NIKE (NKE) 21 Mar 232023 Q3 Earnings call transcript

Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2023 Third 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, VP of Investor Relations and Strategic Finance.

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 Trussell, results that differ uncertainties expectations, and risks in reports the are filed detailed uncertainties and with These NIKE's SEC.

measures discuss website, measures refer participants and earnings NIKE's In investors.nike.com to and comparable release financial reconciliations. may press addition, NIKE's and non-public non-GAAP financial or for GAAP Please quantitative statistical information.

to call the like Mr. to Trussell. would Paul I Now turn over

everyone, joining Hello, third us to discuss and results. XXXX fiscal today thank you for NIKE, quarter Inc.'s

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

allow possible your Following ask this. your you remarks, their take you our would one. in your Thanks prepared for cooperation will many to questions as to we as like time, question to limiting questions. appreciate on so allotted initial we of would We

President to I will now Inc., turn John over the NIKE, Donahoe. and call CEO,

Thank of you, quarter revenue exceeding a plan. on basis, with today's in reported QX, and another growth everyone We currency-neutral delivered call. on and XX% strong a our basis on hello XX% Paul, to

our in segments strong strategy the achieve was channel We partners. continue sales across fueled of wholesale QX, quarter we Direct, distribution will our by growth, our be XX% consumer this over-indexed growth growth important our And in and digital that retail apps. Wholesale and of double-digit our to and and XX%, Digital, strong to grew reflecting marketplace. geographies. across while traffic led across Our with as drive strategic increases channels an had which brands, by part once broad-based access remains was growth key continues our strong scale again on mobile

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over to the that, I'll turn with Matt. And call

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share earnings was diluted quarter per $X.XX. Third

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we the full For grow approximately year, expect SG&A XX%. to

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have prepared cycles this volatility us. that we and before, managed We through in like of front for will is be well the

for call questions. let's the up that, open With

Boss, go [Operator Matthew will Instructions] to first We JPMorgan.

with Congrats all your a quarter Thanks. Great. on priorities. progression very of nice and

tailwinds John, us the we as as acceleration the that magnitude the healthy to of And see pretty basketball in just, year margin with maybe you turning of sounds in finish to about from and on or help speak the position, product Matt, momentum, look timing inventory headwinds underlying women's? confidence think from this could forward? then a increased the year share to market track drivers As forward-looking opportunities you your So tone, to pipeline current just robust. business across you running, break down

broadly, so accelerate product pipeline. areas we feel the Matt, good share very we of our good more three in to each Yes. and and very you mentioned our about about ability feel

on briefly areas just me you mentioned. touch three Let the

start with -- Just running. me let

three insights: as segments Peg QX, models. platform; consumer geographies six we shoes where we very and specialty to As we're was then you six of Day X across And all we as we've as and XX with road you wholesale dominate racing, the X, Invincible really running received models. Racing, on share launched the like Trail as months NEXT% over channels, well our other channels, the And the Matt where refocused speak in with know, innovative which Race continue such segment know, as all very into in we running in based partners Trail, around to four well DICK'S direct our I doors. past both gaining mentioned,

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conditions anticipated changing we've set to And on And brand sustain that And our remarks in we're through that seeing. the goals clear two recall, progress tremendous set given inventory. financial to had increasingly inventory clear marketplace. ago, it to actions levels on we're in we -- than parameters the marketplace, marketplace. had inventory. quarters 'XX momentum And in season healthy We've made year we're I'll you'll with we're the the going spring. we to quarters the prepared just exit inventory leverage we able fiscal mentioned response the decisive to two made going to supply leaner even across and confident fact, into be in into able within across And momentum been my chain that and continue ago, channels and and the exit in in holiday that I with that jump

on transitory I headwinds As the talking been that and next relates that I'll about complete quarter. promotions specific arriving in the excess full our quarter gross to year guidance. and I we've fiscal provide and in and years mentioned and I'll margins But elevated will and through XXX we will you inventory. much early margins about cost that what basis then give fiscal year the of it begin points 'XX, impact transitory tell logistics is gross over guidance And move headwinds to past 'XX, ocean two expect next those between how recover freight required to

Next, a Partners. from question we'll take Evercore Saad, Omar

all share. competitive channels you different outlook locals, my landscape, the with then to which a marketing that how there, there, across recovery you're having on ask to need being the what taken in behaving, some especially recovery, you consumers? little also resonate the seeing may a China. landscape. dimensions, Maybe the is vis-a-vis the access could And dive bit marketing unfettered the to love you the Are different few consumer have the deeper I'd for consumer maybe question on

feel in Yes, the wellness and both that's and key very saw some about Chinese going a market trend good there. we winning and is is you for It fundamentals innovation simply quarter, this But month your with Omar, a a And really Sport a look to desire is relevant is, up the And QX, connecting a in more second good, of forward, put, of and bottom growth great -- a line very in that's the are way. key consumers our importantly, to environment, position. we even in the and pick market specifics, style. healthy market a momentum our of the where tailwind inventory China. post-lockdown There's in it right? innovation -- is large locally this having is growing. and

And so doing. that's what we're

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in and cool growing. his an remarks, think our favorite widened mentioned strength, X,XXX a advantage. stores where Matt it's brand QX are We're this Beijing. And in #X And environment monobrand in That real brand. gap I

China. to invest for continue China to we're going in so And

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on focused good and very we're very momentum. So it very feel -- our about

Omar, the digits. We further of to policy shift momentum that Lunar of And was January, in February, relative New And trends flipped then that we were to and in year. our monthly we sales doors the strong just open January, saw traffic script add talked that rebound about on comp accelerate in and our COVID the single down the in Yes. amount on we nine-month had even in the with some retail growth December in saw month Year traffic. in I that of commented prior in business and high December, performance. that, of that’s brick-and-mortar comping and both a I the retail impact my And the on would in

the fundamentals our a opportunity absolutely we quarters. versus look there should been momentum inventory China And straight at the versus year that are be continue -- this when NIKE. expect So year continues for talking to say, second position for down being we've again for growth that to us for several about this quarter, I or prior the we quarter,

Lejuez, Your call from question Paul comes next Citigroup.

and retailers? any progressing Thanks, Lejuez. And they thoughts the partnerships you've Can future? apps certain an planned? us in guys. what give the on linking that new developed your Are your with Paul shared are as update you on up partners with

our wholesale membership across allow with partners, partners know, Paul, really when membership Yes, own get And what want program, wholesale want consumers members. is they of tied across our all strategy is across they retail this beginning whole which our connected our fruit. active marketplace our want, XXX notion they as with to it to you how bear and to together own our is digital, million

us. A us example provide can't examples shared early DICK'S. the with, in they say, baseball let's simple personalized you're experience we get about season of way be is upon a DICK'S, be, that elsewhere examples to DICK'S to can guess, and some seeing NIKE where I and benefits member a benefits might And a

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positive And for so clear, both. early benefits

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Our Morgan Alex Straton, question Stanley. from next comes

congrats saw year. bit on And quarter. Great. took I the you for SG&A up guide great the full guys that really a another

just review forward? that? what that driving next year? as you moderating we priorities your can think Or And what's are wondering, about just going should I'm So

quick one. Then just second one

growth I have you think that think you about upcoming we you seasons? you pre-COVID posted. in have Or much And should mentioned numerous guys taken of are expecting pricing How versus levels? the how that? ASP quarters to more take

wanted But saw back as an step Alex. prioritize year. Sure, second SG&A, the single when double-digit conditions, liquidation take to a this digits getting we a inventory relates in around sharpen pull market. Well, low to we it started guidance decided with of fiscal our guide for to maybe our at we the the as finish SG&A And first we growth. we to to year that going to change and the end back a healthy were of quarter, efforts we high

over new so are And tightly, And are quarters a got the land us we've are our the going were for that count we next absolutely planned been we from said investments going head making that very exciting making with been that last priorities the we have. in about ways flowing that we transformation years digital regards and was feel to things consumer-led expense we've reduce that to our we the two enabling to capabilities the that we've good and growth. operating for a would some that the transformation, towards what perspective create six growth resources momentum the in and prioritize to working that NIKE. done months. several ensuring And would we've manage of model our And

a back we're our quite was updated And growth, to basis carry able at increase. our to revenue guidance head next growth, growth in high expense now And I'm guidance to low even attention managing expense manage the been revenue step into as point definitely to given that we've even growth. expense variable proud revenue revenue seeing, When that on revenue year. you and that being seen growth on we for single-digit focus fiscal and time count intend actually continue we've our further, growth that single-digit mid-single-digit brand our momentum or

prices increased pricing, digits about mid-single As average and ASPs it question relates we've year our your this across to on portfolio.

prior it a quarters, a think averages average, wasn't I approach, to it on mid-single-digit product I've across every style. growth. As in butter but out surgical It said was in peanut

are I'll absolutely focus As at our chain we're ahead also product, make continually looking the in year, profitability of the looking on will that guidance absolutely way the together been continue levers pricing specifics, profitable to we we've next those we on you inflationary at try costs to to costs and order forward. managing impacting product. look we're our and growth the product that supply of our And that's in quarter inflationary and more margin for many going years. drive but to next give many, managing strategy

Guggenheim is from Drbul next. Bob up

Just a on couple of questions inventory.

inventories, even where that's side, at of a America, lot had lot you at your level in I'm progress partners, about specifically two in wholesale your talk numbers. of you a retail with apparel the interested the made in, wholesale channels, Europe. see inventory. maybe You then North excess where been Can the meaning you on pieces And

of on over the your from positioned Just us wanted the give apparel? think could is an updated you how the learnings pipeline all you understand working sort few maybe in apparel quarters through outlook next to there? And

move we Bob. had put actions NIKE with Well, into relates and And into momentum channels as was and we're it that order as the set holiday in challenge it. overall seeing from inventories with product, place our order to we've across the ago, we we specific Sure, products our late-arriving and more holiday to the be able to two the to given it that and And the aggressive saw of in made the balance we inventory to be into to very of to when moving slower spring, heading order that marketplace at seasonal marketplace, promotions across some on momentum was be in partners Direct. plans beginning. the great quarters which progress on the also, season across partners that relates address in particular, apparel to part able

wholesale America North look should of or say, wholesale and overall, channels, across the partners we're I we our and sales EMEA when in channel, rate at the those wholesale that So seeing we progress look that the side was to sales this our we sell-in. and made. feel very we larger the in And partners the than fact, have good in about our our quarter, consumer retail

So progress very good we feel there. about our

think the early of apparel, benefit that in tell on relates summer And had forward carry seasonally in in a fall take so you it with biggest of after what would right -- us I learnings we've the year, we getting our to against one focus making front consumer. closed of continue factories inventory rising I and were on had seeing is early of the I in season watching levels the of excess product the and was marketplace. that of of so hindsight, quarters up we actually in in there late to is And prior current that that delivery moving specifics and that think significantly now pre-pandemic. last the late the or versus the one starting timing rival As fall and product we're we much to deliveries the fast because now to that do-over constraint was in decided product would we was that

together having stories consumer at experience the is is right colors, in right difficult that to NIKE, match. can the very advantage right so right And materials, it competitive the retail for creates NIKE the a we the assortment, because way pull

have earlier, Again, away. The right it's in spring very that. on way, months build highly in is, the apparel months the coming supply right -- 'XX. six see and chain seasonal just to when in a nine have six business. the you But you just were powerful. referenced right overseeing And together crisis colors learning a assortments Matt I'll that's Yes, I I don't and our

there exciting. pipeline looks very the so And

Your next Sherman, Aneesha Bernstein. question comes from

is and of versus how get XXXX exit a month. be possible how the about the for tough about little a you you know moment? your sense China. we it a out more the through know trending December quarter at behaved being quarter terms quarter about to in curious in demand I'm can of talk really the Would the of bit trends possibly I to so December rate talked

then guidance. have And I a second around sales your question

be between quarter, on sales guidance base? implies expecting to quarter-over-quarter sales a similarly flat Are few inventory so to down kind QX. about this quarter-over-quarter flat QX down Your a percent you of versus

but trends China, again I'll quickly. I mentioned question, in response monthly Omar's earlier it hit just Aneesha. in Sure, the to

saw to the door in and digits. retail shift in of we the And a period in policy in New With the and China. growth single COVID of Year year-over-year the Lunar different month under prior even in February, traffic lapping and brick-and-mortar to business then in improvement an in And We that month improvement month. traffic of the the greater year closures January. relative because flipped December, includes our was pressure down an it was high saw January

So are we that encouraged. there. healthy I mentioned inventory are levels our

exited momentum we're encouraged the the on as that had And quarter. we based we so

and full to quarter full time than our this also guidance higher upward, was look at We two it at particular, guidance. previous revised in quarter. again year relates our it when I our But month QX is fourth this in based point momentum year this the -- revenue on in been revenue has that quarters. outlook strong As

and revenue our inventory we're and place an partners perspective. that. brand is momentum an our year of cut confidence perspective continue our a to great summer ensure buys to inventory from the largest this in decision to fiscal and to made we The QX ago, finish And So see build. spring making our progress we're our that we driver a continuing we guidance against months six help this in healthy place finish healthy year from that

So improvement to look our we're to see that to and of strength are as a we in year to confident 'XX. position finish in going in expect year QX ahead fiscal inventory continue we this

We'll take Fitzsimons, our Wells from Fargo. question next Kate

the movement the just can expand digital over we've you if of margins Curious on of last some couple in quarters. seen

the to the with seems on ROAS with associated shipments. continue like see of some you reduced like digital front. pleased you're movement Sounds It benefits

margin detail can margin just just to wholesale speak point? the you now seeing you're of digital think about between how channels. flow this I'm kind the we delta So the curious maybe if at And about more should and through direct

for we growth, is And opportunities it from that that. been NIKE's the And the you high line financial in our in business, And transformation was fiscal to momentum of gave to we've revenue business transforming this we're business our that year gross this momentum if how direct you highlight points the been channel related I digit profitability that think performance see mix grow our what X% about higher 'XX dynamics for quarter, from to in margin looking business. we've intended the year fiscal at would we the really always channels. not at examples our of around year being And top that is digital Well, our call a both And but about some I goes quarter is actually really had that And of the just exiting were low referenced going digital perspective, is continued said channel. I some time us expansion there's those wholesale Sure. from of digital channels. margin. mix and model. we as the that look us only the and than at the fueled driving trying digital that benefited our not benefit at of algorithm talking fiscal the ASP we tailwind margin -- roughly reflect this as gross through see from a look we've from to to really of on you digital I mix our a 'XX. consumer-led We've seeing only terms improve XX% quarter provided say for that that business digital but that single to 'XX the our of two contribution higher to as double-digit in of can and X

marketing points. of more that is are the more side, serve if about and funnel idea and our membership we've digital to and from should ROAS who and of the split digital lower improvement in return spend we talked ad through our of the from able making top we and then the EMEA And through business. that team specifically continue on through shipments to the to be cost a on or more moat a lot some to digital give a in our start One, that a OXO, to building we're an the engaged coming efforts got confidence members reducing adding pickup fulfillment frequently, perspective buying see us in perspective grow

So to those working examples, even are in of two our particular, us the of hard digital profitability channel. improve greater

recovery we confident we've term, drive in markdowns and been those those long-term to think provided. remain we've in we've and the goals ability through higher transitory we as are promotions our begin channels see think that this Obviously, I year direct should excess the year, look towards seen inventory, to in moving as to costs, longer 'XX. but we fiscal we of continue our beginning

We for have time last one question.

Bank. Deutsche Carbone, Gaby from come will question That

into you seeing if are any Curious EMEA. between on environment. the you're resilient dig the seeing But meaningful macro quite region? be countries? can in it seems is question despite like My continues differences what It to you

Jordan. consumer what's demand. can I'd I a the has Matt, The NIKE fill statement, held specifics. That's is our EMEA some across well. in of has brand really up strong then strength just say and and you mean And broad remarkably both for clear

really well strong digital, channels, as very this this channels. as quarter across year well and as saw as wholesale entire strong direct our You

there play Jordan across major our is NIKE with connection NIKE is brand of anywhere. the fields So as across strong it and as

running to which across continuing a And all highlighted markets some there. offense that ago, softness portfolio, Yes. had offense phenomenal dimensions, UK, including look price lifestyle, see when down job a seen brands, the we And and UK, and complete growth in across we're I has mean we're across sport is strong different genders, across just that would our of -- and add back. up country bounced team we the strong we've performance Western complete that points. and several we're quarters across running European in doing the I but a growth marketplace,

the driving lifestyle resonate that we John world referenced, at sneaker a the their find we're continuing through to I'll and that in you, of the for and starting as important and And culture market. around so on that focus region. in brand sport be in dynamics lot the things look incorporate authenticity honest Europe place with And

in growth of to closeness consumer region, that not behavior and the our just to to outside that in trends critical drive market in but so is And that region. markets drive

earnings today. you. the for We'll participating the call Thanks all in to thank next conference Thank This QX and you talk call. for our for Gaby, concludes time. you question,

you, that call. does Thank this Once everyone. again, conclude

disconnect. may You now