Nike, Inc.

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'll find it at http://investors.nike.com. Leading today's call is Paul Tressel, VP of Investor Relations and Strategic Finance. Before I turn the call over to Mr. Tressel, let me remind you that the 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 references 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 forward slash http://investors.nike.com. Now I'd like to turn that call over to Paul Trestle.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss Nike Inc.' 's fiscal 2022 first 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. Thank you for your cooperation on this. I'll now turn the call over to Nike Inc. President and CEO, John Donahoe.

Thanks, Paul. And hello to everyone on today's call. Nike creates value through our relentless drive to serve the future of sport. And as we saw again in Q1, our strategy is working with business results that reflect our deep connection to consumers around the world. Thanks to our brand momentum, culture of innovation, commitment to purpose, and proven operational playbook, we stay at the front of the pack. Q1 was another strong quarter for Nike, with revenue growth at 16%. And even as we saw physical retail traffic return across much of the portfolio, digital continued its momentum with 25% currency-neutral growth led by North America at over 40. Our digital success is evident to the product innovation, brand strength, and scale that drives our meaningful relationships with consumers as we continue to show momentum against our biggest growth priorities. As has been the case since the start of the pandemic, I'm proud of the way our entire Nike Inc. team has delivered through macro volatility. Over the past 18 months, we've demonstrated our ability to manage through turbulence to emerge even stronger and better positioned. And that's what we'll continue to do as we navigate through these current supply chain issues. We'll focus on what we can control while leveraging the many levers at our disposal. You'll hear Matt walk through our mitigation efforts in a few minutes. Today, we're in a stronger position relative to our competition than we were prior to the pandemic. Why? Because the changes happening in the market work in our favor. Consumers shift to digital that might have taken five years will now only take two. That plays to Nike's advantage. And our consumer direct acceleration strategy is capitalizing on this marketplace transformation. We know that when we get to the other side of this, we'll be in even stronger shape. We'll be more agile, more direct, and more digital. So we remain focused and competent in our long-term business outlook. Our competitive advantages, including our innovative product, brand strength fueled by compelling storytelling, our roster of the world's best athletes, and increasingly, our industry-leading digital experiences at retail will continue to create separation. As we drive strong, sustained consumer demand, our confidence remains undiminished. We've just wrapped up an incredible summer of sport, highlighted, of course, by the Olympics and Paralympics. And moments like these are exciting for our company because sport energizes our roughly 75,000 employees around the world. You can just feel it. And it's through that passion for sport that we continue to innovate and connect to the consumer. And this summer in Tokyo, our leadership as the world's most innovative sports brand was demonstrated once again. If Nike were a country, we would have eclipsed the competition. capturing 226 medals, including 85 golds. Here are a few examples of what excited us most this summer. We saw the emergence of Gen Z as a powerful next generation of athletes, led by a pair of 13-year-old skateboarders who showed us the joy in the expansion of the definition of sport. We shined in key team sports, including football, where Nike teams took home gold in both men's and women's, And basketball, where Nike and Jordan teams combined to take five of the six medals, including both golds. And we continued our great legacy in track and field, with Nike athletes winning more individual medals in track and field events than all other brands combined. And at the same time, the European Championships brought incredible energy to football in Q1, with England making it to the final. Our brand anthem, The Land of New Football, brought a fresh approach to the sport, representing Nike's vision that in this game, everyone is welcome. The film saw more than 800 million impressions across all channels, as more than half of EMEA's Gen Z population viewed it at least once. In the summer of sport, also saw Giannis and the Milwaukee Bucks win the NBA title after an electrifying finals, against Chris Paul, Devin Booker, and the Phoenix Suns. Days later, we released Giannis' latest signature shoe, the Zoom Freak 3, which is built to support the dominant physicality that defines his style of play. We continue to see strong response to the Zoom Freak, and we're excited by what we're seeing with our growing Giannis business. And speaking of Devin Booker, Q1 was a great reminder of how we're investing in the next generation of superstars as we continue to build our roster of athletes. Jordan Brand signed the NFL's Doc Prescott in the quarter, joining emerging global icons in Nike Inc.' 's family, including U.S. Open winner Emma Raducanu and Manchester United's Jaden Sanchu. At the end of the quarter, the summer of sport gave way to back-to-school seasons. So far this fall, we've seen sell-through in our kids' business up almost 30%, led by digital with growth of almost 70%. As we focus on the kids' opportunity, our new consumer construct, through that we are connecting with families more authentically than ever before. We're creating kids' specific designs and leveraging new channels for us to connect with these consumers. Take, for example, Playlist, which is a just-for-kids series on Nike.com and YouTube. It's filled with games, challenges, and exclusive athlete content, all aligned to our mission of encouraging movement and play. Its latest season began a few months back with a new video starring LeBron James and some of his co-stars from their movie Space Jam, A New Legacy. Playlist has been a hit with kids and parents alike with viewership numbers well above our expectations. And our kids' business remains an important connection point for us, an organic incubator of the brand across multiple generations as we look long-term. We're the largest kids' athletic footwear brand in the world, but we know that there is still so much potential ahead. And as I've said before, At Nike, everything starts with innovation. Our culture of innovation is our most profound competitive advantage. And this week, I toured our new LeBron James Innovation Center here at our world headquarters with LeBron. At over 750,000 square feet, this new home for our innovation teams is five times the size of our previous lab and is continued proof of Nike's leadership in sports science We expect this facility to act as an accelerant as it helps extend our advantage in innovation even further. And looking at our innovation agenda, the two areas that I'd like to touch on today where our relentless pipeline of innovative product continues to create separation between us and our competition, apparel and sustainability. First, let's take a look at apparel. We're seeing strong over-indexing growth at 16% in this key growth driver. And the investments we're making in our new consumer construct are fueling higher apparel growth for women, led by our yoga business. Our yoga collection today features multiple industry-leading innovations, including DryFit and Infinalon. These innovations are resonating with consumers and have helped us nearly quadruple our yoga business over the past two years. Another key apparel story for us in Q1 was our bras business. This quarter, we maintained our number one market share in sports bras in North America and introduced the Nike Dry Fit ADB Swoosh Bra. Dry Fit ADB combines the ultimate in cooling fabrics with highly engineered methods to make. It's an innovation that's connected with consumers, as we scale this technology across our line. And now, to take a look at sustainability, look at what we've done with Space Hippie. Space Hippie, as you may recall, is quite literally made from trash. And it was originally introduced at our 2020 Future Forum and debuted four separate sustainable material innovations for us, including Creator From, and space waste yarn. Now, since then, we have strategically grown this franchise to global scale. And what's more, we've also scaled these individual material innovations across our entire portfolio. So today, one year after that initial launch, there are more than 43 styles using Space Hippie innovations across four sports, three brands, and our full consumer construct. For instance, you can see it come to life in iconic franchises such as the Air Force One Crater, new performance innovation platforms like Cosmic Unity, and even in our hands-free accessibility line with styles like Glide FlyEase. By driving new dimensions across platforms, our work-to-scale space hippies innovations catalyze growth. Consumers are clearly responding to sustainability as we're seeing very strong full-price sell-through for this family of product, with vast opportunity to drive continued consumer and business value still ahead. And this is just one example of how we lead with platforms and not just products. Our deliberate franchise and innovation management creates scalable and sustainable impacts on our business, And I'm excited by the upcoming new innovation platforms we'll be introducing soon. Next, let's discuss Nike's increasing digital advantage. We continue to lead the industry by creating a premium, consistent, and seamless experience that deepens relationships between consumers and our brand. Our advantage comes to life at retail in both digital as well as at the intersection of digital and physical. I'll discuss both here. Even as physical retail revenue approached pre-pandemic levels, our digital business this quarter grew double digits. This is the result of an unwavering focus on our strategy in the investments we've made against our end-to-end digital transformation. And so we continue to expect digital to be our leading channel for growth in fiscal 22. Now, one of the best stages for success in our digital business is how strongly we're connecting with members. Our digital growth is led by outsized member buying, which has seen a penetration increase of 14 points since last year. Our membership strategy is working as we increasingly use data and analytics to personalize member product offering and experiences. And we're seeing this come to life as repeat buying members grew more than 70% in the quarter. Now, part of our success stems from our constant focus on expanding what it means to be a Nike member. We brought this to life in Q1 by introducing a new launch experience exclusive to the Sneakers app that revolutionizes how we serve consumers. The new experience debuted in one of the year's most highly anticipated launches, the Off-White Dunk. For the launch last month, we rolled out our new elevated Sneakers Exclusive Access. This approach sends personalized purchase offers to members based on their engagement with sneakers, past purchase attempts, and other criteria using data science to drive digital member targeting. For example, 90% of the invitees for the Off-White Dunk went to members who had lost out on a prior Off-White collaboration over the past two years. The result, the off-white dunk ended up in the hands of hundreds of thousands of our most deserving members, creating what we call exclusivity at scale. And this improved consumer experience has a positive impact on the entire business. We've seen that those who benefit from exclusive access on sneakers spend more across Nike fueled by the energy of their win. So our increasingly personalized approach to launch, along with benefits like member days and exclusive Nike Bayou access, highlights how we continue to increase the value proposition of Nike membership. We're also leveraging our digital advantage by investing in our brick and mortar fleet to create a compelling retail footprint. that supercharges how we serve consumers across physical and digital. A couple of weeks ago, I was in Los Angeles and toured some of our great retail there. I got to see a wide variety of stores, including our Nike Live Door in Long Beach, a Community Door in East LA, and more. And across each and every store, what jumped out to me was our team, their love for their community and their passion for our product and bringing it to life for consumers was inspiring and just awesome to see. I also enjoyed visiting a few strategic partner doors, including Dick's and Foot Locker. What's clear across the marketplace, both owned and partnered, is how online to offline is becoming second nature. We know that higher levels of connectivity across physical and digital are driving better consumer experience and loyalty. O2O services, such as buy online, pick up in store, and ship from store, as well as the in-store shopping features of the Nike app, drive our premium and seamless consumer experience. And we're starting to extend these innovative experiences globally. In Q1, we brought our Nike rise an immersive concept to sole. Nike sole introduces new features to live arise rather, including inside track and interactive RFID enabled digital footwear table where shoppers can compare details for any two shoes simply by placing them on the table. Our digitally connected retail experiences are clearly resonating with consumers. This quarter, our inline fleet grew over 70% in revenue, approaching pre-pandemic levels. We're seeing over-indexed growth from members, not just at digital, but also at physical retail, with member buying penetration up double digits since last year. And so we'll continue expanding these compelling experiences across our fleet in fiscal 22, driving that interplay between physical and digital retail. In the end, Nike's doing what we always do, staying on the offense. The strength of our consumer demand around the world continues to give us confidence in our playbook and execution. I said it earlier and I'll say it again. I am proud of our resilient and creative team across Nike, Jordan, and Converse and the work we continue to deliver for consumers. Our confidence as we look long-term has not changed one bit. We've already gotten stronger through this pandemic, and we're going to emerge from it even stronger yet. And with that, I'll now turn the call over to Matt.