NIKE (NKE) 24 Sep 212022 Q1 Earnings call transcript

Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2022 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 Paul Trussell, VP of Investor Relations and Strategic Finance.

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

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

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

to to like I’d Now, Trussell. turn call over Paul the

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

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

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

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

remarks, questions possible in as prepared questions. We time. many ask to would take their we Following your as our will you like to of allow allotted

Thank questions CEO, will one. and to initial So, Inc. now over your call you your Donahoe. we the Nike, cooperation John would you appreciate this. turn to for on I limiting President

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exceed demand expect to ‘XX, supply. the available of marketplace For balance strong fiscal we

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of Your line first Erinn Sandler. Piper with question comes the from Murphy

the question real are -- back any look I what supply fall and afternoon. you’re relatedly or to the I back appreciate agility? than key that And much. are my make term, continue Good Thanks. improve continue the of the guess, more zoom supply footwear type are franchises half the seeing And then, there is, to to when you in you your do and update -- to Thanks really about others? any time within what plan so chain Great. chain. season, if investments being impacted longer think to on holiday there you

Well, Erinn, supply the that aspects thanks to chain just intuitive, are not remarks. are based There the prepared several my probably on challenges for current question.

break down a couple minutes take of me further. let so, And to try to it

to As I for demand strong never higher, has quarters said expect to earlier, consumer and come. been we continue demand

already geographies. that Indonesia. sourcing first, we worsened; transit and Vietnam transit second, differences long in Over Keep our mind that local the and complexities the mandated in things shutdowns are last days, happened there in XX in across global times anticipate: mix industry and two have and didn’t governments times

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comes here’s So, where the geo-specific piece in.

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production closer China, lower shorter the impact times elevated is lead have the second greater combine that of of North and it’s to impact to of with quantities spring sell in North has going in holiday North But because America delayed. factories, levels transit experience is product transit Conversely, impact in-transit which inventory longer fall in have that the which in QX. and QX the Greater lost season lost QX. and inventory earlier you if it coming into the production to And times, the means quarter. So, been America higher going a can will is with has America of production

Vietnam continuing other are in Our leveraging shifting had experience like expected. reaches incredibly And to at to try strategically to production they’re our And we’ve and airfreight. to given countries, a viable, price, than of product and their even teams success doing like others maximizing our leveraging Indonesia out seasonless later serve taking market the footwear actions demand, we’re our where these countries that to operational product apparel other consumer employ strong production we China and the full playbook if capacity to mitigate things in approach impacts. then, selling

is be from we can these supply optimistic year what improved inventory issues are So, supply while And environment head we’re we ‘XX. today, into dynamic, chain believe that will see fiscal the temporary. we available as

question the periods your to this. on what -- like doing that do part second Erinn, strong in during time we’re context companies of of And investment,

our We’re innovation sport and digital marketing going product sports of portfolio and invest and and brand to to support our in storytelling strong transformation. back continue creation, and being in

supply we’ll So, that that’s face in chain of and with we allow market, lever environment. even manage supply things strong to around our air every in us this supply-constrained as continuing. other demand brand And chain-constrained can the transportation -- and a and presence accelerate then, mentioned, driving take in Matt continue

we’re same the going the mantra pandemic. -- into this So, the phase going phase again, first had to we of going next mantra our into is

stronger we emerge we out it even sure make in. coming today than have of going Let’s

from Boss line comes question JP next Morgan. of Your Matthew with the

guess, you the share? to this the think revised outlook size, John, on quick, year, we pandemic? best then, for to margin gross maybe industry? So, innovation could health And How question to as you see the any the is margin from Meaning supply maybe to It my I impact, digital anything drivers? dynamics, does just track. like you athletic chain TAM sounds some and gross scale accelerate Can overall you change real this speak chain of margin speak is, NIKE price do outlook? as the Meaning the for market aside Matt, could leverage exit the overall the on change? about aside from of full fully multiyear selling to transitory, supply really underlying

global question, this an part your we NIKE. for and it’s basketball, through athletic I important happening saw high Matthew, football, Well, such our what incredible would remarks. football, And in just traditional so first Olympics, say on the it, in sports call U.S. football And Open that’s is the mean, college I go is and as school. it, back the is Tennis; back. back. is won’t also back. kids strong grade schools and thing is come -- of now it I Sport summer. that U.S. energizing And goes that healthy it’s market schools back whether I’ll to

sport, the Second included thing the expansion the we’re Olympics of first seeing is with skate time. like being for sports whether definition of that’s in the

pandemic, that of in really skate, in as concept or in But and moments the court. sport, think, was around living dominating exciting definition of health, athlete well to your right, compelling different and the every going the as -- most yoga to young getting very fact room and way. the studio gym in out basketball Gen sport Z Olympics I coming happen generation ways, movements the just the the the also of is of as a Some can asterisk that remarkably or generation,

what the view And and life, your of blurring everyone’s a we’re we for of between rest life. the sport part And is so, us. becoming part seeing sport line as the tailwind part tailwind. everyday your of tailwind that’s is that’s of a athleisure, And then, powerful the life is also

the on traditional on sport. down doubling capitalizing we’re definition -- of new these So, sport, emerging on

You Olympics. saw in in that the skate

see is. You really our consumer well Z that future. that being brand close of campaigns bodes to think that for some we Gen where in And our

quickly, I’ll we’re driving success just excellent quarter proof our the hit point gross believe this Matt. seeing digital an margin in We that that transformation. And consumer-led of was the

fueled greater also that’s mentioned. And price forward in seeing margin NIKE NIKE realization, it. we what Direct expansion they of levels business as have mix how We’re consumer and of that NIKE the both, and demand, NIKE movement I and gross as first of Digital business, mix in our we meaningful high quarter, to of mix leverage capabilities want serve where the lower full Digital business and markdowns Direct

impacts. And that margin look gross quarter. going a seeing that to As when that these we move look offsetting of provided you’ve product these margins navigate healthy pull in But, short towards is longer term, to high-XXs outlook term, we’re the we’re strong transient we got what we transitory we’re we’re to a last through absolutely got and you’ve world. brand market, experience some costs going price full strong around as the continuing

the next Binetti Michael line comes Your question of Suisse. from with Credit

about channel first any or time. after you understanding allocation an give quarter? spoke on the Last of saw within how the to that good John in we’re we the John, America, at China mentioned total see normal You into the think forward us few in -- going from decisions of some Is that a a path to of but Maybe to to more click can kind China feed to that at you quarter? could back trend. quarter, XQ, then, forward, in back that trajectory? is the know extent I thinking trends Maybe, had the where amount COVID transit quarter about in change that. in and right you’re it weighed the help and allocations bit roll the guess, you quarter, the between should similar Any DTC in in do little we about pace what what to the this we markets into wholesale getting headed dynamics are back the there of date on And need you as trends I the inventory to impact was the XQ to dimensions how that a you to some North think in April the what to on here? normal in market? make lockdowns

said, coincidentally, for is the in part On first Mike’s a our frankly China, the quarter, next Matt said we confident question, quarter and which is QX invest XXth anniversary done over opportunity. NIKE’s strong will constraints the consumers, last product beginning local consumer do our which what take is China. of take participation you term, I connections our he’s are we saw connects do with the done results years view this has don’t why And month line deliver long-term we’re for XXth American. North the and just supply the were XX, Phil X,XXX Matt, what to And, with China, second brand, to we innovative the in we roughly done long reiterate the to And this as -- in long-term we’ve that will that country. partly China, continue But, I impact by stores over continuing the take expectations. is performance. in I’ll and Michael, second XX from we’ll monobrand across the the last reinforced of in

have blessed navigating local team, We’re to that they’re through. a am really and so proud of how strong I team,

sort promoting continue then, corporate pandemic to the wellbeing and and respectful they sport on citizens, be, always times activity through and ground we And the will sustainability before, playbook and and themes. to led many be us said have promoting societal of other there. important continue been they the have we’ve and responsible responsive very As very in

longevity we’ll playbook so, and and on time. with of this stay continue to consistency invest that during And period

transitioning deliver just incredibly -- continued consecutive marketplace. growth And in I say, America, quarters of we’ve of to demand. should to seasons, or I five strong strong that North mentioned

product to those is our consumer partners. to that for strategic of the couple I as that’s The no going years the going start brand said, to serve continue what the consumer. our marketplace? really to As is prioritizing within wholesale engaging our And the demand. been How availability do is about with the we’re than different about channels is consumer going consumer to on eyes We will talking that continue locations to continue where And of focus own shopping, is and most Where we our through to the be approach lean. for and we’re now. the shopping? across NIKE’s think a we’ve marketplace, marketplace, be

that We’re have remainder experience marketplace. NIKE the continue to fiscal can of we throughout going this try lean our best the to create and -- year. will But, that consumer partners the to across inventory of

question Your from Bob line with comes of next the Drbul Guggenheim Securities.

two questions. Just

is one first the levels. on spending The

on a levels supply about outlook And of the follow-up. the spending of you’re creation investment the updated I you the revenue lower disruption understand thinking with or technologies? With against whether chain, us the how help can have it’s just the revenue, demand

intuitive. And finished Thanks, chain creating plan we drive supply against digital-first first we Sure. to for a we were we really when investment transitory about created think growth. a the And spending we is And believe at our was not year-over-year I we quarter as is outlook competitive a quarter, the and advantage. to we are we our moment of these here, The particular, talked marketplace. investing while a And strength Bob. finished our ago, as -- begin investment drive couple digital the in comparisons, NIKE’s multiyear XX% a impacts, about about, nature transformation. where accelerating real of of this revenue. against quarters first technology, And we’ve where financial strength our that as a consumer talked to connections that the and our to of about were starting going business, were digital the acceleration in see

we dynamics execute these pass, to believe we’re need direct the what we as strategy. capabilities And short-term so, consumer business scale operate to but a we will convinced the at and more that believe committed we

that’s is attention so, our focus going where be. and And to

from continue be We’re that consumer we we’re is profitability. teams the connection, doing in to And it’s deep sport when order strong stronger capabilities get also going perspective. brands a to and translate which on creating return investments focused this includes what absolutely a into of environment. those rooted that to in seeing our making strength. position growth And that to to stay Strong the sport in need keep and we’re of especially and having brand

one sneak And if in. could more just I Great.

just you how I today, going think give like or on line learnings us think, about the wondered if you what the have that is that? that product -- I and dropped Drake you something might for opportunity NOCTA some

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with Your next Capital Siegel question BMO comes from of the Simeon Markets. line

about magnitude thinking when of the for opportunity then, that and in potential you about wholesale your then between see? And any continuing undifferentiated so partners the Matt, to change support? to Thanks. recognizing pressures just Just talking unit the maybe out with performance order way inventory. this pricing price about strategic partners talk elasticity you of you’re demand, the the Can or quarter parse just you’re

Yes.

factors is value consider I But, season-by-season say, to And tell taken to prepared make relationship take we our that in we the you my a I a So, long half. with a that I pricing that we would we products actions And incorporate a long-standing is Simeon, number basis. we -- have the do. on will different about in some mentioned on what pricing question, that consumer. what decision evaluate of of price we remarks -- second we’ve what our a

take to so, decisions. view of long-term these types And a we

between ASPs second we input whole increases across But, see other strong the past the are given growth and referenced, And And really impacting in that we’ve low our those it’s range. in full and factors higher price and to been costs as partners. for knowing implemented about in talking the the fact locations, it’s got operating drive business. considering that we’ve marketplace, our optimizing driven think rising some appropriate other most in by inventory, of not feel our to factors to are that realization increasingly identifying physical continue to I several where to it so, put ourselves we consumer, providing important and half the wholesale, our wholesale the we’re I putting the our of marketplace single-digit the path access we’ve markdowns, leveraging endless the it in digital and price we capabilities of want strategic our lower that quarters that it, and locations some of

these price the are contributing realization to a marketplace. higher of full All of level across things

so, that we is moment base operate do disruption. in driving opposed from to NIKE to believe profitability that’s And where And for time. we a this lots where a want at as -- that of there’s moment a

accounts growth that strong a in exited partners. of our demand, see to and terms hand the better inventory half tell consumer you while of they’re for I strong of our been be our they we’ve driving. strong think the about further, over demand differentiated, now actually take of question we growth. experience right because fact three the able years, creating they in And differentiated we’ve to is I of like last double-digit differentiated or is about would weeks would more And your a undifferentiated that deliver it on it where second partners to XX% of are terms step in what to continue undifferentiated because driving their that

an in as towards believe that we supply-related in the of we wholesale remarks, his NIKE John And believe reductions marketplace the to most that greater will important so, this strategy. we alluded And will partners. our acceleration continue and trigger down the likely even transformation prepared

Kimberly question last of with Morgan the comes Your from line Greenberger Stanley.

laid to you. wanted that Great. the assuming really, that time Thank Thank resumption inventory really through November And out. you when in frame resumes the and through call great production on you you I October, production levels so just that color normalizing, much. see today. talk Matt,

when lead of the is calendar As that about you year quarters? to so you’re XXXX, the much. growth having really think, Thanks feel do next up holding the you low revenue few about gotten your in comfortable inventory inventory caught on over think here times, levels, back going sort

optimism happened to Well, factories that stems And Sure. starting the our has have Kimberly, that fact reopening our from week. this are approved. plans

production optimistic we’re going so, to in October. begin see that we’re And start to

back this COVID-related that in the XX Indonesia take earlier We’ve closures those China in of since ramp lost weeks pandemic production earlier for the us Our full experience factories time up will capacity. to tells from in and quarter then it mid-July. to

really marketplace. feel When we’re what to lost full serve focused so, time. to linear, fiscal factory towards this and that’s ‘XX. back in supply can are is, getting partners dynamic extended optimistic times, we’re at our in is planning the and plus going capacity to us we And move our point as be combine see to the going tell that we while so demand we the the year we’re year inventory on that experience we re-ramping production exit not that we that this going and improving see would this fiscal situation be And what lead into it’s

great a to things executing say, reality, but I a doing I stronger. just both which Kimberly, And -- of are demonstrating what confronting this do, way dynamic of very might don’t. teams through future sports build And emerge we phase capitalizing that, and we the we’re we what on regardless we agility is had Matt We’re think where adjustments, on the wish making one in the it, is I crystal and ball, making holds, right? that showing

last of phase year with of And year. X shocks got pandemic X shocks supply this demand the phase had we pandemic. with so, in we’ve now some closing the And retail of the

We will last just did navigate those we year. through as

continue were once we leveraging our process, we’re I that be are today. months now maybe the conclude just And stronger expressing to around strengths my in out we’ll think sincere demonstrating than of and field, resilience and call, by that’s XX,XXX day creativity to months the teamwork thanks to and building are continuing who and future serve Paul, XX we I And appreciation world, regardless leadership than circumstances NIKE just the we’re position. we’re innovate. to on we’ll And ago consumers where the today this the capability deals day us. what and again, teammates stronger we’re and the the for from what leveraging want are and XX to in do adjusting

today. for speaking look forward you Take safe. care thanks Kimberly, the us and We to with to stay joining question, next for quarter. you, Thank and all

Ladies call. today’s and in gentlemen, concludes you we thank for participation your This conference conference today’s call.

disconnect. may You now