Nike, Inc.

Welcome to Nike Inc's fiscal 2023 first quarter conference call. For those who want to reference today's press release, you'll find that at investors.nike.com. Leading today's call is Paul Trussell, Vice President of Investor Relations and Strategic Finance. Before I turn the call over to Mr. Trussell, 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, investors.nike.com. Now I would like to turn the call over to Paul Trussell.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss Nike Inc.' 's Fiscal 2023 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. And I'll now turn the call over to Nike Inc. President and CEO, John Donahoe.

Thank you, Paul, and hello to everyone on today's call. Before we get started, I want to give a special shout out to the greatest of all time, Serena Williams, following her final tournament at the US Open. Serena doesn't like to use the word retired, so I won't either. But on behalf of the entire Nike family and sport fans around the world, we're going to miss seeing her play. We're thrilled to see what she does next, as she continues to serve as an inspiration in everything she does. Serena, on behalf of everyone at Nike, thank you. Turning to our Q1 performance, our teams continue to prove their ability to operate through volatility while also staying focused on the long term. For the quarter, our revenue growth was 4% on a reported basis and 10% on a currency neutral basis, led by double-digit growth, in our North America, EMEA, and APLA geographies. I'm proud of our results this quarter, as our brand momentum, culture of innovation, and proven operational playbook delivered yet another quarter of strong revenue growth. Our brand strength continues to give us confidence in sustaining our top-line momentum. These results reflect our deep connection to consumers around the world as we keep them in the center of all that we do. Our consumer direct acceleration strategy enables us to create value around consumer creation, consumer demand, and an entire marketplace fueled by the lifelong relationships we maintain. This significant momentum that we're seeing is fueled by structural tailwinds that continue to create energy for us. Nike's growth is strengthened quarter by quarter by the expanded definition of sport, by the societal movement toward comfort and health and wellness, and by the fundamental shift in consumer behavior toward digital. These advantages, along with our scale, the strength of our portfolio brands, and the right strategy, renew our confidence in a more populated competitive landscape. As the world's largest sports apparel and footwear company, we are happy to set the pace in serving the consumer. At Nike, our focus remains not only to grow market share, but also to invest to grow the entire market. Our ability to expand the world of sport and our ability to create the future of sport itself is why I wouldn't trade Nike's position with anyone. Now, as you look at this quarter's strong results, we can see our brand momentum and global portfolio come to life. This is true across the three areas I'd like to walk through today. Our brand that deeply connects with consumers, fueled by authenticity and sport. Our culture of innovation that drives a continuous pipeline of new product. And our competitive advantage across the marketplace as one of the few brands that can connect with and serve consumers at scale. So let's start with Nike's strong brand in our connection to sport, which differentiates us all over the globe. Consumers continue to rate us their number one cool and number one favorite brand as we connect directly and deeply with consumers worldwide. No matter the macroeconomic dynamics, no matter the competitive landscape, the Nike brand, and indeed all three of our brands, including Jordan and Converse, have created meaningful relationships with consumers across age, gender, ethnicity, and more. This brand momentum is fueled time and time again by our athletes and teams. No other brand in the world can match our roster as we help them perform at their very best. Just look at women's football this quarter. Two fabulous international tournaments ended with Nike federations on top with England winning the Euro Champs and Brazil's winner of the Copa America. And what's particularly exciting is that these two wildly popular teams will compete in the inaugural Women's Felicima, the first of a kind women's match between the European and South American champions. This historic match is slated for February 2023, and we can't wait. And speaking of can't wait, We're very excited for the men's World Cup later this year and the women's World Cup next summer. This will truly be one of the greatest 18 months in football history and Nike will be there in full force. Now our brand strength and consumer connection will continue to be driven by storytelling through sport in a way that only Nike can. In tennis, I mentioned Serena's farewell to the sport at the U.S. Open, but the new generation made some noise there, too. Carlos Alcaraz won the men's side at 19 years old, become the youngest men's number one ever. Along with Francis Tiafoe and Yannick Sinner, the future of men's tennis was on full display, with Nike proud to represent this next generation of exciting players. Also in the quarter, the Las Vegas Aces won the WNBA title, led by Coach of the Year Becky Hammond, Kelsey Plum, and league MVP Aja Wilson. And American football is now back, with the swoosh won by all 32 NFL teams, and Nike and Jordan representing 21 schools in college football's top 25. And finally, in the Berlin Marathon last week, Eliud Kipchoge smashed his own world record, running the marathon in an incredible two hours, one minute, nine seconds, while wearing the AlphaFly Next% too. Simply put, we have a roster of athletes, teams, leagues, and federations that represents the very best in sport, creating inspiration for consumers worldwide. Let's move to innovation. As we've said before, Nike's relentless pipeline of innovative product continues to create separation between us and our competition. Today, we have incredible momentum in key products and franchises across the spectrum of lifestyle and performance. And what excites us even more is the energy and anticipation we're feeling for the innovative product that's next in the pipeline. We're now starting to see the product that reflects our shift two years ago to our new consumer construct of men's, women's, and kids. And the impact it's had is remarkable. We're also excited about how we'll be connecting this product to the consumer. Today, we're working toward being more seasonally relevant across the full assortment. So the energy we're creating from an innovation standpoint When combined with how we plan to storytell and connect it through the marketplace gives us immense confidence as we look ahead. Earlier, I mentioned this landmark 18 months for global football we've got coming up. We created a football boot to match the moment. So during the Women's Euro Champs this past summer, we debuted the Air Zoom Mercurial, which for the first time adds a Zoom airbag to what was already our fastest football boot. This gives the footballer an even greater sense of snappy, propulsive energy return. The new material and energy around it is Nike at its best. As product storytelling, the marketplace and elite athletes come together to connect this innovation to consumers. And with our best boot ready for the biggest stages of the world's most popular game, not to mention a full lineup of Federation kits, we're thrilled about translating this energy into commercial opportunity. Our culture of innovation is fueled not just by what we make, but also how we make it. We're always looking to increase the pace and precision of product creation. New VR design software and simulation tools allow our designers and engineers to collaborate in real time like never before. This transformative path to continuous new innovation is highlighted by the new Air Max Scorpion. The Scorpion, which is an eye-catching shoe that offers our most air ever in terms of pounds per square inch, followed a development timeline of just 18 months In fact, our digital transformation investments directly led to Scorpion's breakthrough innovation within our iconic air franchise. How did that happen? Well, thanks to computational design pioneered by Nike for industrial design uses, Scorpion introduces a radical new system for airbags, moving from simple forms into complex new geometries for a unique underfoot sensation that has to be felt, to be believed. And moving forward, we plan to accelerate the use of our industry-leading digital creation tools to bring new excitement to our biggest franchises. Now, during last quarter's call, I mentioned a new platform that we believe has the potential to change the apparel industry. As some of you have seen, with its launch last week, I'm talking about Nike Forward, our biggest apparel innovation since Dry Fit 30 years ago. Nike Forward revolutionizes apparel creation to make premium, sustainably-minded product that offers brand-new, comfortable sensation. The truth is, Nike Forward feels different because it is different. Forward's being introduced in hoodies and crewnecks for men and women that feature raw-cut pockets, minimal seams, and a modern silhouette. And this innovative product is warm and yet lightweight with a future-forward look that consumers have responded to since its unveiling last week. And as the consumer focus on comfort continues to gain momentum, we see vast opportunity ahead for scaling forward in our entire performance-driven sportswear apparel business. So from performance to sportswear to sustainability, Nike has always married the art and science of product creation as we use innovation and design to connect with and inspire consumers all over the globe. My third and final point today is our competitive advantage across the marketplace. We're continuing to accelerate against our one Nike marketplace approach in which we directly connect with the consumer no matter where they shop. and with each channel playing an integrated role in the consumer's overall journey. Now, our approach starts with Nike Digital, as that's where most consumers begin their shopping journeys. And then it's augmented by our strategic wholesale partners who share our vision to provide a consistent premium and seamless consumer experience. And last but not least are our monobrand stores, which continue to play the key role of supplementing where there are gaps in the marketplace, such as women's or Jordan. Now this quarter, we delivered Nike Digital's highest net revenue quarter ever. We see consumers continuing to vote for Nike Digital as the Nike Commerce app had its highest traffic in history during Q1. And we keep elevating our ability to serve these consumers. For example, new membership tools we put in place last year in fiscal 22 that went live in Q1 create one-to-one connections at scale by delivering personalized consumer journeys and experiences, which in turn drive first purchases and increased loyalty. And the Sneakers app continues to fuel energy to our growing audience of high-value members. We're bringing this community an almost daily flow of compelling content and product launches. In Q1, for example, Sneakers saw its most member entries ever for the Travis Scott AJ1 that dropped in July. With a record 3.8 million member entries for just a single shoe, Sneakers continues to impress as it offers the perfect intersection of content, community,