Nike, Inc.

Good afternoon, everyone. Welcome to Nike Inc's fiscal 2021 fourth quarter conference call. For those who want to reference today's press release, you'll find it at http://investors.nike.com. Leading today's call is Andy Muir, VP, Investor Relations. Before I turn the call over to Ms. Muir, 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 the reports filed with the SEC, including the annual report filed on Form 10-K. Some forward-looking statements may concern expectations of future revenue growth or gross margin. In addition, participants may discuss non-GAAP financial measures, including references to constant dollar revenue. References to constant dollar revenue are intended to provide context as to the performance of the business eliminating foreign exchange fluctuations. Participants may also make reference to other non-public financial and statistical information and non-GAAP financial measures. To the extent non-public financial and statistical information is discussed, presentations of comparable GAAP measures and quantitative reconciliations will be made available at Nike's website http://investors.nike.com. Now I'd like to turn the call over to Andy Muir, VP, Investor Relations.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss Nike Inc.' 's Fiscal 2021 Fourth Quarter Results. As the Operator indicated, participants on today's call may discuss non-GAAP financial measures. you will find the appropriate reconciliations in our press release, which was issued about an hour ago or at our website, investors.nike.com. Joining us on today's call will be Nike Inc. President and CEO, John Donahoe, and our Chief Financial Officer, Matt Friend. Following their prepared remarks, we will take your 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 questions to one. In the event you have additional questions that are not covered by others, please feel free to re-queue and we will do our best to come back to you. Thanks for your cooperation on this. I'll now turn the call over to Nike Inc. President and CEO, John Donahoe.

Thanks, Andy, and hello to everyone on today's call. Looking at Q4 and the full fiscal year we just concluded, our strong business results prove yet again Nike's unique competitive advantage. Our relentless focus on our objectives is clear, and our strategy is working. We're excited by the momentum we continue to see. In Q4, we saw growth of over 95%. which translates to 19% growth for the fiscal year. This full year growth was led by our own digital business, which is now more than doubled versus fiscal 19 prior to the pandemic. I've said before that these are times when strong brands can get stronger, and each quarter this reality becomes even more clear. Today, we are better positioned to drive sustainable long-term growth than we were before the pandemic. our team has proven their ability to be unrelenting and executing against the macro complexities while also building the future. We saw broad-based growth this quarter, led by North America at over 140%. Greater China's currency neutral growth of 9% was impacted amidst marketplace dynamics with improving trends as we exited the quarter. One of Nike's strengths, is our diverse global portfolio, and through the power of that portfolio, we once again over-delivered on our expectations for the quarter. As we look ahead to fiscal 22, the opportunity ahead of us is significant. We remain very confident in our long-term strategy and our growth outlook. The structural tailwinds we've discussed before, including the return to sport, and permanent shifts in consumer behavior toward digital and health and wellness continue to create energy for us. And we remain focused on our largest growth drivers, including our women's business, apparel, Jordan, and international. Nike sets the pace through a continuous flow of new innovation, the world's greatest roster of athletes, and compelling experiences for consumers that create lifelong relationships with our brand. Our strengths and proven playbook give us the confidence to move even faster, to invest at even a more accelerated pace against the opportunities we see ahead. As the world's largest athletic footwear and apparel brand, we take seriously our leadership position to promote sport participation and an active lifestyle through inspiration and innovation. Our goal isn't merely to take market share. Our goal is also to grow the entire market. Nike's growth has been and will continue to be the result of three areas I'll walk through today. Connecting with consumers through compelling brand experiences across Nike, Jordan, and Converse, driving product innovation against our greatest growth opportunities, and expanding our digital advantage. First, let's discuss how we serve consumers. As sport continues to return, Nike leads with our unique, rich heritage and our deep roster of global superstars and up-and-comers who connect us with consumers everywhere. Euro 2020 started two weeks ago with Cristiano Ronaldo becoming the leading scorer in Euro's history. England, France, Portugal, and the Netherlands are among the teams with great momentum heading into the tournament's next stage. And we're proud that more goals have been scored thus far wearing Nike boots than all other brands combined. On the club side, Chelsea won the Champions League on the men's side, and Barcelona was the top team on the women's side. In the U.S., The WNBA season is underway with the Seattle Storm in first place, led by Sue Bird and Jewel Lloyd. And in the NBA, a captivating playoffs has showcased our unmatched rosters of the game's greatest players across Nike and Jordan, including KD, LeBron, Luka, Jokic, and several who are still in the hunt, like Giannis, Chris Paul, Devin Booker, and Paul George. And earlier this week, I was in Eugene for the U.S. track and field trials and got to see incredible performances from Shukeri Richardson, Michael Norman, Ryan Krauser, and many others. We remain excited for the power of sport on full display during the Olympics and Paralympics in Tokyo this summer and in Beijing next year. This authentic connection with consumers is also fueled by our belief in redefining how we open access to sport for consumers everywhere. Our recent campaign, Play New, launched in May, kicking off our largest ever invitation to Gen Z and marking the ignition point of a month-long rally around finding joy in movement and play. We focused Play New on TikTok and Snapchat to show Gen Z that, in their words, sport is a change accelerator. And their response has been remarkable. The app's augmented reality lenses, featuring yoga, dance, and surf, led to more than 600 million Gen Z impressions in just the first two weeks. Earlier, I mentioned our goal to grow the market. Well, by inspiring people to try something for the first time, we vastly expand the community of athletes. And we continue to bring the emotion and power of our brand to life through our digital ecosystem, which is led by the Sneakers app. In Q4, Sneakers grew over 90% in demand and saw nearly 80% growth in monthly active users. We're now offering this growing audience of high-value members an almost daily flow of compelling content and product launches. For Air Max Day in March, Six different live stream events gave Sneakers Live its highest viewership ever. So whether it's through Sneakers Live or user-generated style inspiration, Sneakers is the perfect intersection of content, community, and commerce. Moving to my second point, our relentless pipeline of innovative product continues to create separation between us and our competition. our product is fueled by sharp consumer insight, supported by marketing data and analytics as we continue to invest in our digital transformation. And through our new operating model, we are bringing more precision to the art of product creation as we blend the heart and science of innovation. For Q4, let me touch on two great examples of how we're investing in our top growth opportunities. Our women's business, and Jordan Brand. We're investing and focused across the entire value chain to unlock the vast opportunity we see for women's. For the full year, our women's business drove outsized growth of 22% versus the prior year. And despite the tremendous momentum we're seeing in women's, we know that there's even greater growth ahead as we move even faster with our new organization structure and invest far more resources in serving women end to end. For instance, in the marketplace, we continue to provide more compelling retail environment through our Nike Live format. In fact, this past year, we opened nine new Nike Live doors, which offer personalized experiences and services for female consumers. Our investments also mean a larger, sharper focus on women's only insights, services, and product innovation. And we're already seeing this work come to life. Consumer insight from our female consumer drove the new Pegasus 38, which kept the best cushioning innovations from this popular franchise while improving and tailoring comfort and fit that she wants. The Peg 38 has sold extremely well, and we continue to be energized by the potential we see in footwear for her. For the WNBA's 25th season this year, we created the most comprehensive player, team, and fan apparel collection in league history. The new WNBA uniforms were completely re-engineered to deliver the exact fit, movement, and comfort players said that they want from their jersey in sport. The players love them, and consumers have agreed, with sales growth well above our expectations. And that heightened demand extended to the larger product assortment, with the WNBA's 25th anniversary tee selling out in one day. This is just one example of how we drive energy for women's sport across the marketplace. as we remain excited by this enormous opportunity looking forward. Next, let's discuss Jordan Brand, whose momentum continues to be driven by its unique blend of heritage and innovation, as well as its deep connections to consumers and communities around the globe. In fiscal 21, Jordan Brand grew 31%, propelling the business to nearly $5 billion. This growth was driven by continued energy for Jordan's most coveted icons, including the AJ1 and AJ11, as well as new product dimensions. For example, Jordan's women's business nearly tripled in Q4, fueled by compelling product such as the Flight Essentials apparel collection, We are also increasingly are excited about our delivery of exclusive access for women through collabs like Laylee Lee's, May's AJ1, which drove over 40% female buyers, more than 10 points higher than average AJ1 buyer profile. In Q4, Jordan also launched Zion Williamson's first signature shoe, the Zion One. as well as the apparel collection. As the first Gen Z signature shoe in Jordan Brand's history, Zion offers both transcendent athletic possibility as well as a deep personal connection with fans. The strong sell-through of Zion's signature shoe collection demonstrates the continued love for Jordan Brand's roster of athletes all over the world. Quickly looking to the summer in Tokyo, in the next few weeks, we'll be officially launching more of our Olympic product, including our USA women's basketball and football uniforms, our four skateboarding federation kits, and a new metal stand shoe featuring our hands-free FlyEase technology. We're excited by the strong reaction we've seen for our Olympic product thus far. And we're also thrilled to see our innovation continue to separate us. In running, this includes our Vaporfly Next% 2 for distance runners, as well as our best-in-class track spikes. As you've probably heard, our spikes are creating dominant performances at the U.S. track and field trials, not just for Nike athletes, but competitor athletes as well. From performance to the medal stand to sustainability, We're excited for the world stage this summer in Tokyo to put a global spotlight on our advantage in innovation. One final observation on innovation. I recently got the chance to see the long-term product plans that our teams are developing against our new consumer construct of women's, men's, kids' and Jordan, with sharpness against sport performance and sport lifestyle, and I could not be more excited. It's safe to say that we're more confident than ever in our product pipeline as our focus on the consumer of the future drives our relentless innovation engine. And as we start welcoming employees back to work in our new state-of-the-art design innovation centers, I know that our innovation pace will only quicken as we reinvent what's possible. My third and final point is increasing our digital advantage. As I said earlier, our owned digital business has more than doubled over the past two years to over $9 billion. And at the center of our digital ecosystem is our suite of apps, which in Q4 reflected over 40% of our owned digital business. This is the result of deeper consumer connections fueled by compelling product and content. A key differentiator for us is membership. It has proven to be a compelling driver of repeat engagement and buying across digital and physical retail. In Q4, we continued to see growth in member demand outpace total digital growth, hitting a new record of $3 billion. This member demand growth was underscored by strong results across the consumer funnel, including member engagement, average order value, and buying frequency. In this fiscal year, we met the goals we set at our last Investor Day around membership a full year early, and now have more than 300 million Nike members. More importantly, buying member growth is outpacing new member growth, signaling progress on a deeper member-led commerce funnel. We're always looking to elevate our unique member proposition, whether that means expanding the number of member exclusive products or creating new and meaningful retail experiences through member days, our Nike-only retail moments. And this engaging membership experience fuels a virtuous cycle, feeding insight to product creation, inventory optimization, and more. knowing and serving our members drives greater competitive separation. Today, we're the clear leaders in our industry, and we continue to see digital as our leading channel for growth in fiscal 22. The combination of owned and partner digital revenue is now nearly 35% of our total business, more than three years ahead of our prior plan. And we see no sign of this shift slowing. In fact, We believe we will achieve 50% digital mix of business across owned and partnered in fiscal 25. As part of our overall One Nike marketplace, we're also actively engaged with our strategic wholesale partners who share our vision. Today, we're working closely with large strategic partners like Dick's Sporting Goods, Foot Locker, and JD Sports as well as compelling local neighborhood partners who are authentic to sport performance and lifestyle. Together, we are driving change to create a new, more connected, and seamless experience for consumers around the world, which is exactly what consumers want. It's a shift that speaks to our belief that the strong gets stronger. We're supercharging how we serve consumers, with convenience, innovation, content, and services. This is how we stay ahead of the pack and expand our lead. Finally, as we end our fiscal year, I want to thank our global Nike teammates. We've all been through a lot this past year. And at Nike, that's included store closures, supply chain challenges, a digital transformation, a new accelerated strategy, and more. And throughout it all, our team has delivered for our consumers and communities. So I just want to take a moment as I close to recognize and personally thank our 75,000 Nike teammates. You've demonstrated creativity, teamwork, and resilience, and you are the reason Nike leads. I've said it before and I'll say it again, the people of Nike are our greatest competitive advantage. With that, I'll turn the call over to Matt.