our sport by consumer field of play and our commercial teams to serve our retail partners. We believe the strategic actions that Elliott has outlined are the right moves for NIKE to create better balance in our business and to reignite growth with our wholesale partners in an integrated marketplace. But over the near-term, the net effect of these actions will result in lower revenue, additional gross margin pressure and higher demand creation expenses, with a greater headwind to the fourth quarter compared to the third quarter. Turning to our third quarter outlook. We expect Q3 revenues to be down low double-digits. This reflects initial steps on the actions outlined above as well as worsening foreign exchange headwinds, partially offset by a timing benefit from Cyber Week shifting into our third quarter. We expect Q3 gross margins to be down approximately 300 basis points to 350 basis points, including restructuring charges during the same period in the prior year. This reflects the actions described earlier to clean and to reset the marketplace. We expect Q3 SG&A dollars to be slightly down year-over-year, including restructuring charges in the prior year. We will continue to tightly manage expenses while we strategically increased investment, as mentioned earlier. We expect other income and expense including net interest income to be $30 million to $40 million for Q3. With that, let me turn it back over to Elliott. |
5,551 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Thanks, Matt. Before taking questions, I wanted to share some additional thoughts. Matt and I have made it clear that we're repositioning the business to get back to driving a pull market for NIKE. Over the coming quarters, we'll provide more details on our plans and I commit to being transparent on our progress. We'll also share more specifics about the marketplace moves, stories and products. They give us optimism. But I want you to know my bigger purpose for being here. I rejoined NIKE to take our consumers, our amazing athletes and this great company to someplace new. I want to be a part of a team that celebrates the biggest sports moments in unexpected ways, supports record-breaking athletes create innovation that people couldn't even imagine, build new markets for sport from the ground up and most of all, a team that changes people's lives, a team that helps athletes at all levels all around the world to reach the full potential. It's an ambitious vision, but one that I truly believe only NIKE can deliver. Thank you, and let's open it up for questions.
Operator: [Operator Instructions] The first question comes from Bob Drbul, Guggenheim.
Bob Drbul: Elliott, welcome back. Congratulations and best of luck.
Elliott Hill: Thank you, Bob. I appreciate it. It's good to be back.
Bob Drbul: I guess, I appreciate all the commentary. The one question I'd love for you to elaborate a bit more on is the relationships and the reception by your retail partners, especially around earning back the shelf space that you've given up as a company over the last few years. |
5,552 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yes. Here's what I'd say. We are absolutely committed to getting back to leading and growing a consumer-led marketplace. And I think there's a couple of keywords there, obviously, key being consumer-led. The bottom line is there are consumers that want to shop NIKE Direct, consumers that want to shop wholesale, and there are consumers that want to shop digital and physical, and we have to show up with the best representation of the NIKE brand wherever that is, and we will do exactly that. In terms of our key wholesale partners, I've got a long history there, as you know, Bob, and I have deep relationships with all of them. I listed a number of them. And so we have worked to do. And I would say, especially in the specialty channels bond, running and football specialty, and we're committed to investing in there, we've already started to invest in those areas. We started to engage with our wholesale partners, bringing them out here for what we call key account planning meetings or bringing them out to have product engagement meetings for fall and the response has been very positive. If I had to sort of frame it up for you, they want us to get back to being NIKE, and they want us to have the unrelenting flow of innovative products that we bring across all sports and against all price points and they want us to get back to being -- to delivering bold brand statements that help drive traffic. When it's all said and done, they want and need from us is to drive mutually profitable growth for them and for us, and that's exactly what we're going to get back to. And we will -- the only way we're going to get back open to buy shelf space is to do the things that we've already laid out, paid up the marketplace, bring innovative coveted product every single quarter, bring the brand heat that drives traffic and drive sell-through. They're open, they're receptive and we're excited and looking forward to getting back in business with them. |
5,553 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Bob Drbul: And I guess one of the other meetings, I think you said you had -- was with the NCAA. Just curious if you think this is the year for the Ducks, are they going to win the college football playoff?
Elliott Hill: Bob, that's a trick question. My guess is I might have the founder on this call, I don't know. But I think where I sit today in the role, I -- it -- I better say I better go with the NIKE team. And by the way, with the number of NIKE teams we have in the playoffs, I like my chances. I'd like a few more of those calls or questions.
Operator: We'll take the next question from Michael Binetti, Evercore.
Michael Binetti: Elliott, welcome back, it's great to hear your voice. Elliott, do you think -- you gave us some commentary around how you're planning the near-term investments in the business. And Matt, you made some allusions to some of those investments continuing into the fall. As you look at your first 60 days and think about the path to getting this brand back to growth longer term that it deserves, what do you think are some of the most important things about how you phase the cost in bringing investments back into the business along the way and the pace of those investments along the way as you look to, I guess, returning to growth as we look past fiscal '25? |
5,554 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: We touched on in our prepared remarks, what we saw out in the market as we travel around. And first and foremost, we've got to get back to putting sport at the center of everything that we do. Our product management, we're starting to clean up what we have out in the marketplace. We're starting to shift dollars from performance marketing to brand marketing. We will invest our fields of play because that's where we drive our product innovation, our newness, our distinction and we will also invest in the brand. And then finally, which is demand creation, both from sports marketing and then just big, bold brand marketing efforts. And then we touched on what we call our ground game in key countries, in key cities. We'll speak later today with our teammates. But I think the easiest way to think about it, we can't do all of them everywhere. So we're going to focus in on five sports to start with, running, basketball, training, football and sportswear. And while we have 10 key countries and 12 key cities, we're going to focus our efforts on three key countries in five key cities. So, we're really going to narrow down and we'll pace and phase as we go throughout the next 18, 24 months or so. So I'm excited about the actions we're taking and the clarity we have about where we need to invest. |
5,555 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: And Michael, what I would add to that is you've seen us for a couple of quarters now tightly managing expenses as we have been prioritizing our investments in the brand and demand creation. The long-term sport partnerships, these assets like the NFL, the NBA, the WNBA, Brazil, these are long-term partnerships deep into the next decade. And I think that's a great example for you of our commitment to sport and to invest behind sport not only now but for the long-term. And so over the next couple of quarters, you will see our demand creation investment continue to go up. That's going to be a combination of sports marketing and our investment behind the brand. This quarter, our SG&A was down 3%, but our demand creation was up 1%, and we expect demand creation to continue to lead our SG&A growth over the next few quarters. The other thing I would just add is when I think of investment, I'm thinking up and down the P&L and we are making meaningful investments beginning in the third quarter to clean up the marketplace. That means liquidating inventory. That means our sales return reserves in order to be able to clear aged inventory, so we can create space to sell in our new assortments and the innovation that we're excited about in fall and holiday '25, and it also means planning for markdowns in our factory stores. And so that's reflected in the guidance that we provided for Q3, and we do expect that to continue for the near-term until we can get ourselves back to a balanced and repositioned business to drive growth looking forward.
Operator: From Bank of America, Lorraine Hutchinson has the next question.
Lorraine Maikis: You're accelerating a lot of the work around lifestyle in fiscal '25. But how much incremental pressure do you expect on 2026 sales? And based on your analysis of the pipeline, when will newness gain sufficient scale to offset that pressure? |
5,556 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Again, as we look at where we are today, we touched on it for a number of times already and the concentration that we have in a key franchise styles and one of the core competencies that we have in NIKE's franchise management and it's foundational to this company and what we will -- as we talked about, we're taking actions to reduce the amount of inventory in the marketplace, which then it opens up shelf space open to buy for a new innovative product. And I am excited about the product that is coming. We are -- we have three brands that we can drive from NIKE, Jordan and Converse. From performance to sportswear with over 10 different sports, men's, women's kids, footwear, apparel equipment, accessories and up and down price points. And I've seen now the product that's coming from our fields of play. I was able to sit through a fall '25 -- a few of the presentations with our key retailers and they're excited about the product that's coming and it will be led with running, training and sportswear. And again, I think the small cross-functional teams are doing a really nice job of now starting to flow innovative product into the marketplace. And that's the quickest way to return to health. |
5,557 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Lorraine, we took another step forward this quarter and those three franchises decelerated at a rate that was faster than the overall business for the second straight quarter, and the rate this quarter was greater than we drove in the first quarter. And so as I mentioned last quarter, that has had a disproportionate effect on the NIKE Digital business results because of the concentration of those franchises on digital. And so what we had highlighted was that these actions would result in a mid-single-digit headwind on our financials for the balance of this year. And with Elliott being 60 days in and looking at the current plans and where he wants to take our product portfolio, we have accelerated those actions. And so, I expect the impact to be bigger for the balance of this year. And getting very sharp and specific on reducing the weeks of supply over the next few seasons to ensure that across the entire marketplace, these franchises are back at a healthy full price level. I made a comment in my prepared remarks that summer '25 is down slightly versus the prior year and that reflects this accelerated level of actions that Elliott outlined. I'd note that even with these actions, we almost offset it by the contribution of newness and innovation. And so even that as a signal for me gives me confidence that the work we started over a year ago to build the pipeline is taking root with our partners.
Operator: Adrienne Yih from Barclays has the next question. |
5,558 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Operator: Adrienne Yih from Barclays has the next question.
Adrienne Yih-Tennant: Elliott, welcome. Look forward to meeting you. I apologize if my phone is crackly, sorry about that. I appreciate the notion of margins before sales. And so when we look at kind of what you're doing, you accelerate sort of the reset actions. When you get to the fall of next year, do you have the proven innovation at scale to replace what you are liquidating now? And then, Matt, is there a reset inventory provision that's happening right now in the gross margin -- excuse me and kind to wrap that all up, it would very much seem that you are going for those margins before sales. So when we think about FY'26, I think it would be rightfully the right thought to think that sales would be down again if you're going for margins as you say, healthy bedrock margins before you drive the top line growth? |
5,559 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Hey, Matt, how about I take the first part of it, I'll hit product and then. So we outlined the idea of fields of play and taking each of our sports and further segmenting them by men's, women's, kids and putting tight small teams against each one of those segments of business. That fortunately has already started over 12 months ago. And because of that we're starting to see those teams deliver the innovation, they're taking the insights from the consumers that they serve in each of those fields of play. And we're starting to see the product come through the marketplace and started in spring and summer. As it relates to fall, as you referenced, great confidence around running, especially on the footwear side of our business, structure Peg, Vomero, three different price points, a line-up that includes a really structural line-up, and we have a leading business in racing, both flats and spikes. Our training, of course, is led with Metcon and continues to be strength of ours in training along with our apparel that's coming along with that. We have some new concepts around comfort, style and performance. Basketball is another one that excites me, and it's maybe the best example of this field of play working. Let me start with men's and our portfolio. You have Jordan with Tatum and Luka coming and then the NIKE brand, of course, the LeBron, Kobe, Ja, Booker and a new GT series. So I'm really excited about the basketball line-up. What is really fun for me to see coming back now to see us running this tender offense. We've launched a women's basketball program, which I didn't think we'd ever do. Sabrina, Matt already touched on it, #2 shoe in the NBA and then we have A'ja and Caitlin coming back from behind -- and behind that. Sportswear, a new lineup around look at court, look at basketball, look at football, including the Field General. So net-net is the products coming, and we're gaining confidence with each season. |
5,560 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Yes. And from a financial implication perspective, Adrienne, I guess, a couple of thoughts. First, as I said, a number of these actions we had underway and Elliott has provided a perspective that we accelerate them. And some of these actions are new actions, like moving more aggressively to reposition NIKE Direct and NIKE Digital, in particular, as a premium channel. And so with him being 60 days in, we are continuing to take time to understand the impact of those actions. But we remain committed to being transparent and provide guidance on a 90-day basis. As it relates to kind of what's in the third quarter outlook and how quickly are we moving with revenues being down low double-digits and our margins being down 300 basis points to 350 basis points, we are certainly accelerating some of these actions. But some of these actions are going to take time to carry all the way through. And so our focus is on getting back to a healthy marketplace and getting back to a full-price business, both in our partners and importantly, in NIKE Direct because we believe that will elevate the entire marketplace and create a foundation for growth. We're very focused on our inventory because we know that a healthy inventory is absolutely critical for us in order to be able to present the right assortment for consumers and to give our new innovation and our new seasonal product, the best presentation across the entire marketplace. And so that's what's been reflected in our third quarter financials. And I'll just reiterate a point I made in my prepared remarks, which is I said that we expect a greater headwind in the fourth quarter as compared to the third. And that's because the timing of implementing these actions are different across different geographies and different time lines. You heard me talk about the product portfolio rebalancing being ahead in APLA or are repositioning the digital business being ahead in Europe. And so as we look ahead from what we can see to date in the fourth quarter, we expect the |
5,561 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | business being ahead in Europe. And so as we look ahead from what we can see to date in the fourth quarter, we expect the headwinds to be larger in the fourth quarter than the third quarter guide that we provided. |
5,562 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Operator: The next question is from Jay Sole from UBS.
Jay Sole: Elliott, you mentioned in your prepared remarks that you're willing to take some actions in the near-term that will hurt in order to do what's best for the brand and the company over the long-term. The history of NIKE is that the top companies always try to balance short-term earnings with sort of long-term investment. The question is how far are you going to take the actions in the short-term to really put the business on that sustainable path you're talking about to drive -- in other words, how long are you willing to sort of take the actions in terms of resetting the marketplace, making investments in key cities, rebuilding brand marketing. Is there a limit? And is there a sort of a balance you're thinking to strike? Or you want to go 100 percentage, do the right thing, whatever it costs to put the company back on the path to winning. Sorry, that's a long question, but hopefully that make sense. |
5,563 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: No worries. So here's -- I'd love for all of you to think about it. I wanted you to know we're acting with a sense of urgency. And you've heard Matt talk about the different moves that we're making around inventory, et cetera. And I think the biggest takeaway hopefully is that we're putting sport back at the center of everything that we're doing. Our products offense, we are going to lead with sport. And we'll do that through our sport field to play cross-functional teams. And you can see now already the investments that we've made there, and we'll continue to make there are starting to pay dividends as we roll it through spring and sort of '25 end of fall and holiday '25. From a marketing perspective, we will continue to invest in big, bold brand ideas. We touched on some of the activities that have already taken place and some of the -- excuse me, marketing campaigns the Winning Isn't Comfortable ad won an award at Ad Age for 2024 Ad of the Year. So feeling good about where we're heading. We've made investments in sports marketing, and we've continued to do that. And then, of course, through the marketplace. And investing in the marketplace is doing the things that we've already talked about, pulling inventory out, return to vendor, but it's also investing in new product, marketing, in-store presentation both at a strategic account level that covers an entire country and then down to the city level, which includes -- specialty accounts, which we are making some investments in running specialty , we started in North America. So I think it's going to take time, but I am confident that we are making the right moves and the right chips to drive this brand, this business forward. |
5,564 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Matt Friend: Jay, the way I think about the implications on our financials in the near-term. I break these actions down between two buckets. I would say there are near-term headwinds that we will endure as a result of the repositioning of our channel mix and our product portfolio. And those will create headwinds and are creating headwinds right now. But we expect that as we recalibrate the portfolio of both our channels, meaning NIKE Direct and Wholesale or our product, that those headwinds will end. And then we have transitory headwinds, which are the actions that we're taking to clean up the marketplace in inventory as well as some of the supply chain deleverage that we're experiencing as our sales decline which we would expect to recapture as our business returns to growth. And so I think that hopefully, that's a helpful way to think about what we're looking at here. And we're definitely focused on both of those dimensions and confident that these actions will reposition Nike and also provide opportunity for us once we've completed what we've set forward to do.
Operator: Next up is Matthew Boss, JP Morgan.
Matthew Boss: Elliott, so maybe could you help rank the fields of play opportunities you see by category. And then just on the long-term view, what's a reasonable timeline to realign inventory to pull market? And then after for the product pipeline and the marketing investments to return to sustainable profitable growth. |
5,565 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yes. So let me hit the fields of play, and we have a number of fields of play and we have a sharp focus on five. And we see those as our biggest opportunities from running to basketball to football, that's global football or soccer, training and sportswear. And we will break each one of those fields of play down by men's, women's and kids. And what we're most excited about is not only the product innovation that's coming out of there, but the merchandising opportunities that we have. So for example, there are moments when we need to show up as a running brand, footwear, apparel, accessories, men's, women's, kids, and there are moments when we need to show up as a women's brand. And this offense allows us to do both of those and will unlock incremental growth for both our brand and our business moving forward. So in terms of the fields of play, those are our sharp focus in the near-term. And we are learning and growing this offense and would be able to apply it to more sports in the future, and we're excited about it.
Operator: The next question is Jon Komp, Baird.
Jon Komp: I want to follow-up on the output sort of margin recapture potential, if you will. I'm just curious, Elliott, as you look at some of the moves in the past few years as the brand is focused on, where are the products being sold more in the digital channel, specifically. And today, if you look at the organizational structure throughout supply chain and distribution, are there sort of unique opportunities to become more efficient? Or is it purely going to be getting back to growth to scale some of the investments from the past few years? |
5,566 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: I just want to say, no question on growth certainly will help and I believe the moves and the confidence that the moves that we're making will help set us up to for long-term sustainable and profitable growth, the product, the marketing, the clean marketplace. One of the moves that I did make is -- one of the first leadership moves I made, I had Venky, who's now our Chief Supply Chain Officer reporting directly to me, he looks everything from factory transportation all the way through to logistics to the consumer. And it certainly will be -- I've only been here 60 days, but it will certainly be a focus as we move forward as an opportunity for margin expansion.
Matt Friend: And Jon, if you look over history, we've consistently been a double-digit margin company. And when I think of the actions that we're taking in the marketplace today, there are a number of opportunities as we look forward. Specifically, we talked several years ago about the profitability of selling a product through the digital channel. But that math is relying upon it being a full-price sale. And to take the point that Elliott made around the business being 50% full price and 50% off price today, the profitability of the channel has significantly been challenged over the past several quarters. And so in addition to cleaning up the inventory, there's certainly a margin rate benefit opportunity within NIKE Direct to run, albeit a smaller but a healthier and more profitable business. And that includes opportunities our teams are working on to continue to drive the cost of fulfillment down as well as being less reliant upon paid media and performance marketing in order to be able to drive the top line. But leveraging the investments that we're making in our brand to drive organic top of funnel traffic to us and to our partners.
Operator: Next up is Brooke Roach from Goldman Sachs. |
5,567 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Operator: Next up is Brooke Roach from Goldman Sachs.
Brooke Roach: Elliott, I was hoping you could speak to any specific actions that you'll be taking either in the North America or Greater China geographies as you look to accelerate some of these actions over the course of the next 12 months? |
5,568 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Elliott Hill: Yes. So I'll take North America first. We have a new leader. Tom Petty leading North America, he has a deep, long history with Nike and a lot of experience. He's led North America before and I can tell you that he and his team are being aggressive in all of the actions that we've outlined in terms of cleaning up the marketplace, building back the relationships with our wholesale partners, investing in the brand, elevating NIKE Direct and they'll start moving there in spring, so in January. And so resetting NIKE Direct, leveraging the relationships, investing in RSG, which is running specialty. We've invested in [Eakins ] on the ground game, investing in the brand. We touched on a bunch of that Liberty, Dodgers wins. And so the shift is going to take time, but I'm really confident in Tom and his team's ability to execute across product brand marketplace and to get North America back to growth. In terms of China, hey, we are all -- we continue to be excited about China long-term. There's 1.3 billion consumers and our biggest opportunity is to invite those consumers into the world of sport and the lifestyle of sport and to grow the overall marketplace. And when we do that, I like our chances of growing. We were just in China, and there's no question. It's also a promotional marketplace. The competitors have both international and local increased. And it's a place that I've spent a tremendous amount of time. I've been in China market since 2002 and had some deep experiences in China in 2006, '08, getting ready for the '08, '08 Olympics and led a reset plan in China, and a growth plan there. But in the end, I have confidence in the teammates to help get this business back to growth. It will start as it always does. With product innovation, and we are investing with China in product innovation, not only the product from the globe, but we have a local what we call GEO Express Lane. It's a local product creation team on their own, creating product for China. We also have a sports research lab. We call it |
5,569 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | It's a local product creation team on their own, creating product for China. We also have a sports research lab. We call it the NSRL, NIKE Sports Research Lab that is doing of China research, in terms of gate, foot form, et cetera. So we're making product of China for China and then big brand bold statements, Matt touched on some on the Shanghai Marathon, et cetera. And then I think our biggest after product becomes the marketplace. We have got to reset bigger bolder consumer-led NIKE concepts that represent the full expression of the NIKE brand, have the service and the experience that we expect that will drive the performance and the productivity of those doors. And the good news is, just -- I was over there and I met with Topsports and with Pou Sheng, our two biggest partners, and they're ready to go. So long-winded answer, but I think it all comes back to what we were talking to in both of these geographies. It comes down to product management. It comes down to brand management and it comes back to marketplace management. |
5,570 | NKE | 2 | 2,025 | 2024-12-19 17:00:00 | NIKE, Inc. | 291,981 | Operator: Now we'll hear from Ike Boruchow, Wells Fargo.
Ike Boruchow: Elliott, great to hear from you. Actually two questions, I think, for Matt. Just a follow-up on the guide. When you talked about the expense guide for the third quarter, I just want to make sure I understand. Is that relative to the $4.2 billion and expenses of last year because I know there was the restructuring charge that some of us took out. So just trying to understand the growth up slightly or down slightly is relative to what dollar number. And then just a follow-up to that is when you talked about greater headwinds relative to 3Q. I think that was in the sentence of talking about revenue, gross margin and demand gen spend, was the comment meant to absolutely all three of those line items? Or was it really meant for revenue or gross margin or something more specific?
Matt Friend: Yes. Ike, on your first question, the SG&A guide is related to the full amount, including the restructuring charge in the prior year. As it relates to your second question, the answer is yes. As I mentioned, these actions are happening on different time lines across different regions. And based on what we can see today, we think the net impact of these actions across revenue, margin and demand creation will be larger in the fourth quarter than they are in the third quarter. So the year-over-year impact is another way to take it is the year-over-year impact when you compare to the prior year will be more significant in the fourth quarter.
Operator: And everyone that does conclude the question-and-answer session as well as today's conference. We would like to thank you all for your participation today. You may now disconnect. |
5,571 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2025 First Quarter Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Paul Trussell, Vice President of Corporate Finance and Treasurer. Now, I would like to turn the call over to Paul Trussell.
Paul Trussell: Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s fiscal 2025 first quarter results. Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE's reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and non-public financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. Joining us on today's call is one speaker, NIKE, Inc.'s Executive Vice President and Chief Financial Officer, Matt Friend. We will start with prepared remarks, and then open up for questions. Today's call will be abbreviated as compared to past earnings calls. In order to allow as many of you to ask questions as possible in our allotted time, we would appreciate you limiting yourself to one question. I'll now turn the call over to Matt. |
5,572 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Thanks, Paul, and hello to everyone on the call. Before we get into a review of the first quarter, let me acknowledge that we are reporting our results in a transitional moment, as John retires as President and CEO; and Elliott Hill joins us as our new President and CEO on October 14th. First, we deeply appreciate John's contributions to NIKE. He has served on our Board, led our company through a global pandemic and meaningful supply chain disruption, accelerated our digital transformation, and initiated new NIKE community investments around the world. We thank him for all he has done to move NIKE forward. As we look ahead, we're excited to welcome Elliott back to NIKE. Elliott is a beloved NIKE veteran, who brings a powerful connection to our employees and culture, a deep love for our brands and a passion for sport. Over his 32 years with the company, he built a proven track record of leading our global teams, brands and businesses with significant expertise in delivering growth by bringing product and storytelling with impact into an integrated marketplace. Our Board believes that Elliott is the right leader to drive NIKE's next stage of growth. Having had the opportunity to work closely with Elliott for many years, he leads with a passion that inspires the best from the team. Our employees' response to this announcement has been tremendous. You can feel the energy and the enthusiasm walking around campus. And we've heard nothing, but excitement from our teammates around the world, including our alumni network, as well as our partners. We all look forward to working with Elliott as he leads NIKE's next chapter. Given our CEO transition and with three quarters left in the fiscal year, we are withdrawing our full year guidance. We intend to provide quarterly guidance for the balance of the fiscal year. This provides Elliott with the flexibility to reconnect with our employees and teams, evaluate the current strategies and business trends, and develop our plans to best position the business for |
5,573 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | and teams, evaluate the current strategies and business trends, and develop our plans to best position the business for fiscal '26 and beyond. To that end, we have also decided to postpone our Investor Day. Now let me turn the discussion towards our current business. NIKE's first quarter results largely met our expectations set last quarter. We are moving aggressively to shift our product portfolio, create better balance in our business, and reenergize brand momentum through sport. That said, a comeback at this scale takes time. And while there are some early wins, we have yet to turn the corner. Today, I want to provide a deeper insight into the trends we saw in our first quarter. Then I will speak to the portfolio shifts that we are driving and the implications for our near term performance. I will also touch on some of those early wins, including indicators to track our progress. And last, I will review our financial performance and Q2 outlook. Let's start with a deeper look into the first quarter. While Q1 revenue was largely in line with our plan 90 days ago, we delivered lower unit sales than we expected, partially offset by a higher ASP. Traffic declines across NIKE Direct were more significant than we anticipated. We saw particular softness in traffic on NIKE Digital, as well as in our partner stores in Greater China. As a result, retail sales underperformed our plan, including our wholesale partners, with slightly elevating marketplace inventories requiring higher levels of promotional activity in Q1 to drive conversion. This included the back-to-school period as our results underperformed the market. We saw store traffic improve in August and growth in factory stores in Q1, but the overall period fell short of our expectations. However, Q1 showed that we took an important step forward as we shift our portfolio to create better balance in our business. We have been intentionally reducing the proportion of our business driven by our classic footwear franchises, Air Force 1, Air Jordan 1, and Dunk. And as |
5,574 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | reducing the proportion of our business driven by our classic footwear franchises, Air Force 1, Air Jordan 1, and Dunk. And as expected, NIKE revenue in Q1 from these franchises decelerated, declining more than the total business, as we tighten marketplace supply. We expect this trend to continue tempering our reported revenue over the coming seasons. Our timelines differ across each franchise, each geography and each channel. Overall, we have taken the most aggressive actions in NIKE Direct and especially, Digital. In Q1, these franchises were down nearly 50% versus the prior year on NIKE Digital, while we saw much better sales trends in wholesale. So we are actively rebalancing product allocations to our highest traffic channel in order to maximize franchise health and full price realization. In the near-term, this will have implications for certain dimensions of our business. Our men's and women's lifestyle business was planned down double-digits in Q1, and we expect these declines to continue through the year. The Jordan brand was planned down double-digits this quarter, and we expect Jordan to be down at the same rate for fiscal '25. And we expect NIKE Digital to decline double-digits in fiscal '25 versus the prior year. All taken together, these trends drove a mid-single digit headwind on Q1 revenue. As we look ahead, we are working to position new products in the path of the consumer, create scale for new ideas, and drive more balanced marketplace growth. Partner feedback on our future product pipeline has been very positive. I had the chance to meet with many of them at our Partner Summit in Paris during the Summer Olympics and directly hear their response to the products and stories that we have coming in our second half. We also gave them a sneak peek to what is coming in fall '25, deepening confidence in our accelerated pace of innovation to build a more compelling future product pipeline. Progress with partners will be accelerated through new brand momentum and new energy with consumers. But the |
5,575 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | product pipeline. Progress with partners will be accelerated through new brand momentum and new energy with consumers. But the multi-brand environment is very competitive today and it will take time to expand market share. This was reflected in our spring '25 order books, which came in roughly flat versus the prior year, a little lighter than we had planned. Our teams are now hustling to close out the upcoming summer season, closely engaging our partners as we finalize bookings. Now let's turn to some of the early wins that we are seeing, especially, as our teams get back on the offense in sport with consumers. This quarter, we saw growth in multiple sport dimensions, an indicator that we are gaining traction. This was led by men's fitness, men's global football, and men's and women's running footwear. In addition, two of our largest performance franchises, Mercurial and Global Football and the G.T. series in basketball delivered double-digit growth across all channels. We are especially encouraged by the momentum building in our Running offense. This has been one of our toughest fights over the past few years and it is one of our biggest opportunities. Our team's focused here first in driving our comeback. And more recently, men's and women's running footwear delivered positive growth in Q1, a meaningful improvement versus the prior quarter. The order book looking forward is strong with spring '25 footwear units set to grow double-digits versus the prior year. In North America, we were up double-digits this quarter with running specialty partners, and our holiday and spring order books will build on that strength. We also just launched a new campaign, one of our biggest Running brand investments in years, which will carry into fall and holiday. So far, consumer engagement has been very strong. Meanwhile, our ground game activations are creating energy and running communities around the world. In addition, our Pegasus 41 launch showed the impact that we create when we launch new ideas at scale, delivering |
5,576 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | the world. In addition, our Pegasus 41 launch showed the impact that we create when we launch new ideas at scale, delivering mid-teens growth above last year's Pegasus model. And this is just the start, as we scale the franchise through multiple dimensions, Peg Trail, Peg Plus, and coming in spring, Peg Premium, which introduces visible full length NIKE Air with more energy return than ever. Most importantly, we are most optimistic regarding the full product pipeline in Running across footwear and apparel that we will bring over the coming seasons. This includes a new maximum cushioning system in an iconic line, blending comfort and style for our softest, smoothest ride yet, a premium model that combines high-stack ZoomX foam and Zoom Air for a new sensation that had test runners raving; a refreshed lineup of performance running apparel, including new women's led designs; the latest NIKE Trail models updated for even better traction and durability, and new franchises below $100 that scale innovation to more accessible price points. Looking more broadly across our product portfolio, particularly in footwear, we see clear indications of progress in accelerating newness and innovation. Q1 revenue from new footwear products was up strong double-digits versus the prior year. This includes multiple franchises that have scaled quickly based on unit growth over the past 12 months. For example, in performance footwear, Sabrina has grown roughly 5 times. Kobe has nearly quadrupled and Alphafly has almost tripled. Meanwhile, in lifestyle, what we call our look of running business, led by Vomero 5, V2K and P-6000 has grown more than 4 times over the past year. While this is not yet large enough to offset the declines elsewhere in our portfolio, we are gaining ground. As we look to the spring season, contribution from newness and innovation will take a significant step forward with growth in footwear units of mid to high-single digits versus the prior year. And over the coming seasons, we expect to see sequential gains and |
5,577 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | units of mid to high-single digits versus the prior year. And over the coming seasons, we expect to see sequential gains and the percentage of newness and innovation as a mix of our total footwear business. As we move forward, we are continuing to invest to grow, while staying disciplined on costs. For our teams, this means tightly managing operating overhead and reallocating resources to maximize consumer impact and growth. You saw that this summer with our Paris Olympics campaign, Winning Isn't for Everyone. We led with the voice of the athlete on sport's biggest stage, backed by one of our biggest brand investments in years, as NIKE athletes dominated the medal count. NIKE owned over 60% of total share of voice during the games, resonating especially deeply with our athletes and Gen Z consumers. Most importantly, this summer was just the start, with the investment lined up behind a steady cadence of bigger, bolder brand storytelling to come. In addition, we are investing with our partners to elevate and differentiate our brand in retail. For example, last year, we partnered with DICK'S Sporting Goods to introduce an elevated women's fitness concept, which is generating impressive year-over-year comparisons in pilot doors. We also teamed up with Foot Locker to introduce a new concept, Home Court, in their doors with a shared vision to deliver a fresh new multi-brand basketball experience. By bringing the best of NIKE, we create sport inspired distinction for consumers and deliver attractive returns for both NIKE and our partners. Together, we shape the kind of retail environments that drive competitive separation and segment the marketplace for growth, enabling us to serve consumers through strong assortments with full expression across each dimension of our portfolio. All told, we expect that the return to strong growth will take time, but we believe that we have all the right building blocks, especially, with Elliott now leading us forward. Now let me turn to our first quarter financial results. In Q1, NIKE, |
5,578 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | blocks, especially, with Elliott now leading us forward. Now let me turn to our first quarter financial results. In Q1, NIKE, Inc. revenue declined 10% on a reported basis, and 9% on a currency neutral basis. NIKE Direct was down 12% with NIKE stores up 1%, and NIKE Digital down 20%. Wholesale was down 7%. Gross margins expanded 120 basis points to 45.4% on a reported basis, primarily due to lower NIKE brand product costs, lower warehousing and logistics costs, and benefits from strategic pricing actions in the prior year. SG&A declined 2% on a reported basis, with accelerated investment in demand creation more than offset by a reduction in overhead expenses, primarily, driven by wage related savings. Our effective tax rate was 19.6% compared to 12% for the same period last year. Diluted earnings per share was $0.70. Next, let me turn to our operating segments. Given similar themes across many of our geographies, I will keep my comments here briefer than usual. In North America, Q1 revenue was down 11%, NIKE Direct declined 11% with NIKE Digital down 15%, and NIKE stores down 1%. Wholesale declined 11%, reflecting unfavorable shipping timing. EBIT declined 15% on a reported basis with gross margin expansion offset by higher investment in demand creation. This quarter's highlights included brand activations around a full summer of hoops. We engaged players and fans with our New York versus New York Series, our WNBA All-Star celebration, Jordan Grassroots Basketball in Chicago and L.A., and our Mamba League Invitational. In EMEA, Q1 revenue was down 12%. NIKE Direct declined 12% with NIKE Digital down 24%, and NIKE stores up 3%. Wholesale declined 11%. EBIT declined 15% on a reported basis. This summer in Paris, both NIKE and Jordan were unmissable, with our Olympics campaign just about everywhere you could look: on billboards, big screens, on the side of buildings and most importantly, across all of our retail touch points. In addition, Jordan introduced its new campaign with a six-week District 23 takeover in |
5,579 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | across all of our retail touch points. In addition, Jordan introduced its new campaign with a six-week District 23 takeover in the city, a global one-on-one basketball tournament, and the brand's first-ever Twitch live stream, which drove over 10 million views, the biggest ever activation for any brand on the platform. In APLA, Q1 revenue was down 2%, NIKE Direct declined 4% with NIKE Digital down 15%, and NIKE stores up 9%. Wholesale declined 1%. EBIT declined 3% on a reported basis. This quarter, we celebrated the opening of our new NIKE and Jordan World of Flight Door in Mexico City, our largest retail space in Latin America and first dual brand shopping experience. Q1 traffic and sales for this concept far exceeded our plan, with consumers seeking out exclusive products, member-only experiences, and our latest women's and Jordan assortments. For Greater China, let me go a little deeper into this quarter's performance. Q1 revenue was down 3%, NIKE Direct declined 16% with NIKE Digital down 34% and NIKE stores down 4%. Wholesale grew 10%. EBIT declined 4% on a reported basis. This summer, retail sales moderated across the industry, and NIKE was not immune as traffic decelerated in our channels with lower sell-through rates. This has resulted in elevated inventory in the marketplace in an already promotional environment. That being said, NIKE continues to be the number one sports brand in China, and we continue to create brand distinction when we bring our best stories and products to local consumers. Over the summer, we drove incredible social buzz with storytelling around NIKE athlete, Zheng Qinwen, who took home gold as China's first Olympic Tennis champion. Jordan's first athlete tour in China since the pandemic was also a big success as Luka, Tatum, Paolo, and Zion connected with young fans in Shanghai and Beijing. Top innovation and sport performance continues to resonate. This quarter's standouts included Peg 41, Alphafly and Sabrina 2. In addition, consumer response to our latest Protro release proved |
5,580 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | quarter's standouts included Peg 41, Alphafly and Sabrina 2. In addition, consumer response to our latest Protro release proved that Kobe remains one of the most beloved athletes in China. While our outlook for the near term has moderated, we remain optimistic about the long-term opportunities for sport and for NIKE in China. Now let me provide specific guidance for the second quarter. We expect Q2 revenues to be down in the 8% to 10% range. We expect Q2 gross margins to be down approximately 150 basis points, with higher promotions, channel mix headwinds, and supply chain deleverage more than offsetting lower product costs and a decreasing benefit from strategic pricing actions. We expect SG&A to be roughly flat versus the prior year, with increased demand creation investment largely offset by tighter operating overhead. We expect other income and expense, including net interest income to be $30 million to $40 million, reflecting lower interest rates. And we expect our effective tax rate to be in the high-teens range. Although, we will not be providing full year guidance for the remainder of this fiscal year, we do want to provide additional color to help you understand our latest read of NIKE's business trajectory, as we see it today prior to our leadership transition. Looking forward, our revenue expectations have moderated since the start of the year, given traffic trends on NIKE Digital, retail sales trends across the marketplace, and final order books for spring. Franchise management actions will continue throughout the year, and we expect a similar impact in scale to what we experienced in Q1. However, we continue to see indications of slight second half improvement in revenue trends versus our first half, as we plan to introduce and scale newness and innovation across the marketplace. We now expect gross margins to decline versus the prior year, due to incremental headwinds based on the previously mentioned factors. We intend to remain disciplined on cost, especially operating overhead, while we invest |
5,581 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | on the previously mentioned factors. We intend to remain disciplined on cost, especially operating overhead, while we invest to fuel brand momentum. Before I wrap, I'd like to finish with this. Throughout our history, NIKE has always faced pressure. NIKE was born through adversity. Every obstacle, every setback was an opportunity to learn, to adjust and to improve. This is the foundational mindset at NIKE, inspired by athletes and competition and today is no different. Adversity creates sharper focus, leading to innovation and new growth. We will continue to address the challenges head on, and we look forward to doing so with Elliott's leadership. With that, let's open up the call for questions. |
5,582 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Bob Drbul. Please go ahead.
Robert Drbul: Hey, Matt. Good afternoon.
Matthew Friend: Hey, Bob.
Robert Drbul: I was just wondering, if on the inventory situation, I think you talked about specifically China being elevated. Can you sort of break down some more regional, your perspective on where we are with inventories regionally with some of the -- I don't know, if I'd use the word dislocation with some of the classics, North America specifically?
Matthew Friend: Sure, Bob. I'd start by saying that as we look at the performance of our business over the last couple of seasons, retail sales have underperformed plan and that's a statement about the overall portfolio. It doesn't specifically relate to just the classics. While we saw growth in retail sales in North America and China in Q1, we are seeing slightly elevated inventory as a result of the retail sales plans falling behind. And so, as we've looked at our outlook for the remainder of the year and the commentary around trends moderating, we've taken into consideration a more muted point of view on retail sales trends and also the gross margin implications of needing to not only be more promotional to work through some of this elevated inventory, but also acknowledging the fact that the outlook for the balance of the year is going to require us to be more promotional as we're scaling new ideas and concepts, while working through the rest of the product portfolio.
Operator: Your next question comes from the line of Alex Straton with Morgan Stanley. Please go ahead. |
5,583 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Your next question comes from the line of Alex Straton with Morgan Stanley. Please go ahead.
Alex Straton: Perfect. Thanks a lot, Matt. I just wanted to drill down on this kind of unit disappointment in the quarter. Have you guys identified what exactly like the biggest challenges or I guess, problem areas are that you didn't expect a few months ago? And then just zooming out, as you look forward, have you guys identified the key metrics that you're monitoring just to gauge comeback progress throughout the year? |
5,584 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Yeah, Alex. I mean, overall, when we look at the business in its total, we are encouraged by the performance that we've seen on the new products that we brought to market. And we've delivered, I mentioned, we delivered double-digit growth in our new products. And it continues to give us encouraging signs as we see the team's focus on sport and performance, and the way that those products are landing in the marketplace and the growth that we're driving. As it relates to our performance in the quarter and the unit misses, I would start by saying that in Greater China, we did see performance in the quarter underperform our plan. And so that was one factor that impacted our unit decline. What I would say more broadly than that is just general macro across the different geographies. We just saw more softness for another season and so our teams are on it. They are focused on moving through these slightly elevated inventories. They're not in a place that cause us significant concern at this point in time, but they do require us to be proactive and to take action. And that's what we're focused on doing, while we bring newness and innovation at a greater scale with greater impact in the second half of this year. On Digital, we did see, we were down 20% in the quarter in Digital, and that was largely driven by the three classic franchises being down nearly 50% versus the prior year. And the sales trends for those franchises in our -- in the wholesale channel was substantially better. And so that also had an impact on our Q1 results. But as I said, we planned for the declines on those big three franchises, and we’re continuing to manage the inventory of those franchises carefully, beginning with NIKE Digital so that we can put the product where the traffic is, and we can drive high full price realization on that product in the right channels in the marketplace in order to continue to manage the long-term health of those franchises. |
5,585 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Your next question comes from the line of Michael Binetti with Evercore ISI. Please go ahead.
Michael Binetti: Hey, guys. Thanks for all the help here. Matt, I guess, just one thing in the near term. You said that the spring order books actualized a little lower than you were expecting. But you did mention some elements of the second half revenue outlook that are maybe a few bright spots versus what you thought 90 days ago. Could you just help me reconcile those two comments? I guess, and then thinking a little bit more long term, I think the plan previously was for direct-to-consumer to rise in mix and pull the margins of the company up as the margins in the DTC segment rise above wholesale after some pretty heavy investing you guys did to stage that the DTC business for scale. Are those investments in place and do they become leverageable over time or are there elements of the -- in the DTC business that need to keep growing as you do look ahead to getting back to growth of that business? |
5,586 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Sure, Michael. Well, starting with the spring order books, what I mentioned is that our order books came in, on with our partners at flat versus the prior year. And it was a little light relative to what we expected. What we're seeing in there that we're encouraged by, very excited by, is the fact that we're seeing newness and innovation scaling in the second half. And so, I mentioned that footwear units related to newness and innovation, we define that as products that have been introduced, they are either new or have been introduced within the last eight seasons, are growing mid to high-single digits in the second half and, in particular, in that spring season. Underneath that, where we look with the most optimism and where we've been focused first is running. I talked about the momentum that is building in running. And this is where our team started focusing first more than a year ago. This quarter, men’s and women's running footwear was up and it was the first time we've got positive growth in several quarters. When we look at the order book for spring footwear, men's and women's running footwear is growing double-digits. Our North America Running specialty partners were up double-digits in Q1, and the order books for holiday and for spring are giving us indications that we're going to sustain that momentum. And when you look at the way we're investing behind the brand, the ground game that we're operating, if you visited any running events around the world, I recently ran a half marathon and saw NIKE quite present, but I know they were -- we were very present over the Berlin Marathon and multiple activations around the world. We're focused on being present with runners in their communities in order to truly land the impact of our product portfolio. And then I talked about the pipeline of what's coming. And we're really excited about a number of things that are coming in our product pipeline, including new cushioning innovation, new premium models that are blending Foams and Zoom Air for a |
5,587 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | in our product pipeline, including new cushioning innovation, new premium models that are blending Foams and Zoom Air for a new running sensation. We've completely refreshed the lineup of our performance running apparel, which has always been a strength for NIKE, and so we're excited about the product that we're bringing there. The trail models that we've got are continuing to perform well in the marketplace. And we're excited about the growth that we see in the running segment around trail. And then lastly, we've talked about the core opportunity, which we define as below $100. And our teams have been focused leveraging our speed lane to be able to get product to market faster at below $100. And this represents several billion dollars' worth of revenue that we walked away from over the last couple of years. And our partners are very excited about the new product that's coming in this dimension. So Running and Core are the two areas where we're most optimistic that we see momentum building from an innovation and a newness perspective. As far as your question about DTC and the investments that we've made in DTC, we continue to see opportunities to more profitably run our Direct business. We talked about the investments that we were making against expectations for further growth, and we were largely meeting the demand that the consumer was driving towards those channels. We continue to see opportunities to drive efficiencies in the profitability of our Direct business. And that includes a higher mix of full price product in our direct channels, but also leveraging supply chain capabilities against the capacity that we've in effect, built to serve our DTC business. As we’ve talked about for the last couple of quarters, our focus is on driving growth across the entire marketplace, balanced growth across the entire marketplace. And that is where our teams have been focused, and that’s where you’ll continue to see us trying to drive growth and improve profitability across both dimensions of the marketplace. |
5,588 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Your next question comes from the line of Simeon Siegel with BMO. Please go ahead.
Simeon Siegel: Thanks. Hey, good afternoon, guys. Matt, any – thank you for all this. Any color you'd be willing to provide or just order of magnitude on how large each of the core franchises that you are resetting are at this point and just maybe where you'd like to take them? And then just revenues were down double-digits, but the gross margin still grew nicely this quarter. So any context on the margins of those franchises that are being reset versus the rest of the product? Thank you. |
5,589 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Well, Simeon, what we've been talking about for a couple of quarters is trying to create better balance in our business. And over the last couple of years, one of the things that we've talked about, but especially this last year is that we've -- our portfolio has gotten too concentrated, particularly against these classic -- the classic dimensions. Our teams have tried to bring new dimension to these classics. And as a result of that, we've created an incredibly large amount of consumer demand. But at the same time, the portfolio was largely too concentrated against these styles. Classics footwear is an important dimension of our overall portfolio. Internally at NIKE, we refer to these products as icons. They're incredibly culturally relevant and they will continue to be an important part of our portfolio overall. But this quarter, in particular, we took a big step forward in the reduction of these products, causing them to decline more than it’s overall business so that we could start to shift the portfolio back in order. And we're going to continue to take those steps over the coming quarters. And what I can tell you is that the continued actions results in us expecting to see a headwind similar to what we experienced in the first quarter. In other words, a mid-single digit headwind on revenue for the balance of this year, as a result of more proactively managing these franchises back into a proper place within the overall portfolio. They are long-tenured products. They do drive attractive margins for the company, especially, when we sell them through Digital. And so part of the pressure on margins and the additional color that we provided on the balance of the year is that by driving the dimensionality more particularly in the NIKE Direct channels and particularly in the Digital channels, it does create a transitory headwind on margin as we right-size the portfolio largely focused on the Digital side or the Direct side of the business. But looking forward, like I said, these products will |
5,590 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | largely focused on the Digital side or the Direct side of the business. But looking forward, like I said, these products will continue to remain an important part of the portfolio. We just are focused on trying to accelerate newness and innovation in order to create more momentum with consumers and more energy with consumers. |
5,591 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Your next question comes from the line of Lorraine Hutchinson with Bank of America. Please go ahead.
Lorraine Hutchinson: Thank you. Good afternoon. How would you characterize the receptivity of your wholesale partners to get behind some of the new launches, and how are your partners feeling about the level of inventory in the wholesale channel now and for the spring season? |
5,592 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Yeah. It's a great question, Lorraine. We've been working, our teams have been closely engaging with our partners since we acknowledged some of the missteps related to over centering on Direct. And I think the momentum that we're building with our partners is very encouraging. I referenced specifically the interactions that we had that I was personally a part of in Paris during the Summer Olympics. But our geography teams, Tom Petty, our partners are leaning in, in order to be able to reignite growth and momentum for NIKE on the wholesale side. And I wouldn't drive past the fact that what's most important in wholesale is, we've got to have a breadth of distribution segmented to create and demonstrate the full dimension of the NIKE portfolio across men's, women's, and kids, across sport dimensions and the Jordan brand. And one of the ways that we do that is, we invest with our partners to elevate and differentiate our brand at retail. That isn't a new playbook for NIKE but it's one that enables us to play to our strengths. And we've got a couple of proof points that we're already working on with partners on the sporting goods side. We're excited about the women's pad and concept, the women's fitness concept that we've been testing with DICK'S in their House of Sport. It's set to be ready to pilot, given the returns that it's driving for both us and for DICK'S. We're excited about bringing new energy to basketball with Foot Locker and you remember the House and Hoops concept, coming forward now with this new Home Court concept. And to be honest with you, maybe I'll take an opportunity to tie this a little bit back to Elliott because this is a similar approach that we took when we ignited growth in North America back in 2010. When we say things like we need to sharpen our focus on sport, it doesn't just mean that we need to sell more performance products. What it means is that we have to create deeper connections with consumers through sport and that's where our relationship starts. And when we |
5,593 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | is that we have to create deeper connections with consumers through sport and that's where our relationship starts. And when we create deep connections with consumers through sport, that enables us to extend into sportswear and lifestyle. And one of the things that we did in North America back in 2010 when our business was stagnating from a growth perspective, and Elliott was a new General Manager at that time, was we reprofiled the marketplace around sport to ignite growth in the marketplace. And the net result of that was double-digit growth over the next four years and really set the foundation for NIKE to grow throughout the decades of 2010. And so that is where our focus and our attention has been. Digital is still and Direct is still an important part of our overall marketplace strategy. Having direct connections with consumers is strategically important. But our consumers want to connect directly with NIKE, whether it's in our own channel or with a partner. And so, we’re going to continue to focus to elevate and to raise the marketplace and bring the best of NIKE to the market. |
5,594 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: Your next question comes from the line of Paul Lejuez with Citi. Please go ahead.
Paul Lejuez: Hey, thanks, guys. You mentioned Running up double-digits in North America, your Running specialty partners. Can you talk about how far that business has fallen from peak to trough? How much do you think you have to regain in that channel within North America? And also, the second quarter gross margin decline that you mentioned, can you just dimensionalize that by region, where your bigger pressure points are? Is it across the board? Where are the larger declines versus smaller declines? Thanks. |
5,595 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Well, on your first question, Paul, what I would say is that we've acknowledged that we've lost market share in the Running specialty channel. More than four years ago, we pulled back on our engagement with that channel. And as a result of that, we saw market share losses. But what I would also say is that the importance of investing and connecting in the Running specialty channel extends way beyond the business impact of driving revenue there. It's about the community of running. It's about connecting directly with runners. And while we've seen tremendous success at the top of the pyramid with innovation with marathons and on the track, we haven't made as much progress with everyday runners. And that's where our team's focus and attention has been over the last year. And what I can tell you is that some of the statistics that I highlighted are there as indicators for us and for you to see the momentum that's building for us in that dimension of the business. And it is incredibly important to NIKE. NIKE's a running company. NIKE is a running brand, and it's incredibly important for NIKE to win with runners. And so our commitment to reinvesting in those channels with those partners on the ground every day is how we're going to change the trajectory of this business. And the proof points and the indicators that I provided are our early signals of confidence that this momentum is building. And then the pipeline of product that we've got coming behind it, we're incredibly excited about. And you'll see it extend from Running specialty into sporting goods. You'll see some of these innovations cross the line into lifestyle based on the ways that we bring the product to market. And so we're deeply encouraged by that momentum that's coming and running. As it relates to the second quarter margin question, I guess what I would tell you is this. There are a number of puts and takes between Q1 and Q2 on margin. And the higher promotions that we referenced, some of the channel mix headwinds, the supply chain |
5,596 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | between Q1 and Q2 on margin. And the higher promotions that we referenced, some of the channel mix headwinds, the supply chain deleverage, as well as the actions to manage the marketplace, they're largely across the portfolio. There's not -- it's -- I wouldn't point out one particular geography more so than the other in terms of where a particular challenge lies. We are seeing a lessening benefit from product costs in Q2 and from strategic pricing actions in the prior year, which we still saw in Q1 of this year. And so that's also playing an impact on the year-over-year comparisons. And then I guess what I would also highlight is, we're watching the East Coast port strike really closely. We haven't baked anything in for a timeline on the East Coast port strike, but that's a possibility of a risk related to what we're talking about right now. |
5,597 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Operator: We have time for one more question, and that question comes from Brooke Roach with Goldman Sachs. Please go ahead.
Brooke Roach: Good afternoon, and thank you for taking our question. I was hoping we could dig in a little bit more on the China business, and what you're seeing between the read on the macro and what's specific to NIKE. How should we be thinking about your inventory levels by channel in China and what types of engagement are you seeing on some of your franchise product versus your new innovation with the Chinese consumer today? Thank you. |
5,598 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | Matthew Friend: Well, as I mentioned in my prepared remarks, our traffic was soft across all channels in the quarter. And when we look at the performance in our business, we look at our industry and we look across industry, from what we can see, NIKE is not immune to the challenges with the consumer in Greater China today. The marketplace has been promotional, and we've actually been seeing improvements in full price realization over the past few seasons as we've managed our inventory very, very carefully. But this quarter, we did -- we were more aggressive in promotional activity, given the traffic trends and given what we were more broadly seeing across the industry. I think that you can probably most notably see where we're focused on inventory on the wholesale side, where our revenue was up 10% in Q1. This was partly impacted by shipping timing, but retail sales grew in the quarter but they didn't grow at that rate. And so we're focused on proactively managing forward-looking order books with our partners, but also margin assistance in order to move through excess inventory so that we can ensure that we stay healthy and that our partners are getting behind the newness and the innovation that’s coming in the second half of the year. In the first quarter, our top innovations for performance stories actually resonated quite well. Peg 41, Pegasus 41 performed really strongly. Alphafly 3 and Running is growing in China. Sabrina 2, KD resonated with consumers, and I mentioned Kobe. Kobe’s a beloved athlete in China, and it was one of the biggest opportunities we saw to bring Kobe back into the product family, and we’re incredibly excited about the energy that’s building in China for Kobe. And so we believe that when we create distinction in the marketplace, whether it’s against our global competitors or local competitors when we bring our best stories and our best products to the marketplace. And I think we continue to see that. As it relates to the largest, the classics franchises, there was definitely strong |
5,599 | NKE | 1 | 2,025 | 2024-10-01 17:00:00 | NIKE, Inc. | 291,981 | And I think we continue to see that. As it relates to the largest, the classics franchises, there was definitely strong demand for the classic franchises in China. Jordan is a big business in Greater China, and we’re watching and managing that business carefully. But our focus and attention is really on performance and innovation. And you heard me say before that innovation has the highest mix of business in China relative to some of our other geographies. Now as we look long term, even though we’ve moderated our near-term expectations for China for the remainder of this year, sport is a growth industry in China. Sport participation is on the rise, and we believe that we’re optimistic about the long-term possibilities for NIKE in Greater China. We’re going to keep playing our strengths around innovation and newness. We think that the investments that we have in the marketplace from a retail point of view and the way that we present our products to consumers through our partner stores gives us an opportunity to present our brand in a way that we can’t do anywhere else in the world. And we’re focused on capabilities that we’ve been building, specifically China for China, around product, around our Digital platforms and supply chain in order to be able to continue to serve the local consumer at the speed that, that marketplace is moving. So we’re optimistic about the long-term opportunity for NIKE in China and the long-term opportunity for sport in China. |
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