Nike, Inc.

Good afternoon, everyone. Welcome to Nike Inc's Fiscal 2023 Third Quarter Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Paul Trestle, VP of Investor Relations and Strategic Finance. Before I turn the call over to Mr. Trestle, 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 Nike's reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and non-public financial and statistical information. Please refer to Nike's earnings press release or Nike's website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. Now I would like to turn the call over to Mr. Paul Tressel.

Hello, everyone, and thank you for joining us today to discuss Nike Inc.' 's fiscal 2023 third quarter results. 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 question to one. Thanks for your cooperation on this. 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. We delivered another strong quarter in Q3. with revenue growth of 14% on a reported basis and 19% on a currency-neutral basis, exceeding our plan. Our growth this quarter was broad-based across our brands, channels, and geographies. We had strong digital growth of 24%, which once again was fueled by double-digit increases in traffic on mobile and our apps. And while direct, led by digital, remains strong and will continue to drive our growth, our wholesale channel continues to be an important part of our strategy as we access key consumer segments and achieve distribution scale across the marketplace. Wholesale grew 18% in Q3, reflecting strong retail sales with growth that over-indexed across our strategic partners. This quarter continued our positive currency neutral growth in all four of our geographies. North America, EMEA, and APLA all delivered double-digit revenue growth. Greater China grew 1% despite a very challenging December following the shift in the country's COVID policies. And we're making great progress on inventory, with our inventory dollars down sequentially versus last quarter. In Q3, we had inventory growth of 16% year over year. Our decisive actions are enabling us to navigate through the shifting dynamics with continued improved efficiency. These results demonstrate yet again that we're on track to hit our fiscal 23 priorities of getting inventory in a healthy position and delivering revenue consistent with the financial goals we set earlier in the year. In an environment of increasing macro volatility, the distinction of our brands and our consumer direct acceleration strategy set Nike apart. Looking ahead, CDA continues to unlock our future growth potential by powering up our holistic offense across innovation, brand engagement, and marketplace, all fueled by consumer insight. As we know, consumers today have rising expectations and changing behaviors. What creates separation for Nike in this dynamic environment is our innovative product, brand scale, and direct connections we have with our consumers. It's these connections that serve as one of our greatest competitive advantages as we translate insight into innovation. Thanks to our consumers' love of our brand, we enjoy a high rate of engagement, fueling richer, deeper understanding. Across the company, our insights model creates confidence and growth in ways that are uniquely Nike as we make the entire enterprise faster, more efficient, and more targeted in the growth opportunities that we go after. So today, I thought we'd go through three areas where we leveraged our insights model this quarter. You may have heard us say before that running is the heart of Nike and basketball is the soul. I'll discuss these two businesses, and then I'll talk about a product franchise that's a multi-billion dollar business in its own right, Air Max. So first, let's start with running. Since our founding, we've used elite athlete insight to innovate at the edges of human potential. And that's led to platforms like Next%, which remains at the front of the pack in the world of distance running. And then we use these insights and innovations to serve everyday consumers, no matter where they are in their running journey. Today, we leverage our direct relationships with runners worldwide, fueled by insight from our Nike Run Club app, along with consumer feedback across brand and marketplace touchpoints, to know how our consumers are using our product and what pain points we can solve to keep them moving. For example, we saw our Invincible consumers pushing more distance on their runs, which requires better support and protection. So this quarter, we introduced the Invincible 3, which is designed to provide maximum cushioning and comfort. It also offers a wider fit than some of our past running footwear and uses the most ZoomX foam of any of our road running shoes. It's a shoe that demonstrates how Nike isn't just innovating for performance, but also designing to drive the lifestyle of running. Consumer response to the Invincible 3 was strong across our geos and throughout Nike Direct, strategic wholesale partners, and running specialty doors. And what really sets Invincible 3 apart is how we executed across the marketplace, driving consistent storytelling across channels, working closely with our partners to elevate our own retail presentation and theirs, all with a sharp focus on helping consumers find the right shoe for them. This approach will be accelerating as we focus on positioning ourselves for share gains in this important category. Our research with runners also leads us to launch product in complementary categories such as trail running, which is our fastest growing running segment. This fueled the launch in Q3 of the Pegasus Trail 4. The Peg Trail 4, which has seen over-indexing strength with female consumers, takes many of the well-loved attributes of the peg and adds rugged features that let runners keep the pace even on looser terrain. The combination of react foam and underfoot traction has proven to be a perfect crossover shoe for runners looking to split time between road and trail. Thanks to our ability to use analytics and insight to discover opportunities for growth in running, we continue to connect to the grassroots of this global community, and we remain confident we can take full advantage of these opportunities over the long term. Next, our basketball category is in the strongest position it's ever been as we continue to grow the energy of the game globally. Across Nike Basketball, Jordan Brand, and Converse, we've strengthened our signature athlete portfolio, adding Gen Z superstars while still being anchored by some of the game's greatest players. Last month, LeBron James set the all-time NBA scoring record in a thrilling game in L.A. I was fortunate enough to be there with our co-founder, Phil Knight. After the game, Phil turned to me and said that moments and athletes like this are why we got into this business, and he's right. And as I said last quarter, the LeBron 20 was the strongest LeBron launch in years, fueled by storytelling and the blend of innovation with sportswear design. This created greater commercial appeal, as seen in Q3 with very strong sell-through throughout the marketplace in full family sizing. This is an approach we use across our portfolio, across our Nike basketball product construct, Thanks to our ongoing dialogue with athletes, from the elite to the everyday, we design around three key aspects of the game, cutting fast, playing long, and jumping high, all while emphasizing off-the-court style. So when we began work on a signature shoe for a playmaker and generational talent like Sabrina Ionescu, we knew the shoe would focus on cutting, helping her stop on a dime and accelerate back again. The Sabrina 1 uses research from thousands of athletes, both female and male, to create a unique traction pattern and a low-to-the-ground design that has lifestyle appeal that we're thrilled about. We're excited about the potential with the Sabrina 1 and the continued power of our increased focus on women's coming out of CDA. Over in Jordan brand, Q3 saw the release of its own young signature shoe. Jason Tatum debuted the Tatum One last month at the NBA All-Star Game with Fireworks, breaking the All-Star record for points scored. The Tatum One joins the Luka, Zion, Westbrook, and Game Shoe franchises for the strongest signature portfolio in Jordan brand's history, helping fuel robust growth for the brand alongside of its consistent strength in retro. Crafted with efficiency in mind, The Tatum One is Jordan Brand's lightest basketball shoe and has a large volume Zoom Air bag in the forefront for energy-returning stability. Special care was given to the Tatum One kids' design. The kids' specific model has specialized zonal rubber on the outsole for the durability needed for young kids' style of play. But the biggest innovation in the kids' design came directly from parents, including Jason himself. who asked for an easy on, easy off system. In preschool and grade school versions, designers came up with a new innovative tailgate system. And in toddler sizing, there's an even simpler collapsible entry technology. The Tatum One represents an evolution for the Jordan brand, shifting from serving an individual athlete to also serving the next generation to come as well. The potential here to bring innovation into our kids' business is vast. as we build lifelong relationships with younger generations. Third, let's discuss Nike's Air Max franchise. Our Air Max business continues to expand, growing double digits in Q3. Like Air Jordan, Air Max is a great example of how we build significantly scaled businesses off our greatest performance innovations. Looking again at our insights model, Air Max also exemplifies how we brief new product by leveraging qualitative and quantitative member data science to have a sharper and more targeted focus. We're able to ask ourselves, who are the consumers we want to serve and what are they looking for? For example, the 270 has been a top five Air Max franchise for the past five years. But we heard from younger age groups that they want their own version, a more street engineered durable shoe. one with a new lifestyle identity. This vision of building a future franchise for the next generation led us to create the Air Max Pulse, with the broader goal of creating an entire portfolio of classics for this generation. The Pulse connects a 270 style airbag with a brand new upper, bold and versatile styling, and new Air Max branding. The Pulse launches on Air Max Day next week, and we can't wait for consumers to give it a try. Another Air Max model launching next week is the Design by Japan Air Max 187. This women's exclusive model represents the first time our members influenced product creation using polling on the Sneakers app as well as local member polling data. With just a year from conception to delivery, we relied on our Express Lane capabilities to make and deliver the product in such a short turnaround. Members who participated will be the first targeted for the shoe, creating Nike's first full-circle insights to shopping experience. And this is only the first example of this kind of product creation, and we look forward to seeing what we can do next. Overall, we're excited by how our focused approach to insights will fuel future growth. We're still in the early innings, and we're thrilled by the possibility ahead of us. as we stay dedicated to listening to the athlete and leveraging membership data to inform future products and consumer experiences. Before I close, I want to mention that in two days, on March 23rd, we'll release our Fiscal 22 Impact Report. As you know, at Nike, purpose is deeply ingrained in everything we do. For example, you'll read that we've given more than 375,000 girls expanded access to sport through our community partners. In addition, we've maintained one-to-one pay equity for women and U.S. racial and ethnic minorities internally, while also helping the first of our suppliers' facilities achieve a gender-equitable workplace with upward mobility for women. As you recall, two years ago, we set new quantifiable ESG targets, focusing on a wide range of priorities across people, planet, and play. I encourage everyone to learn about the measurable progress we've made at purpose.nike.com as we continue to create long-term value by shaping a better future through sport. In the end, We're redefining what's possible thanks to our close connections with consumers and how those relationships make us better again and again. We're supercharging how we serve athletes around the world with innovative product, brand engagement, and experiences at retail. This promises to be yet another incredible year for sport, and there's never been a better time to be in the business we're in. I could not be more excited about our future. And with that, I'll turn the call over to Matt.