NIKE (NKE) 23 Sep 202021 Q1 Earnings call transcript

Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2021 First Quarter Conference Call.

For those who want to reference today’s press release, you will find it at http://investors.nike.com. Leading today’s call is Andy Muir, VP, Investor Relations.

Before I turn the call over to Mr. and you based on those materially. on subject certain remind make call statements me cause to statements could forward-looking current risks let that to this participants will are actual Muir, results that differ uncertainties expectations and risks in reports the are filed filed on detailed annual including the report uncertainties Form and with These the SEC, XX-K.

expectations of gross Some growth forward-looking margin. revenue statements of future may concern

references revenue References are measures, to measures reconciliations financial http://investors.nike.com. to In make addition, will Participants financial financial to references constant to non-public and constant non-GAAP dollar discuss other may dollar statistical at the be foreign information made as and and quantitative participates available presentations non-public NIKE’s context including revenue. GAAP and information of is business intended to website, provide non-GAAP also performance To comparable extent exchange may statistical the measures. the eliminating discussed, financial fluctuations. of

to the Muir, I’d Now, to Relations. Andy Investor VP, turn like call over

you, NIKE, Inc.’s and Thank discuss first results. quarter today XXXX thank joining us Operator. you fiscal to for everyone, Hello,

participants today’s As indicated, financial on operator call non-GAAP may measures. the discuss

ago You at which was hour press will our reconciliations release, the about an website, find our issued appropriate in investors.nike.com. or

CEO, will NIKE, call today’s Officer, on us Joining and Inc. John President our Friend. be and Donahoe; Matt Financial Chief

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Thank you, to call. everyone Andy, today’s hello and on

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on reflect there the that I financial first strategic three As stand key quarter, and are out. themes

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of Let points. to through few walk me a take minutes each these

onset plan as at of previous calls, the earnings we operational enterprise First, on an wide pandemic. implemented discussed the

with ensuring and health manage the to and navigated secure liquidity distribution our and of costs, and consumers. digital to to employees and while supply agility tightly focus have teams all safety demand, Our capacity, recalibrate to increase

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We services accelerating the consumer, value investments that capabilities will while are simultaneously in accelerating create productivity. and for

the two are over you our have As quarters clear. priorities seen last

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women’s personalization drive the services and leveraging across consumer-oriented can unlock greater inventory growth efficiency by enhance membership, and marketplace, accelerated to key in First, data and like OXO apparel. we opportunities

points investments data-driven our predictive our within wholesale. capacity, normalized to in we staging. continue need a operational expand and margin inventory we finally, will member modeling we manage we gross while fulfillment will SG&A versus digital XX roughly period, to And digital Second, digital on through rate tools, personalization revenue guardrails. earn transformation can improve And efficiency higher

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Drbul first Securities. with Our is Instructions] Guggenheim from Bob question [Operator

open. line Your is

Hi, guys. afternoon. Good

Bob. afternoon, Good

our the the price quantification more around little the and guess could of help could a be performance is little if Thanks. question I for the various full hands but buckets just gross maybe selling, maybe the on remainder the quarter. is, year, just, around can you for of you -- bit you margin drivers us maybe the supply just just first any Matt, the time promotions that really bit gross I spend you would performance. the us drivers year the gave have this there the units, on the of a And just that commentary chain, various give more some very if the get helpful? margin around in And full

Bob. Sure,

prior obviously, and recovery. a really strength NIKE’s quarter, had substantial margin we was in reflecting basis market fourth quarter, the our improvement the down year, the So, the first was versus of that versus results XX gross points in

QX factory had in which biggest quarter. of some the The reinstated basis PO supply related cancellations, we demand we in reversals we of incurred that benefit to from points QX. to XX which However, the accrual about seeing one-time strong were did due

So if a and margin points back markdown versus roughly through the get to supply. year to driven basis work normalize you you prior down that’s gross add our that XXX by and activity

it by of and what how continue first because of will of seasonal will function then a to the margin we year because our our QX holiday, a supply year And be promotional we top second the XX.XX and looking this lot Bob, that’s QX, in the year. so end inventory QX flipped quarter. be are our of we into management, consumer to normalize in in last the demand ahead moments priority the whereas like strong saw look is seeing And more than inventory probably Cyber expect to we we performance still despite marketplace got As at are QX. China in the Monday and of also we QX half

will from to as a remarks, improvement in supply benefits the expecting are in the needed with the price first to inventory look mix my half, sequential for the sales chain As we we I we storage mentioned that and start in extra we half. see our full of higher exiting second

of that to levels to and stores, to though in expect maintain the prior investment need anticipating we balance also year an going the year. because discounts are are not recover our in to factory we We traffic

the promotional conversion And balance so to year. half will there as second activity continue that are we and -- year as we to to velocity assuming continue we the the of through unit some in the maintain rates operate keep be of

Thanks. Great.

All-in-all, Bob, flat that versus to is next year. prior about

in all? collaboration meal of Perfect. like Thanks, and have is, Cactus a some pair just with guess, the the maybe Jack, you or anything do quick terms question Jack sort the at is considered pipeline Matt. of get McDonald’s with with follow-up Cactus that, happy the I of a in guys that shoes

give can a I that to question, Bob, no. answer one-word

guys. very right. Thanks much quarter nice All go. Way to and

Bob. Thanks,

Morgan Greenberger Our next question with is Stanley. from Kimberly

open. line is Your

it wholesale next those think, few over a Thank you higher key margin efficient I scale, Is digital that on fulfillment can channel. if the than that any margins, margin Great. -- acquisition of Matt, digital over an time. customer the or or just am visualize happening very much. any color envision you higher said, that track you orders digital XX-point appreciated lower you obviously, ever it gross unlocks Thanks. comments, operating cover wondering the more of years nice, basically cost, in that will that I so to of is I you some on allow would be helpful? your your

Sure, Kimberly.

the to prepared for remarks. it We in drive there of yeah, that benefits almost You the was his for so John obviously digital grow as starts leverage But, me with hitting capability points. we the to significant our size continue the believe that to answered question we develop. business and going scale is financial where continue that business

from of think business. that see scale probably I we digital of three improvement there’s key operating drivers our leveraging margin

that markdowns leveraging gather offerings just a less that And the that product we to to consumers. selling to one the drive create are higher first continue business growing to and will product relates of data as is for realization consumers. data The digitally and personalized we price benefit

piece do data, I is we closer do we we believe in performance expansion. -- of and continued is piece gross connected be how our investment inventory to as that also so second kind flow ultimately, referenced third driver to And to on can and The a be what place to our kind that then costs, and the marketing. where fulfillment ties which of our that will continue the we of will marketing well margin lower back consumer, it,

on members into base. from members member within acquiring deeper more move additional to creation member And a demand we less of we funnel, demand to by higher and able to spend And members, margin and moving that, believe also should our more be and drive got our our running offense, the expansion. and that operating purchase attracting in productivity driving that frequency by those -- we new creation doing have retaining existing return new knowing We spend. will engagement see

Fantastic. Thank you.

Thanks.

Binetti Michael from Credit is Suisse. question next with The

Your is line open.

looking a question, significantly tough at quarter my very I EBIT America the backdrop. North Thanks growth outpacing revenue improving I that and you Kimberly’s markets dollar quarter? markets margins see in the markets. that in and as on how digital for question are dovetailing I growth guys. with in business? the helpful off sorry, maybe, this EMEA lot am was a Is a mean, taking those growth job in digital those Hey, nice the I guess, you those markets, guess, digital already in the move seeing something in that’s rates

Michael. Yes,

well the our which within digital undifferentiated penetration realization to a wholesale from business higher on also direct shifting increased on both and those as seeing highlight But are quarter, focusing gross strategy geographies. benefit the in our the strategic margins in those that on also partners our marketplace, exiting two focus want and would we of full distribution So fueled price drove and our margin. markets I the

in we geographies factors large quarter. working those through some growth of in two to also spend as performance gross quarter in working were relative we in drivers SG&A EBIT ways fuel in those particular managing to then the so And from a that also perspective of and and And had revenue margin were the helped corporate new quarter. the growth leverage

been last momentum. but have into the been I sales strong, you. the obviously, has the of being had a and America, Got over to look different at America very regions, you a you stagnant follow gathering growth then chance as the few despite very there, John, fairly dollars guess as in business the for think And North years the kind up, billion about gotten as strong margins a couple few gaining years North brand

margin COVID of pronounced into do the in North evolution But wholesale more in second what saw here side of probably some normalize shift America you about on XXXX? on look by in quarter, you of forced think the business backdrop. the get as we you from this the half and the here As other in that the and out macro year to period this and

North most it market world. step America say, far would to needs the I along the is of get where North -- of least to back, the if retail America the in I market fragmented major and Michael, the markets Well,

know they want digital away where who consumers and America premium, The that. seamless, so are, modern consistent market from they today physical retail furthest this they want the a in to is North world, And want experience, experiences.

to and where provide they who they and where how so with knowledge And then of transition. infused that experiences Marketplace what’s they it strategic connect NIKE premium way then are where when want OneNike consumers our same We the and what work these regardless already our accelerating fewer have And the simply them with want of Consumers world. and digitally want Matt’s lead provide who know want want we same consumers, want they often so experiences digital, that’s partners all the the for driving our directly Direct described. to are we for are, reasons see shopping. we consistent it with that they the so very world are understanding we with level see we follow

to what to retail naturally the for it environment five we a business to going And are would described which addition one years. Matt drive focusing will two to that in and have years, next the on are in our are next We market years accelerating four share in the that we benefits, have reasons profitability for has benefits, try will having probably to will years is all happened the in financial really on. that have what benefits, growth

John, thanks the a lot for help.

Great.

Omar Saad from is Next ISI. question Evercore with

open. line Your is

it’s number understand did exit overall bricks-and-mortars all rate Thanks digital spoke quarter, digits how I time trends, deep roots and on level to is as guys build integration and a part sports? think, maybe the rate was you back also just us, stores of my huge at well on going you updated this your taking NFL still of kind for to June, A help quarter in DTC us to but the think I those when the on for continue your youth -- slow for Thanks the business? your at and that return the to triple obviously, came of even is team and outlook playoffs, the in sports, an do Thanks. the on love all capitalizing over view the conversion organized clarification And in collegiate I’d back, are you information. in question. digital the last believe quick the NBA

maybe take of don’t piece Why second first I the the part and Omar. grab will Sure, it. then John

when was strong -- APLA, or yes, triple-digit we And EMEA America, digital in and is referenced more month of call, seeing recovered levels, where in to the year prior continue growth So, fastest growth were saw say where in was the at place digital I’d we China, in we what over in earnings is last above XXX% at growth triple-digit digital prior we retail that we levels had the year in our June. quarter that growth. in XX% still in and closer that has but deliver traffic growing the North Greater to marketplace approaching quarter. The channel balanced

is believe will So remotely the sound lead even Greater might that we China that continue the only of way I would that Greater for like a is deceleration China. thing digital that growth normalized. to the say as marketplace But growth

it. Got

is of second, And of just job how leagues thing have the And hours and back NBA, a watch what able bringing Tennis, add sports viewership be just the golf it cool opportunities. to safely, Omar then commissioners who on weekend a to safely literally tournament. sport I’d NHL, NFL, on football, providing major within unprecedented are and first a Open done MLB, fabulous the players is coaches college the congratulate to just for U.S. major

and night We wherever are possible. to good it’s think that, for my and that prayers closely are we with consumers school high college to And does Does about and and good say so, for thrilled them trying work that’s to NIKE. it ultimately so. continue help down cascade every I encourage we very that and youth, hope

a safety obviously and environment -- more the more I’d distributed think controlled in is the challenging is. I less paramount that a get you and environment say the

think the being and And more movement of think engaged health and so which sort I as this we part homes. is organized but other sport these their but I is seeing people started also think are And related. we things to not of I this completely fitness safety sport. are wellness, to and toward return People are embrace balancing when confined

are We continue it to accelerate. seeing

Venus love back just I people are consumers hear the moments in so love I you Serena you, and and love just can are and that some want pandemic. sport go that going to until way, healthy right for spot. my the and at we sport, and I excitement is has the power run of we XX cautiously It are right for optimistic tell you or connecting baskets reinforce. continue to do go trying can, a so driveway by coming You brand out watch including, the we sport NIKE the through TV so to you shoot sport celebrate a all the get game now in here and world the with celebrates to in think voice, will on everything we this we

wishes. Best Matt. Thanks, John. Thank,

Thanks, Omar.

from with Next is Jim Stifel. question Duffy

Your line is open.

years? I Terrific and with you everyone. hoping rebound the management, these provide in you. metrics on talk should some What seeing business. forecasting? in update you can implementation My about demand RFID for that? how inventory model the benefits And then maybe the the coming key are watch Thank in and quarters Hello, materialize any progress am of an question, benefits on the are we

told stores. XX% some take our now We the the before had So, take marketplace of retail apparel visibility demand chain point we at are as both Jim, across you I this to things in and we the in and of in our the we -- our advantage that time, and advantage able quarter, have leverage order to rollout were we continued be inventory of the given across our supply of in tag. and pandemic RFID sitting XXX% of able footwear, think, across have where our stores, the to to

holding drive NIKE our help stores our both fully both critical create across partners. us that’s which costs, enables X we direct transportation improved capabilities doors own enabler stores they by providing our sight and inventory see us us OXO to the at and products our of accelerate our for and to a going RFID factory billion marketplace is line in be got wholesale, to also they levels. going inventory lies So of in XX.XX% reduce we connected believe our costs and and all inventory to in clear to across over units in our now going a readability, a help order and it’s strategic for a to owned to

number is forward can enough, competitive ourselves within to deploy that, consumers for and right real -- real reliably The will strategic inventory then last we Matt build the that’s the supply quarter. right our added the infuses forecast inventory, to that a are be demand, advantage time, we to be with it just from even benefit ground And right? on again, able the where the talked I’d get to data, two maybe country. that’s comes our in of way over both acquisition, get issues large to demand scale where we able story partners. what And to to day for deploy consumers chain quickly about data shipping wholesale it’s one places because so in able an Celect where across forward the inventory predict The to

Very helpful. Thank you, guys.

Jim. Thanks,

Merriman The Bernstein. next with from question is Jamie

is line Your open.

fulfillment ecosystem, app talked Thanks of the very the the digital examples and much. John, capabilities Matt, made some omnichannel far, RFID. investments and of both so you about you that the

data am I lot feel particular here, invest RFID, you you one just the further? have the So you capabilities? to fulfillment about from is you Is a of as wondering invest. to the options of to where think it leverage start business or you scale? you greater more data the out like a matter can really talked it Matt, the where Coast at continuing are on and West about there building just need some now Are it you behind investments Is areas like point

bit result advantage of today. and the a scratching said, an saw you technology much because I a and so of say fact was having it’s background, remaining Board there’s of point have investment I the of had must possible. Jamie, interesting, making that, NIKE are see from I feel a surface clear outside little opportunity the have we a I like view digital we boy, this in of That just digital still the that what’s that perspective,

way particular, right? facing about consumer think is, it And we digital, Demand sensing, the so things. little in

AI on marketing, By continuous, learning so machine sensing, insight improvement membership gathering, of a ability optimization. the turned way, machine and drove learning, we digital bit the inventory little that’s digital use demand personalization, conversion. greater quarter, on to search even This and

we of way or I whole are and not things. in And big ongoing ample think where ample end-to-end through like we we and the have that think opportunities series entire and are technology, product improve we enhance that the beyond across creation integrated technology growth still and automation of whether measurable benefits using a bangs. applying in And supply improvements side and opportunity are exist, whether is our manufacturing still have consumer-facing then and that opportunities and our so one profitability. other got things the those the by ways area. company continuous efficiency to are they it’s chain huge roadmap that very the it robotics It’s improve now I effectiveness, whole or

most is how of and designers. Ho also digitize the just but about can productivity the our Head Design, the that enhance people the is opportunity of of creativity really digital our to One not John only excited

our growth, almost improved can of intelligent whether element business, consumers use view define technology, measurable that so enhanced efficiency as have in it’s I every of all real us every to of this every now clear benefits, technology automation with of and opportunity. use or is so roadmap think the that a deeper of with And you connection case, a thing -- three-year operation to we and about end-to-end and nice bring our element

[Inaudible]

Operator, we have one time question. more for

the with from Boss Matthew comes question last JPMorgan. line of Our

open. is line Your

quarter. Great. nice Thanks on a and congrats

we Are guardrails any on moving and the outpace think to potentially said, and topline outlined. the growth think think of your digital, algorithm So we forward? headwinds as high to offsetting and outlined had there the I accelerated single-digit that rates SG&A have within financial mid-teens through you as ability your constraining shift earnings you

Matt. Thanks for Hey, Well. the question.

financial Acceleration a mentioned a call, I model. Consumer tailwind fuel our that or we Direct the last As the is believe to clearly in long-term

the now, obviously, the Our to to unchanged in we over are deliver capital middle we and how and right growth sustainable, manage business with principles an uncertain. this see of while efficient our a goals are time, related profitable really quite and the financially the opportunities you reality that environment quite look as on the moment pandemic. we uncertain future, is are that is toward sharing right we And our we now perspectives

be our and inventory, see the that days continuing XXX create talking NIKE OneNike And continuing what strategic are we going the our is consumer we to to have wholesale next we days over to we those so marketplace strategy, focused to clean focusing on connections partners. been exiting XX about for And on opportunities really Direct focus and our believe undifferentiated that growth and outstanding have on line create and of number fuel will distribution this the Obviously, disruption we model long-term may profitability consumer of previously financial with there strategy demand that one most a are in factors just obvious pandemic now are that over periods communicated. is the right at time the the and and we consumption in and has as impact look it the that it near-term. like on

long-term attention our is think focus do because this right the at are the strategy thing the we where and and it’s shift and be to so, that’s focus And continuing time. we to to going on

in for investing and where are We focus business this long-term that’s the is. building our

of Best Congrats. Great. luck.

and thanks, to us everyone, quarter. with We look you forward Take care. Matt, joining today. you, next for Thank speaking

everyone. Thank,

and Ladies conference you today’s disconnect. this participation concludes now gentlemen, call. may you Thank your for and