Nike, Inc.

Q4 2021 Earnings Conference Call

6/24/2021

spk_0: good afternoon everyone welcome and nike in fiscal two thousand and twenty one fourth quarter conference call for those who want to reference today's press release still find it at http colon forward slash forward slash investors that nike dot com the eating today's call is the mirror v p investor relations before i turned the call over to miss me or 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 and reports filed with the scc including the annual report filed on form ten k some forward looking statements may concern expectations of future revenue growth or gross margin and addition participants they discuss non gaap financial measures including references to constant dollar of a nail references to constant dollar revenue are intended to provide context as to the performance of the business eliminating for foreign exchange fluctuations participants may also makes reference to their non public financial and statistical information and non gaap financial measures to the extent nonpublic financial and statistical information as discussed presentations of comparable gap measures and quantitative reconciliations will be made available and like his website http colon forward slash forward slash investors that nike dot com now i'd like to turn the call ever to and he mere vp investor relations
spk_1: fazio operator hello everyone and thank you for joining us today to discuss nike he thinks fiscal twenty twenty one fourth quarter results as the operator indicated participants today's call me discuss large gap financial measures you will find the appropriate reconciliation in our press release which was issued about an hour though or at our website and best eras that lucky to stockholm joining us or today's call will be like against president and ceo john donahoe and our chief financial officer math friend following their prepared remarks we will take your question
spk_2: we would like to allow as many of you to ask questions as possible and are lot of time the we would appreciate you limiting your initial question to one
spk_1: and be a you have additional questions that are not covered by others
spk_2: please feel free to leave you and have your back to come back to you thanks for your cooperation on this allowed for and the call over can i see eg president and ceo john donahoe
spk_3: hi sandy a load everyone on at a call looking to for and the for fiscal year we just included are strong business results prove yet again nike's you need competitive advantage are relentless focus on or objectives is clear that our strategy is working we're excited by the moment of we continue to see into do for we saw growth of over ninety five percent which translates to ninety percent growth for the fiscal year the for your growth was led by our own digital business which is now more than doubled vs this or ninety prior to the pandemic i said before these are times when strong brand can get stronger and each quarter this reality becomes even more clear today we are better position to drive sustainable long term growth that we were before the pandemic our team has proven their ability to be unrelenting and executing against the macro complexities the also building the future we saw broad based growth this quarter lead by north america it over a hundred and forty percent greater china's currency neutral growth of nine percent was impacted amidst marketplace dynamics with improving trends as we acted as the quarter what about you strengths is are diverse global portfolio at through the power that portfolio we once again over delivered on our expectations for the quarter if you look ahead to fiscal twenty two the opportunity of had about is significant we remain very confident in our long term strategy and or growth outlook the structural tell ones we've discussed before including the richard a sport and permanent shirts and consumer behavior toward digital and health and wellness continue to create energy for us and we remain focused on our largest throat writers including our women's business apparel george and international nike set the pace through a continuous flow of new innovation the world's greatest roster of athletes and compelling experiences for consumers the crate lifelong relationships with our brand our strengths and proven playbook give us the confidence to move even faster to invest that even a more accelerated pace against the opportunities with the ahead as the world's largest athletic footwear to pair up brand we take seriously or leadership position to promote sports participation and an active lifestyle through inspiration and innovation our goal is it 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 free or is a walk through today connecting with consumers through compelling brand experiences across nike jordan and commerce driving product innovation against our greatest growth opportunities and expanding our digital advantage first let's discuss how we serve consumers as for continues to return nike leads with our unique rich heritage and are deep roster of global superstars and up and comers who connect us with consumers everywhere euro twenty twenty started two weeks ago with cristiano ronaldo becoming the leading scorer in euros history england france portugal the netherlands are among the teams with great momentum heading into the tournaments 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 size and barcelona was the top team on the women side in the us the w n b a season is underway with the seattle storm and first place led by subaru and your voice and then the n b a a captivating playoffs as showcased are unmatched rosters of the game's greatest players across nike and jordan including kd le bron luca joke it's and several who are still in the has like john is chris paul devin booker and paul george an earlier this week i was in eugene for the us track and field trials and got to see incredible performances from she carries richardson michael norman ryan crowther and many others we remain excited for the power of sport on full display during the olympics and paralympics in tokyo the summer and in beijing next year this authentic connection with consumers is also fueled by our beliefs and redefining how we open access the sports for consumers everywhere a recent campaign play do launched in may taking off our largest ever invitation to jersey and marking the ignition point of a month long rally around finding joy and movement and play we focused plane do a tick tock and snapshot to show jersey that in their words sport is a change accelerator and their responses and remarkable the op's augmented reality lenses featuring yoga dance answer lead to more than six hundred million jersey impressions and just the first two weeks
spk_4: earlier i mentioned our goal to grow the market
spk_3: 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 but ran to live through our digital ecosystem which is led by the sneakers out and cue for sneakers grew over ninety percent in demand and saw nearly eighty percent growth in monthly active users where no offering this growing audience of high value members and almost daily flow of compelling content and product launches forever air max day in march six different livestream events get seekers live it's highest viewership ever to whether it's through sneakers live or user generated style inspiration sneakers is the perfect intersection of content community and commerce movie to my second points are relentless pipeline of innovative products continues to grade 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 or digital transformation as were new operating model we are bringing more precision to the art of product creation as we blend hurt and science and innovation for due for let me touch and to great examples of how we're investing in our top growth opportunities
spk_5: or women business
spk_6: and jordan brand
spk_3: we're investing and focused across the entire value chain to unlock the vast opportunity we see for women's for the full year or women's both business drove outside growth of twenty two percent versus the prior year and despite the tremendous momentum were saying and women's we know that there's even greater growth ahead as we move even faster with a new organization structure and invest far more resources and serving women and to end for instance in the marketplace we continue to provide more compelling retail environment to our nike live format in fact this past year we opened nine new like nike like doors which offer personalized experiences and services for see 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 thirty eight which kept the best cushioning innovations from this popular franchise while improving and tailoring comfort and fit that she wants the paid thirty eight has sold extremely well and we consider to be energized by the potential we see and footwear for her for the job you and be a twenty fifth season this year we created the most comprehensive player team and fan apparel collection and league history the new job you and a uniforms were completely reengineered to deliver the exact fifth movement and comfort player said that they want from their jersey and 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 a job you a be a twenty fifth anniversary t selling out in one day this is just one example it's how we drive energy for women sport across the marketplace as we remain excited by this enormous opportunity looking forward next let's discuss jordan brand who's momentum continues to blue be driven by as unique blend of heritage and innovation as well as it's deep connections to consumers and communities around the globe and fiscal twenty one jordan brand group thirty one percent propelling the business and nearly five billion dollars this growth was driven by continued energy for jordan's most coveted icons including the ha one and aj eleven as well as new product dimensions for example jordan's women's business nearly tripled into for fueled by compelling products such as a flight essential apparel collection we are also increasingly are excited about our delivery of exclusive access for women through collapse like alleles mais a day one with drove over forty percent female buyers more than ten points higher than average aj one fire profile thank you for jordan also launched line way him since first signature issue the zion one as well as the apparel collection as the first jersey signature issue and jordan brands history zion offers both transcendent athletic possibility as well as a deep personal connection with fans the strong sell through of zion signature shoe collection demonstrates the continued love for jordan brands roster of athletes all over the world quickly looking to the summer in tokyo in the next few weeks will be officially launching more of our olympic product including our usa women's basketball and football uniforms or for skateboarding federation kids and a new metals and shoe featuring our hands free fly technology we're excited by the strong reaction we've seen for olympic product thus far and also thrilled to see our innovation continue to separate us and running this includes or vapor fly next percent to for distance runners as well as our best in class tracks bites as you probably heard our spikes are creating dominic performances that the us track and field trials not just for nike athletes but competitor athletes as well from performance to the metal fan says sustainability we're excited for the world stage the summer in tokyo to put a global spotlight on our advantage in innovation one final observation and 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 many kids and jordan which sharpness against for performance and for lifestyle and i could not be more excited it's safe to say that were more confident than ever and our product pipeline as our focus on the consumer of the future drives are relentless innovation instance and as we serve welcoming employees back to work in our new set of the are designed innovation centers i know that are innovation pace will only question is we reinvent what's possible my third and final points is increasing our digital advantage as i said earlier our own digital business has more than doubled over the past two years over nine billion dollars and at the center of our digital ecosystem is our sweet of that's which is you for reflected over forty percent of our own 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 issue for we continued to see growth and member demand outpace total digital growth hitting a new record of three billion dollars this member demand growth was underscored by strong results across the consumer fall including member engagement average order value and buying frequency and this fiscal year we met the goals we sat at our last investor day around membership of so year early and now have more than three hundred million nike members more importantly buying member growth is outpacing new member growth signaling progress on a deeper member led congress final we're always looking to elevate are unique member proposition whether that means expanding the number of member exclusive products are creating new and meaningful retail experiences through remember days or nike only retail moments and this engaging membership experience feels a virtuous cycle feeding insight to product ration inventory optimization and more knowing and serving our members drives greater competitive said separation today where the clear leaders in our industry and we continue to see digital as are leading channel for growth in fiscal twenty two the combination of own and partner digital revenue is now nearly thirty five percent of our total business more than three years ahead of our fire plan and we see no sign of this shift slowing in fact we believe we watch t fifty percent digital mix of business across the own and partnered and fiscal twenty five as part of our overall one nike marketplace were also actively engaged with our strategic wholesale partners who share our vision today we're working closely with large for teacher partners like dick's sporting goods footlocker and jd sports as well as compelling local neighborhood partners who are authentic to sports performance and lifestyle together we are driving changed to create a do more connected and seamless experience for consumers around the world which is exactly what consumers want it was shifted speak to our belief that the strongest stronger or 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 consume our fiscal year i want to thank our global nike teammates we've all been through a lot this past year at a 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 thanks our seventy five thousand nike teammates you've demonstrated creativity teamwork and resilience and you are the reason nike leads i said it before and i'll say it again the people of nike our our greatest competitive advantage with that are turned the call over the map thank you john and hello to everyone on the call today
spk_7: before i became my prepared remarks i too want to take a moment to thank are incredible team they delivered extraordinary results over the past year i also want to take a moment and recognize any muir this will be her last earnings call his vice president investor relations after recently becoming see a photo of our jordan brand thank you andy for your leadership and specifically for your support and my transition to cfl last year i wish you the best of luck in your new role and know you'll do great and back feeling indian in this role is paul trussell too many of you already know paul joins us from deutsche bank and we're excited to welcome him to the nike team no i'd like to begin today call with a baseline on where we are in our recovery just as we anticipated night he is emerging from the pandemic stronger and better position to serve the consumer
spk_8: and the reason for this is clear
spk_7: nike's consumer direct acceleration is fueling a deeper consumer connection with our brands and driving business results all while highlighting greater strategic and financial opportunity ahead over the past fifteen months we have navigated through this challenging environment with outstanding execution of are operational playbook we have saved every challenge had on focus on what we could control all while keeping the consumer at the center these actions of health said a strong foundation for sustainable growth in profitability with business performance now exceeding pre pandemic levels
spk_4: in the fourth quarter we delivered over twelve billion dollars that reported revenue or largest quarter ever
spk_7: or nike directors this is now approaching forty percent of total nike brand revenue nike digital represents twenty one percent of total nike brand revenue a milestone we've reached several years ahead of our prior plan and finally our system twenty one either margin reached fifteen point five percent reflecting more than three hundred basis points of expansion when compared to cisco my team these metrics now become the new baseline from which we expect to grow as we recover from the global pandemic it is clear that our consumer direct acceleration strategy is transforming nike's financial model so later on the call i will share our financial outlook through fiscal year twenty five reflecting a more direct member centric business model
spk_4: however first i would like to provide additional detail on are extraordinary fourth quarter results and operating segment performance
spk_7: like me and revenue increased ninety six percent and eighty eight percent on a currency neutral basis this was driven by strong wholesale shipments and nike own store performance as we anniversary pandemic related store closures even as physical retail reopened we continue to see strong growth and nike digital of thirty seven percent versus the prior year gross margin increase eight hundred and fifty basis points versus the prior year driven by favorable nike direct margins and the anniversary of higher costs including actions taken to manage to find the man in the face of the coven eighteen pandemic su they grew seventeen percent versus the prior year due to higher level the brain activity connected to return of sports digital marketing to drive digital demand technology advances to support our digital transformation and higher wage related expenses are effective tax rate for the quarter with eighteen point six percent compared to one point seven percent for the same period last year due to decrease benefits from the three items in the prior year
spk_4: and a shift in earnings next primarily related the pandemic recovery
spk_7: fourth quarter deluded earnings per share with ninety three cents and for you're deluded earnings per share with three dollars and city success up a hundred and twenty three percent versus the prior year now let's move to are operating segments in north america queue for revenue grew a hundred and forty one percent
spk_4: this also marked the first ever five billion dollar quarter for north america
spk_7: driven by notable improvements in full price sell through as the marketplace reopened and sport activity returned demand for like he remained incredibly strong and as we expected to lead revenue from the global supply chain disruption in the third quarter was recaptured during the fourth quarter nike directory over one hundred and twenty percent as nike on stores returned to positive sales growth vs pretend an iq levels more importantly nike digital grew over fifty percent while physical traffic continue to improve across the marketplace nike direct performance was propelled by our members across both digital and physical retail member to manually doubled versus the prior year and a number of buying members grew roughly eighty percent across the total marketplace we continue to see strong retail sales growth and consumer demand for our brands exceeding marketplace to fly with marketplace inventory down double digits versus the prior year nike or inventory declined seven percent with double digits declines in close out inventory in transit full price inventory remains elevated as we continue to experience wander and and we times for supply
spk_8: we have sex supply chain delays and higher logistics cost of process throughout much of fiscal twenty two
spk_7: in a mayor que for revenue grew one hundred and seven percent on a currency neutral basis with strong growth across the region including the uk and ireland france germany and italy nike directory fifty seven percent despite government restrictions require nearly half of our nike on stores to remain closed for the first two months of the quarter in marriage as restrictions these we saw strong consumer response with incredible pent up demand
spk_9: and this momentum is continued into june
spk_7: nike digital drew nearly thirty percent versus the prior year to are member days we saw strong engagement with member demand outpacing total nike direct revenue growth with all time highs for female actors members during your mac suite in the fourth quarter we also expanded the nike mobile apps and more than ten new countries across the region during our last earnings call i shared our expectation that inventory the mayor with normalize in the first quarter of fiscal twenty two we've exceeded that goal to stronger than anticipated consumer demand and in fiscal twenty one in a healthy and normalized into a position
spk_10: and greater china
spk_3: two for revenue grew nine percent on a currency neutral basis
spk_7: for the for your greater china delivered it's seventh consecutive year of double digit growth demonstrating are consistent brand strength and commitments to serving the consumer nike direct route two percent and queue for with strong growth and ninety on source partially offset by declines in nike digital
spk_4: as john mentioned earlier queue for business results were impacted by marketplace dynamics
spk_7: after a strong march or business and greater china was impacted in april and we adjusted our operations by suspending marketing activities and product launches we then began to see a recovery trends
spk_9: improving to a single digits decline in may
spk_7: and sequentially improving into june with months today retail sales trends approaching priors your levels and for the six eighteen consumer moments our flagship store on t all ranked number one driving the highest a man across the sports industry building on our forty year history and greater china we continue to invest in serving consumers with the best products nike has to offer in locally relevant ways also continue to invest in the creation of a premium seamless consumer digital experience
spk_11: and supply chain capabilities
spk_7: and we plan to open a new digital technology center and send them to better serve chinese consumers we haven't experienced local team in greater china
spk_3: who helped create are operational playbook at the beginning of the pandemic they have pro actively managed marketplace supply demand in order to navigate through these dynamics and we expect inventory to be normalized by the end of two two
spk_12: now moving to a pls
spk_7: two for revenue grew seventy six percent on a currency neutral basis with growth across all territories led by japan soco and mexico and career grew double digits this quarter on top of the eight percent growth they delivered in the fourth quarter of last year nike digital grew more than fifty percent and able to an amplified by our membership ah sense this was highlighted by member days which drove all time highs remember demand
spk_4: this momentum also extended to our marketplace potter's and a p away as they return to growth vs prepare them levels and achieve their highest level of full price realization since the beginning of the pandemic
spk_7: during golden week in japan the expressway an assortment was heavily influenced by member in size and deliver to sell through rate that was two times the rate of the rest of nike digital in japan showcasing the power of blending art and science that john referenced earlier dp away with the last geography to once our express lane office
spk_3: and we see significant opportunity to leverage these capabilities to drive deeper authentic consumer connections across the region
spk_13: now
spk_11: as we look ahead to fiscal twenty two and beyond
spk_7: i want to provide a new financial outlook through fiscal twenty five as we emerged from the pandemics accelerate our consumer direct strategy and transform the operating model of the company first of all nike a growth company and we expect to sustain strong revenue growth going forward this is based on the significant market opportunity that we see for our brands across the portfolio as well as r accelerated ship to a more direct number centric business model
spk_4: as a result we expect revenue growth in flux upwards to a range of high single digits a low double digit growth on average with outsized marketplace opportunities in women's apparel jordan digital and international
spk_7: growth will be led by nike direct and our strategic marketplace partners earlier i mentioned nike direct is approaching forty percent of our brand business today and we expected to represents approximately sixty percent of the business in fiscal twenty five led by growth and digital and as john said earlier we expect odin of digital to achieve fifty percent business next in fiscal twenty five with nike own digital to represent forty percent of the business we will continue reshaping are wholesale business portfolio which includes disaster from undifferentiated retail well investing in our strategic wholesale partners for healthy growth overall we expect wholesale revenue to remain roughly flat vs fiscal twenty one we will support partners who continued authenticate our brand as well as those who have the scale to create a consistent premium digitally connected experience for consumers across the marketplace or monitor revenue outlook reflects higher growth expectations across several operating segments we will continue to leverage the power of our diverse local portfolio and we have sat on average north america to grow mid single to high single digits a mayor to grow hi single digits and a p a way to grow low double digits and with respect to greater china while marketplace dynamic still exist we're optimistic that we can continue to grow low to mid teens over the long term we remain committed to investing in the local consumer experience and inspiring the next generation of athletes and china we will continue to serve consumers with like his performance innovation
spk_3: and sports style product franchises while also increasing local customization of style and set for consumers
spk_7: for several quarters now i've highlighted that the strategic and financial benefit of shifted to a higher mix of business through nike direct led by digital and leveraging enhanced data and analytics capabilities to optimize inventory drive fire full price realization and lower did
spk_14: it'll for filming costs
spk_7: we now see gross margin rate reaching the high forties
spk_14: isis will twenty five
spk_7: we will continue to reallocate resources and invest to enable our digital transformation and fuel the long term growth in profitability opportunities that we see having said that we expect you invested as she a day at a rate that right leverage vs pre pandemic levels which average roughly thirty two to thirty three percent of revenue as a result of all this we see or even margin reaching high seen by siskel twenty five with earnings per share growth of mid to high seas on average over this period as we drive towards a more direct business model we remain committed to create long term value for our shareholders through serving consumers and sustaining are disciplined financial management we expect to deliver strong growth in free cash flow maintain annual capital expenditures at roughly three percent of revenue driver turns on invested capital above prior guidance of below thirty percent range
spk_6: and deliver consistent returns the shareholders through dividends and share repurchases
spk_3: now that i've discussed are updated financial outlook to fiscal twenty five i will provide guidance for fiscal twenty two
spk_7: as i've already said we enter the fiscal year strong confident that are deep consumer connections and brand momentum will continue despite being in a dynamic operating environment our confidence is rooted in the fact that consumers and a key cities rate nike as their favorite brand the retail sales continue to grow strongly on lean marketplace inventory
spk_6: and our organization is aligned against our new consumer constructs which will help us accelerate even faster against our largest growth opportunities
spk_9: and fiscal twenty two we expect revenue to grow low double digits
spk_7: and surpassed fifty billion dollars reflecting strong consumer demand across our operating segments as we lead with digital scale nike own physical retail concepts and grow with our strategic partners it's important to note as we normalize our post endemic business and continue to reshape the marketplace
spk_4: we do not expect photo by for rose to be money or
spk_7: therefore we expect first half rose to be slightly higher than second half growth we expect gross margin to expand one hundred and twenty five to one hundred and fifty basis points reflecting our continued shift to a more profitable nike directors nurse and sustained strong full price realization partially offset by higher product costs supply chain investments and he is legalization of certain one time benefits and system twenty one for exchange is estimated to be a tailwind of roughly seventy basis points we expect es una growth the slightly outpace revenue growth as we normalize spend with returned to sport and more consistent store operating schedules as well as investments focus against or largest growth opportunities which i've shared previously however we do expect to leverage relative to pretend denigrates of investment and last we expect the fiscal twenty two effective tax rate to be mid teens as we begin our next fiscal year nike continues to navigate through a dynamic and rapidly changing environment at the same time we're on the office and accelerating our strategy to serve more consumers personally and as scale are unmatched innovation continues to enable world class athletes to reach new levels of performance a sport returns to the main stage
spk_15: our products pipeline is sean
spk_7: and we're even more deeply connected to consumers than before the pandemic we are building upon a strong foundation we set and siskel twenty one and accelerating our pace for the next leg of the race we have a clear vision for operands long term future and we're focused on what it will take to get there
spk_11: with that when i open up the call for questions
spk_0: first question comes from the line of soft around with guggenheim security
spk_16: that's good afternoon and paul tressel congratulations and he better lock and the central information to the i'm against us the first question that i have can you spend more time on china exactly mean you gave us a lot of detail around how it's progressing i guess i'd be curious to see here we take the inventories me think about how you're planning the next you know few quarters from a flow perspective some years ago so more color just a how you'd plan china on the revenues and guess either and quarterly you're just you know for the year based on the trance thanks
spk_17: sir bob
spk_18: and although it takes was the question
spk_7: as we as we think about the dynamics that we're managing through in china right now we're optimistic as we continue to see improvements sequentially teach months as we think about this school twenty two in the guidance we provided we're planning for continued recovery throughout this we're twenty two but we don't expect it to be linear and what i would say as longer term were optimistic given our history of operating in china and are connections and relationship with consumers that over the long term will be able to deliver low to mid teens for us
spk_16: great and i'm just have a question sort of i guess it would be a north american questioned as a follow up but i'm not with le bron out and td out use the yannis and i just wondered if if you think this is his and you think he can he can bring the trophy home
spk_3: are we sell yourself as if that the rod devon booker and if not stem doctor paul george are many the other night yeah states and what's been one of the just one of the great m b a playoffs i know we've all enjoys the case it's so great sports back it's so great that the stands or falls so the excitement said excited that we feel with the tired and be a and friend the all that great for going on right now is palpable
spk_19: thank you very much
spk_0: i slob
spk_20: next question concerning line has kimberly greenberger with morgan stanley great been so much on now and thanks so much for the yes the outlets here's your twenty twenty five is this is a noticeable sort of
spk_21: inflection in the business which appalling force near and and i didn't just hear the enthusiasm so i wanted to just ask us about water when think so see underpinnings audits it's giving you confidence need celebration in the growth rate arms and and
spk_20: where did you see
spk_7: this bit basically this is supports for this level of acceleration what's driving that church and really well you as we talked it out throughout this year we have continued to see the way that we have gotten closer to the consumer creating deeper connections and as we look at our brand is positioned around the world we continue to be very optimistic with with what we see that's translated into very strong retail sales growth throughout the year and in many circumstances we've seen demand outstripping supply
spk_22: as we think about the future and especially as we exit twenty one and we move forward to twenty two thirds definitely specific things that that that give us optimism in confidence john just mentioned one of on which is the return to sports and were already starting to see and acceleration in our sports performance business
spk_7: we're excited about the connections that were driving from a digital perspective especially as physical retail reopens we believe that as a sticky shifts that will continue
spk_18: and as embedded in our guidance for twenty two and also the longer term out with that i provided for yes and that's shifts have a twenty or twenty point mix shifts in direct
spk_7: is definitely an inflection from a revenue creates an inflection from a revenue perspective and dumb and and lastly i would say that in a we continue to talk about this significant opportunities that we see more broadly in the marketplace and while we've had momentum and we continue to see those dimensions of business outstripped the growth of the rest of the business the opportunity is still significant relative to our share in those specific areas and so what i'm referring to there is er women's business and the opportunity we see in front of us
spk_20: the apparel business and the opportunities that we see their and then the momentum that we have with the jordan brand in particular and and the opportunities that we see for that brand both in north america but in international markets as well
spk_0: very clear and so exciting sent you
spk_23: next question hands on the line as matthew boss with j p morgan
spk_24: great thanks congrats on a really nice quarter and any really great higher
spk_23: and earth asbestos sir john met maybe on me on the digital transformation could you help outline what you think most differentiates your digital strategy to continue to build the marketplace leadership and mats maybe with that could you to stop walk through the profitability of the digital channels as it relates to the algorithm the you out
spk_3: the lines and maybe which line items it's most impacting what's your matthew that you're the first thing never in and never look a wonderful tailwind in the in the us are like away for once a week gotta there's a fundamental shift and consumer behavior towards digital and that's been happening but the pandemic is simply accelerated that and that provides the opportunity for us to have a direct connection with consumers which is increasingly important in a digital world where where consumers was going where digital are focusing and fewer and fewer apps and we are going to be one of the very few apps that have a direct connection with consumers and that's a mocking that's a lucky break or that's a lot and growth in our ability to serve them with more personalized shopping experiences with recommendations across our vast our best product portfolio with services and other ways to engage them like nike run club nike trading club we think we're one of the very few and our industry that will be able to establish that direct connection with consumers both around commerce but also engage them on a weekly monthly quarterly basis and then that produces great consumer insights and that consumer inside has a bit of a virtuous cycle the more you hadn't with worse than use it you could use that consumer insight as i said earlier and personalizing recommendation are anticipating a the on replenishing a product when when you know they're going to need it it also drives efficiency and our operations right we talk about building a digital supply chain but that's all about is having the intelligence the know having the right product in the right place at the right time so the we can deliver that products at a low cost convenient and speedy and and and a climate friendly west and last but not least that day that that inside consumers that helps your product ration minutes the more we know about our consumers the more we can build kind of compelling product that they want and and so so we feel like is matt said there's a there's a virtuous cycle by embracing our digital transformation as aggressive as we are we think week play competitive separation and and so you know and were so we think it's going to be us
spk_7: of other a journey that has continuous improvement and continuous are and benefits along the west yeah i would just as if you know the the nike out or our app ecosystem
spk_25: continues to have a significant impact and we are continuing to invest in the consumer experience in order to
spk_7: to take advantage of us as the consumers interest and appetite and engaging with our brand in that way the app actually represents about forty percent of our digital business at this point in time and were planning to launch the nike up and ten more countries and cisco your twenty two as i think about the financial model matt as you ask you to the i i sort of and answered my question to kimberly which is you know this shifted digital and and that directs the also to the consumers definitely causing us confidence to inflict our revenue outlook upwards as the first point the second point i would say is that you know as week continue to see over the past the past several quarters and really you know if you if you sort of looks through the pandemic it's really over the last three years as we've been seeing more and more this is being done to directed digital we've been talking about how that shift in mix has enabled us to drive authentic increase or gross margin expansion vs his oracle levels of gross margin expansion and so that was embedded in that high school these guidance outlook it's it's continuing to shifts and more more direct business and then within that direct business we continue to see opportunities like i reference
spk_9: leveraging data and analytical capabilities of digital transformation type captain capabilities to know where to place or inventories how does the still demand for sort of the consumer whether it's through our stores or through a regional service centers
spk_26: how to think about pricing based on the way inventories flowing and then continued demand and supply management and then i guess the last thing i would say is that the way that we framed are as she may guidance is that we feel confident that as we look at that the transformation is taking place in our business over the next four years
spk_7: where's that as that at that level of as in a investment which is better than where we were in the pandemic we can find the investments that we need to fuel this growth and
spk_23: and and and and sustains us the opportunity that we haven't front of us
spk_0: and grab on the momentum and the new multi your model
spk_27: thanks
spk_21: your next question comes from the line of aaron murphy with paper sandler
spk_3: greetings good afternoon i'm against a follow up question for the team on that china market place bigger picture just that the accelerating growth of late and some of the national athletic grand key to share how you're thinking about nike's market share potential as you work through that twenty twenty five play on it within china specifically yeah and then secondly if i could just ask on the women's business is hit over eight point five billion in this fiscal go year could you to share kind of what your expectation isn't the plan by twenty twenty five and just a role you see some of the smaller footprint sword and a sweet about he developed playing in the that progression their thank you so much sure my what an six are certain and eighty six second sure further questions so years you know about a obama we're confident about what we're sitting in china you drive long term growth and and we have a long term view about china and we've always take a long term view we've been in china for over forty years it'll fill the arrested significant time energy china in the early days and today where the largest for plan there were a brand of china and for china and the biggest as that we haven't tried it is the consumer equity consumers feel a strong connection to the nike jordan and commerce plans and china and it's as real i saw that i'm a first week there can't wait to get back there as a strong and that brought to life on streets all over china through the over seven thousand monogrammed stores we haven't tried as of we have a strong consumer franchise and china and they feel very connected to our breath and so we're going to continue to invest will continue our long term investment china weathered through the express lane which allows us to have local it inside so design and deliver with speed and agility or what a localized the or tech stack you know matt mentioned robin a new digital technology center in shenzhen and work invested long term and were encouraged by the momentum and we have confidence in the future thatcher same with you know we've been the number one sports brand and seem offer a decade and we're still never once a day once we opened back up on it
spk_7: over the last month we've added a million new members on t ball through the six eighteen shopping holidays
spk_3: and so we're focusing what we can control are confident of our momentum on our position whoa we we met outlined we have feel confident about our long term growth and china
spk_7: yeah nah just jump around on women's you don't resist this may sound interesting but we're the largest women's athletic ran in the world today at a map billion and we are very bullish on the opportunity for women's we've been talking about it for several years and you know it starts by what john said on the call which is that you know built the main purpose of our realigning are organizational structure was to try to death the amplify the investments has multiple the where we were previously investing against er women's business and those investments or and to and from specific innovation and the way we invested innovation to the way we're investing in product creation
spk_27: to the way that we're now investing in the marketplace to our nike life concepts and are nike life stores are almost fifty percent women sales which are more than fifteen points ahead of are others to worse in terms of women's
spk_0: you know women's proportion of the revenue and so it's definitely embedded in underlying our our revenue outlook and i would tell you that we expect to see women's outpace other elements of our businesses we aston and driving against the long term opportunity
spk_28: princess super helpful in congratulations past
spk_29: next question comes on the line omar said less evercore
spk_7: thanks for taking my question gray quarter to rest everyone
spk_29: yeah high teens operating margin targets are really is a huge break out from historical trend and a allow the the or long term guidance as you guys have given over the years you're clearly technology and near nike's he a digital excellence is really the the root of with this kind of transformation with all been talking about
spk_3: out you know i'd love to hear know i saw that converse continues to improve i'd love to hear you talk about how you're using that digital advantage and applying it to converse is conversation to generate some of the benefits of these incredible technology that you've developed under the jordan and and and nike halo the to hear more on those lines thanks what the the short answer or mars yes i mean we are blessed with this wonderful portfolio brands of that is jordan and commerce and their additive that's what so striking his father some consumer overlap the role that each place as live in the eyes of the consumer and so as scar on the congress team are doing a great job of connecting with a distinct consumer and expanding it's much like the jordan playbook expanding beyond just historical icons like the job and bringing new design new dimension to the product they're that it's the fastest parts of the fastest growing part of their part father we just had an operating review couple weeks ago and was really striking to see how they're extending that brand and to both performance product and to answer new ways to leverage that congress friend and the and and the product or and the product line as well as is getting into to apparel and and going global and so their digital capabilities are going to have their own is you know in addition to being able to get to them nike website get them on their own website
spk_18: and their digital business is growing at very comparable levels of as nike's are george's are around the world
spk_29: and so we see a lot of upside the commerce opportunity the commerce friends yeah repeated digital's gonna play really important role for congress as they reshape said that composition of their own marketplace
spk_2: and so and so with does with been driving growth for the last couple of quarters or for the last the last a quarters and it's continued to help us as they create that direct connection with consumers as well
spk_0: got it thanks
spk_30: operators we have time for one more question
spk_27: your last question comes
spk_31: barclays
spk_27: good afternoon thank you very much on congratulations on the quarter and congratulations andy and call
spk_32: my question is sat on the city billion dollars or or of the have created and sixty billion dollars for the out here for fiscal twenty two ways the expectation for china in that number on and i guess more specifically in what quarter can be
spk_3: or half of the year perhaps telling expect to see china returned to perhaps p pandemic ten great on and which channel going to be the most productive wholesale or your backslash digital thank you very much
spk_7: or adrian the the rf like to twenty two guidance reflects you know the as the opted the optimism and the momentum that we're seeing across or for portfolio brands and different geography is as i mentioned on china you know we're optimistic and encourage based on the sequential improvements that we're seeing so our business was in fact that in april it was down single digits in may but improving and approaching prior your levels in these first three weeks of june
spk_27: obviously netflix a thief consumer moment gives us optimism or as we continue this recovery and were planning for recovery throughout the school year twenty two
spk_33: but we don't expect it to be linear
spk_2: okay
spk_34: thank you very much
spk_0: sensors and
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