Transcript: Nike Inc (NKE) Q1 2027 Earnings Call Conference

That’s how we believe we’ll move from managing a few successful sportswear franchises to building a deep bench of winners across the entire marketplace.

Jordan Brand

With Jordan Brand footwear, we’re going to get back to leading the scarcity model that we created. Simply put, we’ve been oversupplying our iconic retro product, asking them to do too much. And as we’ve done with the Air Jordan 1, we will deliberately reduce the volume and frequency of specific Jordan retro launches.

We’ve discussed it with our wholesale partners. Together, we will restore balance to the marketplace to create a foundation for more profitable and sustainable growth. In the near term, North America will feel the biggest impact.

To give you a better sense of the scale of these actions, in Q1, the Jordan brand represented 13% of our global business, with revenue falling by mid teens. Here’s why we’re doing this. When consumers see the Jumpman, it should feel special. It should feel earned. And every decision we’re making is designed to ensure the Jordan brand remains as coveted a decade from now as it has been for the past several decades.

Greater China

Let’s turn to Greater China, where for the quarter, revenue declined 26%. With a new leadership team in place for the past six months, we have been moving with urgency to alter the landscape and improve our position in the marketplace.

As we announced in July, we are activating a plan to clean up the digital side of this market. We are eliminating distribution through channels that are not aligned with our marketplace strategy, which will decrease the deep discounting of our brands. We will anchor Nike’s and Jordan’s digital marketplace in China around fewer, higher quality experiences through the official Nike flagship storefronts on Tmall, JD and Douyin alongside nike.com and the Nike app.

We believe the tightened digital ecosystem of NIKE flagships will enable a more premium brand presentation with clearer product stories and a more connected consumer journey. The focus will allow our top partners to concentrate on creating inspirational brick and mortar retail experiences. The majority of our partners’ physical doors in Greater China have not been refreshed in the past seven years.

When we elevate retail experience and lead with sport, we see results. In Shanghai, our House of Innovation has delivered ten consecutive months of growth since making that shift. In the near term, revenues and profitability in China will be impacted. We expect our digital cleanup to take multiple seasons as we continue to take targeted actions with our partners to improve inventory levels.

Taken together, sportswear, Jordan Brand and Greater China represent significant work ahead, but we know what healthy looks like, and we’re taking deliberate actions to get there.

NIKE Performance and the Sport Offense

These challenges are significant, but they are not the whole story at Nike. At the same time, the sport offense is delivering measurable progress against our performance portfolio.

Here’s what that looked like this quarter. Running is up double digits again with consistent share gains. Global football benefited from World Cup energy to drive strong double digit growth in all four geos. Training grew globally led by EMEA. Basketball was up double digits in North America with expectation that the sport will continue its momentum in Q2, and both tennis and golf grew double digits.

Running

In NIKE Running, our innovation in Max cushioning helped reignite this business led by the strength of the Vomero franchise. We’ve nearly tripled our share of the Max cushioning category over the past year. Now we’re entering the next phase of NIKE running.

Over the past two months, we’ve introduced four new footwear innovations, three in our racing silo and one in our Pegasus silo, each built around a different runner, a distance and a goal. In August, we launched the Pegasus Plus 2, a fast tempo training shoe with a curved Air Zoom unit for a quick, smooth ride.

In September, we unveiled the Alphafly 4, a lighter, more energy given version of our most celebrated marathon shoe. And yesterday, we introduced two new shoes that span the spectrum of runners. The Swooshfly, our entry level marathon racing shoe designed for the four hour plus runner and Nike Apex, a super shoe with double stacked Air Zoom units that deliver an incredible 40% more energy than the Alphafly 3.

Global Football

In global football, we’re pleased with our World Cup results as we doubled our World Cup team kits sales compared to the 2022 tournament. One of our strategies going into the tournament was to use the energy to invest in a much needed refresh of the global football marketplace.

This quarter, the newly elevated marketplace helped drive stronger sales in our club football kits this quarter, which was up high teens. That’s critical because club football fans buy season after season.

Training

Training is one of Nike’s largest untapped performance opportunities because every athlete trains. We’re seeing success across the portfolio. Nike Mind has quickly become one of our top selling franchises. Nike Pro and Metcon are industry icons.

And we just introduced the Nike Hybrid footwear system for both running and strength movements to serve the fast growing world of hybrid training and racing. The new Hyperslide brings the next recovery innovation from our Nike x Hyperice partnership to a more accessible price point.

Basketball

In basketball, where we are the global leaders, one of our most powerful growth opportunities is the women’s game. Nike basketball has grown our women’s signature business nearly 500% from FY 2022 to FY 2026.

Today, we activated the largest women’s signature shoe launch in Nike’s history, the Caitlin 1. It will launch in 5,000 doors, twice the average for a Nike basketball signature shoe supported by our largest Nike product campaign for the holiday season.

Introducing PACE

What we’ve learned through the sport offense is that focus wins. When teams get closer to the athlete, the consumer and the marketplace, they make better decisions. And over the past year, we’ve taken steps to make certain that the rest of the company can move at the same speed.

That’s the thinking behind PACE, a program that brings several operational changes together under one effort. The purpose of PACE is clear, accelerate the sport offense. It will change how and where we work, move decisions and roles closer to the consumer and build capabilities that will allow us to move faster. The sport offense is proving itself, PACE is how we scale it.

The first element is the work that’s already underway to evolve our supply chain from a mostly fixed structure to one that is more flexible, responsive and cost effective.

As a next step, we’re establishing a new campus in Bengaluru, India. Its mission is to drive new capabilities and ways of working for NIKE. They will work closely with the teams around the world to run the business with greater speed and precision. These full time NIKE teammates will span across a number of functions across the company.

As part of PACE, we also plan to organize into three geographies: The Americas, which brings together North America and Latin America; APGC, which combines Asia Pacific and Greater China; and EMEA, Europe, Middle East and Africa will continue operating as it is today.

We’ll reduce layers and move more resources to the countries, territories and cities and give our local teams more ownership of winning in their markets. We expect teams to move into this new formation in fiscal year 2028.

And the final part of PACE is enhancing the way we work across Nike, which will change the shape and size of our workforce. In some areas, we’ll add capabilities to increase speed and scale, and others will eliminate duplication. Over time, those changes will reduce the overall number of roles across NIKE, Inc.

As Dave will outline, we expect PACE to streamline decision making, so we can capture demand faster and improve productivity, while also creating greater capacity to invest in what has always set NIKE apart, serving athletes, creating industry leading innovation and building the world’s strongest sports brands.

At our Investor Day in November, we will provide a clearer view of our long term growth algorithm, the actions behind our portfolio priorities and how our operating model will support sustainable growth and value creation. With that, I’ll hand it over to Dave.

CFO Remarks

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Thank you, Elliott, and good afternoon, everyone. Over the past few weeks, I’ve had the opportunity to connect with many analysts and stakeholders. But importantly, I look forward to working with all of you as I begin my tenure here at NIKE.

I’ve long admired NIKE as an iconic brand, not only for its relentless commitment to innovation, but also for the way it inspires athletes through the power of sport. I’m pleased to be joining NIKE at such a pivotal time with so much opportunity ahead of us. It’s clear to me that there is an enormous potential to drive significant long term shareholder value.

NIKE operates in a growing, vibrant but yet competitive sector, where it remains a clear leader despite recent results that have fallen short of expectations. A key part of my role is to ensure that our Performance business grows sustainably and profitably over the long term, while also focused on getting sportswear and our Jordan and Converse brands back to financial health.

That means ensuring we are appropriately resourcing our priorities, taking the right actions with discipline and urgency and maintaining accountability across the organization.

We will continue our unwavering focus on driving shareholder value, which requires us to restore the NIKE portfolio of brands back to premium positions, improve the company’s operating margin through enhanced productivity and better ways of working, invest with purpose to drive higher quality top line results and unlock new growth opportunities and appropriately allocating capital to maximize shareholder value creation.

Under Elliott’s tenure, it’s clear we have made significant strides toward these objectives, but we still have more work to do. Our results are below both our expectations and our potential, and we are focused on closing this gap.

And today, I’ll cover our financial performance for the quarter, then I’ll highlight a key program focused on improving operating margins across the enterprise, and then I’ll close with our guidance for fiscal 2027.

First Quarter Financial Results

Our first quarter results reflected progress in several areas while also showing where we still have work to do to return our business to a healthier position.

In Q1, revenues were $11.2 billion, a decline of 4% on a reported basis and 5% on a currency neutral basis. And by geography, Greater China declined 26%, EMEA declined 5%, while APLA was flat, partially offset by a 2% growth in North America.

From a financial standpoint, the quarter continues to be defined by two different realities. Our Nike performance portfolio delivered strong growth, while Nike Sportswear, the Jordan brand and Greater China remained significant headwinds to our consolidated results.

In fact, NIKE Sportswear and the Jordan brand, including men’s, women’s and kids, represented a high single digit drag on consolidated NIKE. And if you were to isolate our Nike performance business, it was up high single digits this quarter, benefiting from the World Cup.

Additionally, if you were to exclude the reset in Greater China, Nike performance would have been up low double digits in Q1. Performance was driven by double digit growth in running, global football, tennis and golf.

Gross margin was 42.8%, up 60 basis points compared to LY. The results included benefits from our supply chain cost management efforts and FX tailwinds, partially offset by increased discounts as well as channel mix.

Importantly, SG&A declined 3% on a reported basis. The team has maintained strong discipline on expenses in the quarter while increasing investments in demand creation associated with the World Cup. Earnings per share for the quarter were $0.48, down 2% versus LY.

Overall, our financial results were largely in line with our expectations for the quarter, but clearly below the company’s long term potential.

The company’s balance sheet remains very strong. We ended the quarter in a net cash position with $8.4 billion in cash and short term investments with leverage at roughly 2x. We remain disciplined in how we allocate capital with an emphasis on prioritizing investments that can strengthen the business and improving returns on those investments over time.

In the quarter, we returned approximately $610 million to shareholders through dividends, and the dividend remains a significant priority in our capital allocation strategy.

Taken together, the quarter shows a business in transition. We are not where we want to be yet, but we have a strong understanding of the trends throughout the business and importantly, the actions required to improve results over the long term.

PACE Savings and Costs

As Elliott mentioned, we are taking strategic actions to build a healthier and more productive operating model that gives us greater flexibility to invest for growth, improve operating margins and create long term shareholder value through a program we’re calling PACE.

PACE is focused on improving how and where work gets done, improving our speed to market, streamlining decision making and sharpening our focus in areas that matter most to both consumers and athletes. We expect this program will enhance productivity and drive a lower cost base at Nike.

We expect PACE will deliver approximately $2.5 billion in savings. As we move forward with this work, we intend to reinvest a portion of the savings from PACE back into the business with discipline, prioritizing the opportunities with a clearer strategic impact and the strongest return.

We also expect the cost to implement PACE will be approximately $1 billion over the program’s life, which is in addition to approximately $300 million of severance related costs in fiscal 2026. We have begun taking actions and expect the majority of the program savings to be realized in fiscal years 2029 and 2030, with the full realization of the program to continue into fiscal year 2031.

Now we expect to provide additional details on these actions, our investment priorities and the measures we will use to assess our progress at our upcoming Investor Day.

Fiscal 2027 Outlook

Now I’d like to just spend a few minutes discussing our outlook for fiscal 2027. And before I discuss the outlook, let me share my approach to guidance.

I believe guidance should be grounded in the realities of the business, informed by both the risk and the opportunities ahead of us and set at a level that we believe is reasonable and attainable based on the information we have today and importantly, the actions we are taking to drive the business forward.

One of my objectives is to build on our financial discipline and provide investors with a clear framework for understanding our performance as well as our outlook. To that end, beginning today, we intend to provide a view of our expectations for the full fiscal year and update that perspective as the year progresses.

Today’s outlook should be viewed as our initial assessment of fiscal 2027 based on a comprehensive business and financial review conducted over the past several weeks. We expect to provide additional context in November as we further refine our plans as well as our priorities.

Starting with revenue. For fiscal 2027, we currently expect revenues to decline in the high single digit range. As Elliott outlined, we are making deliberate choices across portions of the portfolio, particularly in NIKE Sportswear, the Jordan brand and Greater China, to improve the health of these businesses over time.

We will continue to take actions to reduce supply across key parts of the marketplace in support of a healthier marketplace environment and stronger full price realization. We expect those actions will create pressure on reported revenues for the remainder of fiscal 2027 and into 2028.

And as a reminder, in the second quarter, we are also lapping significant promotional activities in EMEA from Cyber Week and a higher comparison of North America sell in activities versus last year. These two items will represent a headwind of approximately 400 basis points to revenues in the second quarter. While these decisions can dampen near term top line results, our focus is on improving the quality of revenue and creating a more sustainable foundation for long term growth.

Now turning to profitability. We currently expect EBIT to decline by a greater percentage than revenue. This outlook reflects continued pressure on gross margin and fixed cost deleverage associated with lower revenue levels. Higher input costs but partially offset by disciplined expense management.

At the same time, we remain focused on the levers that we can control. These include improving inventory management, increasing full price realization, strengthening sourcing and supply chain execution while managing our cost structure.

We also expect SG&A to remain down year over year as we continue to identify opportunities to improve efficiencies, simplify operations and increase productivity across the organization. Our priority is to direct more resources towards the consumer, sport, product innovation and the growth opportunities with the greatest long term potential.

And finally, with respect to adjusted earnings per share, we currently expect fiscal 2027 adjusted earnings per share to be in the range of $1.15 to $1.35. This range excludes approximately $0.15 of impact from the PACE program. We look forward to providing additional perspectives on our strategic priorities, investment approach and our long term financial objectives in November.

Here’s what I’ve taken away from the last six weeks. We are not at a standing start. Significant and valuable work has already been done to build a better NIKE, and we intend to accelerate those efforts over time.

From a financial perspective, I hope you come away with a clear sense of our focus on moving the company forward with discipline, accountability and urgency. Our teams are working with purpose to restore the business to stronger financial health while prioritizing the long term strength of the company and positioning NIKE for sustainable success.

And with that, I’ll pass it back over to Elliott.

Closing Remarks: Nike in Austin

Elliott Hill, President and Chief Executive Officer, Nike Inc.: A few weeks ago, the University of Texas hosted The Ohio State in what many call “the biggest game of the college football season.” Most people will remember how Texas came back from a 20-point deficit against the number one team in the country.

But what stood out to me wasn’t the final score. It was how they got there, a series of methodical drives, a few calculated risks, extra effort in critical moments. They stayed committed to the plan, and eventually, the scoreboard caught up.

That resonates with me because as Dave and I just shared, we have a lot more work to do. That’s just the reality we’re in. Increasingly, I see signals that remind me why our strategy is right. That happened in Austin and it happened off the field.

For six days leading into Saturday night, we helped turn the football game into a broader consumer moment. We activated every dimension of NIKE, bringing together running, training, football and sportswear. We leveraged Blue Ribbon Elite, Nike’s program for NIL athletes and our retail partners to capture the attention of an entire campus.

Students went for a guided run along Lady Bird Lake with our icons. They did yoga with our trainers on the South Lawn. They got a special invite to work out at the Texas football weight room. They lined up at 5:30 AM to shop at our SKIMS pop up on Speedway. They customized Studio Fleece and Solo Fleece designed specifically for Texas and we sold through the collection.

We seeded custom Vaporposite cleats with our top athletes. And we announced 13 new NIL athletes across eight sports, even UT legend Kevin Durant showed up to welcome new athletes to join Team KD.

This was Nike surrounding a moment, deploying our full sport offense, something no one else can do. It was the kind of focus on the ground game that helps us become more locally relevant.

And when you have 1,000 partnerships like we do across universities in North America that reach over 13 million students, it’s clear to me that Austin wasn’t a destination. It was a reminder of what’s possible, of a larger opportunity in front of us, of what happens when Nike plays to our strengths.

Now, one week in Austin doesn’t change the work in front of us. We have a lot to prove, but it reinforced something special. The closer we get to the athlete, the closer we get to the consumer, the more opportunities we uncover to serve them. This is NIKE using our partnerships in bigger, more creative ways.

We can do it with Texas, the Ohio State and soon Miami in football, with the upcoming German Football Association partnership or with FC Barcelona and Paris Saint-Germain in global football, at our major marathons and at March Madness. That’s how we create more value for athletes and fans, strengthen our brands and that’s how we expand the opportunities ahead for NIKE and our shareholders.

With that, Dave and I will now answer your questions.

Question and Answer Session

OPERATOR: We will now begin the question and answer session. Our first question comes from the line of Simeon Siegel with Guggenheim Securities. Go ahead.

Performance vs. Sportswear and Jordan in North America; Confidence in Guidance

Simeon Siegel, Analyst, Guggenheim Securities: Thanks. Hey, guys. Good afternoon, Dave. Welcome. Looking forward to working with you.

Elliott, any way to frame for us how large performance versus sportswear in Jordan are in the U.S.? I’m just trying to align the positive and negative comments with the fact that North America still grew revenues. And if I’m looking at it correctly, I think saw first regional positive inflection in EBIT margin and dollars. So that would be helpful just in terms of sizing.

And then Dave, just maybe higher level, curious if you can speak to your confidence in these numbers and your thoughts on how much you’ve been able to learn and touch in the short time you’ve been with the company? Thanks guys.

Elliott Hill, President and Chief Executive Officer, Nike Inc.: Simeon, thank you. It’s good to hear from you. Let me start first with performance. I’m going to start bigger picture. The sport offense is in fact working and you can see it as our performance business continues to grow. It’s a proof point. We believe that when you really get sharp on a distinct consumer segment that’s when we win.

Performance delivered broad based growth in Q1 across all key sports. We grew high single digits in Q1. Performance did overall. That was driven by football, running, training, basketball, tennis and golf all contributed to performance growth. So it’s across the board growth there.

And so Q1 performance and we said this in the remarks, growth that the Q1 performance growth was on top of the performance growing mid single digits in FY 2026 to $16 billion. And typically what I would say is innovation is clearly driving that growth and I won’t go through every one of them, but in running, training, golf you go through it. Innovation is what’s driving the performance business.

But it’s also not just about product, it’s about how we line up what we call our sport offense, not just the sport, but how we execute at the country level across product, across marketing, across the marketplace. And you can see that what we did in the World Cup. I was really proud of the work that the teams did there here in The United States and around the world.

The Caitlin launch today has been incredibly successful. The Nike Hybrid launch that we did at the HYROX World Championships in Stockholm, those are proof points when we get performance, innovation, product in the moment all lined up. We have great success there.

As it relates to North America, North America did grow 2% as we said and it was driven by performance led by running global football and basketball. Those were the drivers there. So overall excited about the direction that we’re headed from a performance perspective.

And the last thing I’ll say about North America, we are seeing good sell through across all channels whether it’s sporting in North America specifically, whether it’s sporting goods at a Dick’s, an Academy, a Scheels, athletic specialty, JD, Foot Locker, performance product is selling and then also at our specialty accounts. So overall, we’re pleased with the sell through of performance product in North America.

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Simeon, Dave here. Really look forward to working with you. Maybe just a couple of comments on guidance.

First and foremost, you should understand that we’ve really performed over the past several weeks a bottoms up comprehensive business plan review and a financial plan review, taking into consideration all the realities that we’re seeing within our business across all the dimensions of our business, and importantly, the risk and opportunities actions that were taken to manage this business and returning it to health over the long term.

Obviously, I gave a range from an earnings perspective, and that just shows that we’ve pressure tested a series of continued trends across the business and feel comfortable that this range reflects our best assessment of where this business stands today and the outlook.

So I sit here today feeling very confident. The teams are focused against this. These financial measures are pushed into the business, and everybody is accountable for delivering against these results. So this is our best estimate. I feel good about where we stand, and we’re focused against delivering not only this year but the years ahead of us.

Greater China: Magnitude and Cadence of Pressure

OPERATOR: Our next question will come from the line of Brooke Roach with Goldman Sachs. Please go ahead.

Brooke Roach, Analyst, Goldman Sachs: Afternoon and thank you for taking our question. Elliott, Dave, I was hoping you could provide better context on the magnitude and cadence of pressure that you expect in Greater China relative to the 26% decline observed in 1Q. Are there additional strategic actions that you think are still necessary to be taken on top of what’s already been taken to improve the health of the China business beyond the reset of Nike Digital? Thank you.

Elliott Hill, President and Chief Executive Officer, Nike Inc.: Thanks Brooke. We continue to execute a marketplace reset in China and you saw that reflected in the numbers this quarter. The teams and we here working with the teams on the ground are focused on becoming a more premium and culturally relevant brand.

I’ll start first as I always do on this question is China does remain an incredibly important marketplace. This year marks our forty fifth year of doing business in China and we remain committed to serving the Chinese consumers through sport. And we know Brooke when we lead with sport that’s when we win.

I could point to running this quarter. It continues to grow. We’ve lined up in China not only the innovative product, local experiences, which are critically important in China, After Dark Tour this quarter. We had almost 4,000 runners register selling out in the first day. We are driving double digit growth, and it’s our sixth quarter of growth in running. So when we lead with sport and line up the experience in marketing, it does work.

We are aggressively cleaning up the marketplace, at the same time elevating the consumer experience. The digital marketplace, as you stated, we haven’t taken some actions. It was too broad. It wasn’t differentiated and it had become promotional. So we did eliminate some online distribution that was unprofitable and brand dilutive. We’re anchoring as we said in our prepared remarks around some fewer flagships.

At the same time, it’s not just about digital. We have to be elevating our physical retail and we’re investing with our partners in their must win doors to create more, I would say consistent and elevated experiences because we know when we do that, we’ve had some great successes at our House of Innovation flagship. We’re driving growth there.

The last component of this is about being more local. So we will continue to invest in product creation teams on the ground in China and working on future seasons. Our first collection coming out of China, made for China, will launch in October. It’ll be a brick and mortar only launch purposely. And then we will continue to deliver products over time, products and assortments that are locally designed, developed and even manufactured in China.

So we’re excited about what the team is doing in China. I’m confident in Cathy and her team. It’s just going to take us time resetting the marketplace and we will continue to see pressure on revenue and profitability in the near term, but again confident in Cathy and the team.

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Hey, Brooke, this is Dave. Just real quickly, as Elliott said, we have multiple efforts underway in China to improve the performance of the marketplace and improve our performance within the marketplace.

But from a specific guidance perspective, the guidance range that I just provided to you assumes that China actually gets worse from a revenue perspective for the balance of this year. And that’s because of some of the actions we’re taking today to make sure that we return this business to health in the long term. So I think that’s what you should expect from that business for the balance of fiscal 2027.

Second Quarter Revenue and Gross Margin

OPERATOR: Our next question will come from the line of Jay Sole with UBS Securities.

Jay Sole, Analyst, UBS Securities: Great. Question is on 2Q. I didn’t think I heard full second quarter guidance within the comment about the 400 basis point headwind. Can you give us a little bit of help on how you’re thinking about revenues for Q2? Then maybe on gross margin as well.

And then even if for the fiscal ’27 outlook, I know you said SG&A down year over year, but you have sort of an unusual compare in fourth quarter. Can give us a little bit of help on where you think the gross margin lands for fiscal 2027? Thank you.

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Yes. Thank you. This is Dave. Actually, we’re probably not going to provide guidance specifically for gross margin, but for the year. But at this point in time, are puts and takes.

I think one thing that’s really constructive from a gross margin perspective is we’re making fairly significant moves in our supply chain and sourcing programs today that is actually bolstering gross margin. At the same time, we are taking discounts and resetting the marketplace, which is dampening gross margins over time. So there’s a little push and pull for this year as we go through the balance of fiscal 2027.

I will say, as it relates to Q2, I just wanted to highlight, because of the actions that occurred last year, we’re up against a tough comparison with what happened in Cyber Week in Europe, as well as what happened in North America sell in last year, Q2. So if you look sequentially, quarter over quarter, you will see, because of that comparison, growth rates being pressured in Q2. So I hope that helps.

Mbappé Departure and Signature Basketball Strategy

OPERATOR: Our next question will come from the line of Bob Drbul with BTIG. Please go ahead.

Bob Drbul, Analyst, BTIG: Hi. Good afternoon. And Dave, welcome.

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Thank you.

Bob Drbul, Analyst, BTIG: Elliott, I was wondering if you could spend some time a little bit more on I’d love to hear the decision to let Mbappé go from your roster. But the other piece of this, I’d love to hear more clarity the game plan in basketball, signature basketball. You’ve had some moving pieces there with Shai coming into Nike. So can you put some meat on the bone around some of that for us, please?

Elliott Hill, President and Chief Executive Officer, Nike Inc.: Yes. Thank you, Bob. Just in terms of Mbappé, we’ve had a relationship him for over two decades, we’ve had some great moments together, working together with him, and he was an important part of Nike football. And what I would say is that we’re proud of what we achieved together on and off the pitch and we wish him much success as he makes the move.

And so again, we’re happy for him and we excited about what our portfolio has in Nike football, great stable of athletes, great stable of federations and also countries. And I’m very proud of the work that our team has done around the football boots. So I’m excited about opportunities in football.

In terms of basketball, you’ll see us continue to dimensionalize basketball, both men’s and women’s. We had a tremendous launch today with Caitlin and Caitlin’s just part of the women’s business. Obviously, we have our women’s business is up over 600% over the last few years. So it’s new opportunity.

We see the women’s being helping us dimensionalize the overall basketball business between A’ja and Sabrina and now Caitlin. And so Caitlin was our largest, by the way, signature launch for women ever at 5,000 doors and great sell through.

In terms of Nike basketball, also launched Shai shoe today. I don’t know if you saw that Shai 2 and good sell through there. And we’ll continue to lead basketball with some signature athletes, but we also are excited about what we’re seeing in our GT series as well.

So overall, excited about where the team is headed in basketball. We’re starting to see growth there. We even called it out. North America had growth in basketball again. So we see it as another growth opportunity from a performance perspective.

Regional Expectations, PACE Speed to Market and Family Footwear

OPERATOR: Our next question will come from the line of Sam Poser with Williams Trading. Please go ahead.

Sam Poser, Analyst, Williams Trading: Thank you for taking my questions. I’ve got three. I’m just going to read them real quick.

Can you give us what you expect? You talked about China, the regional expectation by geography for the year sort of relative to Q1, where you anticipate sales will trend?

Two, you talk about PACE and the PACE project and increasing speed. You’re now, I think, about eighteen months to market. What are you trying to get that speed up to, when you optimize it?

And then in the family channel and your sub core products, sub $100 price point, does most of that product live in sportswear?

Elliott Hill, President and Chief Executive Officer, Nike Inc.: Yes. Let me I’ll take by the way, you broke all the rules, Sam. We’ve got three questions in. I’ll hit family and PACE.

And in terms of family footwear, that channel of business, which is what we call core footwear here internally, Sam, that it cuts across all performance sports. So we have an entry level core product across running, across basketball, across training, and then, of course, we do have it in sportswear. So it is a cross sport across sportswear opportunity in that family footwear channel. And that’s at $65 to $85 segment. And again, the teams continue to focus on that and are driving, I think, some really nice progress there.

As it relates to PACE, we’ll dive deeper in terms of the eighteen months question at our Investor Day. But since you asked the question, I want to make sure I hit PACE for everybody on this call. So I might spend a bit more time. I’ll go a little higher level.

And that is that we are setting PACE up to help scale the success of the sport offense. And I want to remind everybody, the sport offense is creating product through the lens of sport, but it’s paying it off at a country level. And so we’re building an operating model that we need to get closer to the athlete, the consumer, the marketplace.

And we’ll do that through some work that we’re doing around our supply chain, which we went through in some detail around a new capability center in India and moving from four to three geos, Americas, EMEA and then Asia Pacific, Greater China, getting resources closer to the countries and then changing the size and shape of our workforce.

And so at a high level, that’s the progress or the work that we’re doing around PACE, and it will help us build a stronger Nike for the future and help support a more profitable and sustainable growth into the future, and we’ll share more details at Investor Day.

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Yes. And maybe I’ll just touch on a couple of things real quickly. One on the PACE program, as Elliott said, this is a program that at the end of the day is working in tandem with the objective of in creating operating profit leverage over time. So this will be an important program and leverage initiative to be able to do that.

Secondly is we’re not going to give guidance obviously by region. But as I said earlier, the actions that we’re taking in China will further dampen China compared to Q1 from a growth perspective for the balance of this year.

What Was Underappreciated in the Turnaround

OPERATOR: Our next question will come from the line of Alex Straton with Morgan Stanley.

Alex Straton, Analyst, Morgan Stanley: Maybe just a big picture one for you, Elliott. If we just go back a couple years when you first started, I feel like we knew what the main or we were having a better understanding of what the main pressure points were with Jordan, with China, with sportswear. Things haven’t entirely moved that much. They’ve gotten a little bit worse in some of those areas.

So can you just walk through maybe what you underappreciated about some of the challenges there at that time? And then what gives you confidence that some of the revised strategies you outlined today are the right ones? Thanks so much.

Elliott Hill, President and Chief Executive Officer, Nike Inc.: Thanks, Alex. What I would say is since I returned, I believe strongly that we have strengthened the foundation of our business and our direction is super clear that we’re building Nike the right way and we’re building Nike for the long term.

And I would characterize that our comeback is ongoing. At our size and scale, meaningful change takes time. Our turnaround is happening. One sport community, one city, one country at a time, and we are reallocating resources against our biggest opportunities. So we’re building for the long term.

I would say that we started with the areas that mattered most, focusing on our culture, getting this company focused back on sport. Innovation, we started with running, and you see now that momentum through our performance business. We thought it was critically important to re anchor this company in sport. We reignited our marketing efforts. We started serving consumers across an entire marketplace, rebuilding our wholesale partnerships, and organizing against the sport offense.

And so we understand that we still have work to do in Sportswear, Jordan, in Greater China. And, again, from a Sportswear perspective, what we are going to do is break this big business called sportswear, and I think this is one thing that I probably did underappreciate, breaking it down into segments focused on a distinct consumer, which will allow us to have greater clarity around the products, the stories and the retail experiences for those consumers.

In terms of Jordan, we’re repositioning the Jordan brand, restoring the scarcity model for retro styles and you will see us dimensionalize the brand through sport. And we’re already seeing some success and growth in our football or excuse me, our cleated business, our golf business, our training business.

And then in terms of China, we’re leading with sport and innovation. I’ve talked a lot about that. And we’re taking some really decisive actions in the marketplace and that we build a healthier business over time. So we look forward to sharing what comes next for each of those businesses at Investor Day.

Pain Before Gain and Timing of PACE Benefits

OPERATOR: Our next question will come from the line of Matthew Boss with JPMorgan. Please go ahead.

Matthew Boss, Analyst, JPMorgan: Great. Thanks. So, Elliott, could you elaborate on the level of potential pain before gain? It seems like that’s a key theme here that you’re laying out today. What segments of the business may further moderate type of the strategic actions that you noted would impact the business for the balance of this year and into early fiscal ’28?

And just on PACE, would it be fiscal ’29 where we could expect this transformation work to bear fruit at a P&L level?

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: This is Dave. Maybe I’ll start. First, I think as we indicated, those three areas, whether it be sportswear, Jordan, and China, we’re taking deliberate actions in those areas to improve performance for the long term, and that’s going to dampen performance now.

So yes, we’re going to experience some, as you described it, some additional pain. But I think that and that’s going to be through the balance of this year and probably bleed in a little bit into fiscal ’28 as well. But that’s all in the goal of returning these businesses to health and driving really outsized shareholder value creation over time, number one.

Secondly, as it relates to PACE, we are beginning to see savings now even through Q1. Some of the actions that we took as it related to supply chain are bearing fruit in gross margin. So you’re beginning to see some improvement in our P&L today from PACE. But clearly, the savings are going to ramp over time, starting now, with the maximum savings to be appreciated and accrued in ’29 and ’30.

China Reset Timeline and Dividend Priority

OPERATOR: Our final question will come from the line of Michael Binetti with Evercore ISI. Please go ahead.

Michael Binetti, Analyst, Evercore ISI: Hey, guys. Thanks for taking our question. Let me add my welcome, Dave. It’s nice to work with you. I just want to ask thanks, Dave. Another way on China, you mentioned that it’s going to take multiple seasons to reset it to health. You mentioned revenue pressure a couple of times will bleed into fiscal 2028. I’m assuming maybe there’s a connection there.

If you just talk to us about what you mean when you frame China in multiple seasons and if you see a path to total company revenue positivity at some point in fiscal ’28.

And then, Dave, you did mention the dividend and as we take kind of an initial pass at the cash model, it sounds like you’re alluding to some ongoing top line challenges here for a little bit on the guidance midpoint today. I think the dividend ratio is over 100%. So just given the investment needs in the business, talk to us about the priority there for the dividend.

Dave Denton, Executive Vice President and Chief Financial Officer, Nike Inc.: Yes. First and foremost, let me hit that right out the gate. Dividend is a very significant priority for us here at Nike. It is a significant priority from the capital allocation program. And under all scenarios, we have support for maintaining and ultimately growing the dividend over time. We can put that to bed with that statement.

Secondly, I look forward to spending some time with you in November, because in November, we’re going to give you a financial algorithm so you can begin to assess what not just ’27 looks like, but what is the next five years begin to look like, both from a top line and a bottom line perspective. Why don’t we hold that question? We’ll come back to it at Investor Day, and we’ll hit that head on.

OPERATOR: And that will conclude the question and answer session and our call today. Thank you all for joining. You may now disconnect.

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