Nike, Inc.

Good afternoon, everyone, and welcome to Nike Inc.' 's third quarter fiscal 2026 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 Trussell, VP of Corporate Finance and Treasurer. I'd now 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 third quarter fiscal 2026 results. Joining us on today's call will be Nike Inc. President and CEO, Elliott Hill, and EVP and CFO, Matt Friend. Before we begin, 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. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time. So we'd appreciate you limiting your initial question to one. Thank you for your cooperation on this. I'll now turn the call over to Nike Inc. President and CEO, Elliot Hill.

Thank you, Paul. Last quarter, we said we were in the middle innings of our comeback. Since then, we have continued to take meaningful actions to improve the health, quality, and foundation of our business. While we are not satisfied, I am confident that our progress in the areas we prioritize first through our win-now actions point to where we are ultimately heading across our portfolio. Because of the scale and breadth of the Nike portfolio, that progress will not happen all at once. We have approached this comeback deliberately across brands, sports, geographies, and channels with some parts of the portfolio moving faster than others. One of the most important actions we took this quarter was further removing unhealthy inventory of our classic footwear franchises from the marketplace. That created roughly a five-point headwind to our reported results. It was intentional. It was necessary, and while it weighed on the quarter, it is improving the health of the marketplace, the quality of our revenue, and the foundation for more sustainable growth ahead. As we were removing unhealthy inventory, we focused first on the areas that create the greatest impact. We focused on our sport offense in running, our largest performance sport, and in football. the beautiful global game. We focused on athlete-centered innovation, building platforms that can scale across multiple sports and price points over time. We focused on our wholesale business, the environment where the majority of our consumers shop and where we needed to prove we could compete and win back market share. And we focused on paying it all off in North America, our largest geography that drives nearly half of our business. These are the dimensions that are furthest along, and each is absolutely essential to turning around this company. At the same time, other parts of the portfolio, including Greater China, Converse, and Sportswear, are still earlier in their comebacks. We have new leadership in place, clearer strategies taken straight, and structural changes underway designed to strengthen these businesses over the long term. We are moving with urgency. We're not simply fixing what needs to be fixed. We're building brand by brand, sport by sport, country by country, partner by partner. We're reshaping our marketplace, rewiring how we operate, and investing in the technology platforms that we expect will help us serve more consumers better and run our business more effectively. These actions will continue to create near-term pressure, but we believe they are the right actions to strengthen Nike for the long term and create more durable value for shareholders. This is complex work, and parts of it are taking longer than I'd like. but the direction is clear. The urgency is real, and the foundation is getting stronger. By the end of the calendar year, we expect to have finished our win-now actions. Aged inventory across the marketplace will be healthy, allowing our sports teams to consistently flow athlete-led, innovative, and coveted products in all sports across our three brands. including Nike Sportswear and Jordan Streetwear. Our marketing teams will be creating even more locally relevant, inspiring stories in key countries and cities around the world. Our account teams will be elevating those stories and our brands at point of sale with consumer right assortments and presentations, which will all result in more balanced, profitable and sustainable growth across the integrated marketplace. owned and partnered, digital or physical. And because we are now far enough into the work and clear enough on the path ahead, this fall, we will share a more detailed, long-term view of the business at an investor day at the Philip H. Knight Campus in Beaverton. We look forward to sharing more about the future of Nike later in the calendar year. Turning to the quarters. I'll start with the dimensions that I consider to be progressing fastest in the comeback. Nike Running was the first team to move into the sport offense. They created a clear product construct based on athlete insights, segmented and differentiated assortments across an integrated marketplace, and elevated our presence in storytelling at retail. The consumer is feeling the impact of the full offense with Nike running up over 20% for the quarter. Nike running has created the roadmap for other sports to follow. Global football is the next sport to fully transform into the sport offense. For the World Cup 26, it starts with our footwear construct that successfully launched the Tiempo in Q3, and we will unveil the new Mercurial in June. In apparel, We'll deliver Aerofit kits for our competing Nike federations, including a Jordan Away kit for Brazil. We're also utilizing the World Cup as an opportunity to catalyze the football marketplace for quarters to come. By the end of the tournament, we will have elevated our presentation in more than 5,000 football doors around the world with wholesale partners and Nike Direct. Because winning in football goes beyond winning the World Cup. We went through the Classicos, the derbies, in Copa, with colleges and youth clubs in every neighborhood, season after season. In innovative products, we're back to leading big ideas for our industry. In just one quarter, we delivered both footwear and apparel platforms with deep insights that leveraged years of scientific research from our labs, owned IP, and advanced manufacturing. Our new Nike Mind platform, with over 150 patents filed globally, was the highlight of the quarter. Designed to help athletes clear away distractions pre- and post-competition, the Mind 1 sold out in all geographies. We responded by doubling production of Nike Mine over the next two seasons to meet demand from more than 2 million consumers who signed up for Notify Me on Nike.com. Following Nike Mine, we introduced several early-stage innovation platforms this quarter. We used Nike Air for the first time ever as a self-inflated thermal layer and apparel, unveiled a new Liquid Air Max platform that is low to the ground and moves naturally with the foot. And we delivered AeroFit for football, our new elite apparel cooling platform that increases airflow by 200% over regular dry fit. It will expand into multiple sports, including Nike running in the fall. These platforms are scalable foundations for growth that we can extend into multiple sports, and price points over time. Recently, our leadership team reviewed our full innovation agenda for 2027 and 2028 by brand and by sport. That focus is showing up in sharper athlete insights and more complete head-to-toe solutions. And we're excited to share our vision for the future of sport with you this fall. And yes, innovation sparks demand, but products alone don't deliver long-term growth. For years, we were running a Nike direct first offense. Now, we are rebalancing our offense through an integrated and elevated marketplace and running a key city offense. These moves require us to rewire our supply chain and upgrade our technology platforms. You saw the early signs of those actions this quarter, and it is a critical step in our return to double-digit EBIT margins. Many of our win-now actions are being paid off first in North America. One of our strongest executions this quarter was the NBA All-Star Weekend, which connected us to consumers and drove full-price sell-throughs while deepening our wholesale partnerships in Los Angeles with Shoe Palace, Dick's, and Foot Locker. The experience set the tone for how we will show up in L.A. for the World Cup, Super Bowl, and the 28 Olympics. Across all dimensions in North America, our wholesale momentum is accelerating. In sporty goods, Dick's and Academy are leaning in with us to tell more sport performance stories. We're building long-term plans with Foot Locker and JD and Athletic Specialty, and we're fully committed to our partners in running specialty, football specialty, and city specialty through our investments in product innovation and presentation. Ultimately, this is about creating a more profitable business model for both sides of the partnership. In Nike Direct, we've elevated our own experiences, setting the standard for how our brands show up in the marketplace. We've intentionally cleaned the market in all channels. The teams are hyper-focused on consumer right assortments and presenting them in environments that tell our best innovation stories, all with the goal of accelerating sell-through. If running shows what our sport offense can do, North America shows the power of our complete portfolio in an elevated, integrated marketplace. From here, We expect that to translate into consistent growth in North America. I'll finish with the areas of our business that are earlier in the journey, starting with our growing portfolio of emerging brands. This quarter, we tapped into the energy of the Winter Olympics in Milan and Cortina to build excitement around ACG. It was a world-class execution that showcased the ACG logo on all Team USA athletes. We executed creative brand marketing, including an experiential chain from Milan to the Alps called the All Conditions Express. And we elevated our presentation in more than 600 retail doors around the world, including a standalone ACG door in Beijing. The Nike ACG team is committed to serving the outdoor athletes. by creating the world's most innovative footwear apparel and accessories, building our presence authentically over time by supporting world-class racers and events, and building long-term partnerships with the retailers who authentically serve outdoor athletes. The outdoors is a tremendous opportunity for Nike as we bring excitement and a fresh perspective to the consumers, and the industry. In Nike Sportswear and Jordan Streetwear, our teams are moving from playing defense to playing offense. Matt shared last quarter that by the end of this fiscal year, we will have intentionally reduced over $4 billion of revenue from the peak levels of classic footwear franchises. A cleanup of that scale is significant and has taken several quarters to execute. From here, we're investing in a more sophisticated city offense, one that incubates new styles through different consumers and channels, account by account. And as you know, there is both an art and a science to seeding, igniting, and scaling new sportswear styles. A great example this quarter is the strong sell-through we drove around the globe with a more thoughtful approach to the reintroduction of the Air Max 95. That city-led approach is especially important in EMEA, where we lack a fully integrated marketplace, and it has been one of our biggest hurdles. The team is responding with a more complete, street-up model, working more closely with wholesale partners to improve point of sale storytelling and seeding in the community. In EMEA, you'll see us show up more as a local Nike. Greater China, too, will benefit from a more local approach and closer connection with the consumer on the ground. We have become clearer on the structural challenges in China and the channel dynamics in the marketplace. We are taking action to clean the marketplace, tighten execution across digital and physical retail, and rebuild the brand locally through sport. It will take time, but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport. In Converse, the team took some decisive steps this quarter to bring the brand back to a healthy business. Converse is a beloved brand that serves a distinct consumer through their connection to creative culture, music, and youth. Converse will remain an important part of the Nike Inc. family, and we are excited about its long-term prospects. Overall, the work is not finished, but the direction is clear. Our teams are moving with focus and urgency, and our foundation is getting even stronger. I'm going to pass it over to Matt, and I'll come back on to close out the call.