Nike (NKE) Q1 2015 Earnings Results Conference Call Transcript

In just the past 90 days, we’ve demonstrated the versatility and potential of our advanced Flyknit technologies, with products in Running, Global Football, Basketball, and most recently, Football in the U.S. The consumer benefits are incredible, and looking ahead, I know the potential for this is significantly increasing the scope and scale of this technology is very, very real.

We set new levels of performance in apparel with products such as the NIKE Dri-FIT rain jacket, the NIKE Pro collection, and the further extension of our Dri-Fit Knit and collections like NIKE Tech Fleece continue to drive growth and distinction by leveraging technical performance features in the premium sportswear apparel.

We launched the Air Jordan 29, our lightest Jordan ever, bringing a new level of basketball performance to the Jordan brand. And just last week, we expanded the potential of our Zoom Air technology with the launch of the LeBron 12. We have some very ambitious plans for this signature Air technology. I can’t tell you much more now, but I will say that the LeBron 12 is just the beginning of the revolution.

It’s important to understand that NIKE’s innovation agenda goes beyond products. It touches everything that we do. One example is how we’re leveraging the power of digital. The digital world moves fast, and NIKE is at the forefront. We’re employing new ways to engage consumers online as we create communities, services, and ecommerce experiences that fuel our growth strategies around the world.

These strategies are strengthening our relationships with consumers and driving our business, as ecommerce revenues were up over 70% in the first quarter. Going forward, we will innovate at an increasingly rapid pace. We are a growth company, because we are an innovation company. That is why we are committed to sustained investment in this area. We know it fuels the top and bottom line expansion and drives value for our shareholders.

And when I look at our innovation pipeline, I see innovations that will, no doubt, surprise and delight, innovations that are better for athletes, consumers, and the planet. I couldn’t be more excited about what’s coming.

The final competitive advantage I want to highlight is the power of NIKE’s portfolio. It’s a complete offense that encompasses brands, geographies, categories, product types, and channels. When all these components are working together, the portfolio generates amazing growth, and when we double and triple click into the various dimensions of our business, we see even more potential.

The diversity within our portfolio is a tremendous competitive advantage. It allows us to thrive in a rapidly changing environment, create separation, and ultimately expand the market. Trevor will discuss the NIKE brand’s outstanding Q1 results in more detail, but let me give you three highlights from my point of view:

One, the Nike brand is strongly resonating with consumers around the world. We’re delivering robust growth and profitability in some of our largest geographies, maintaining momentum in North America, accelerating growth in Western Europe, and turning the corner with strong results in China.

Two, our category offense is accelerating growth. Our largest performance businesses – running, basketball, and global football continue to expand. Sportswear grew at a strong double-digit rate, and our women’s and young athletes businesses grew rapidly, in fact, faster than our men’s business.

And three, we’re driving growth across an integrated marketplace. DTC revenues grew over 30% in the quarter, and our wholesale business grew double digits, reflecting strong growth in stores and online.

I’ve said that becoming a better retailer would make us a better wholesale partner, and our Q1 results are only the beginning.

We have been extremely thoughtful about the investments we’ve made against our biggest growth opportunities across the portfolio. From accelerated product innovation to enhanced consumer experiences, to sharply focused retail executions, it’s the integration of complementary strategies and investments that leads to an acceleration of growth.

And we will continue to make strategic investments to drive growth for years to come. I’m tremendously proud of our Q1 results, the momentum and our management team’s ability to seize opportunities and manage risks. At the same time, I’ve never been more excited about the potential to raise the bar even higher in the future.

Thank you, and now here’s Trevor.

Trevor Edwards – President, NIKE Brands

Thanks, Mark. I’m also very proud of the results we reported for Q1. On a constant currency basis, NIKE brand revenue grew 15%, with growth across all six geographies and nearly every key category.

NIKE brand DTC revenue increased 30%, driven by comp store growth of 15%, new store expansion, and accelerated growth in online sales up 70% and global futures are a robust 14%.

The great results we’re reporting today clearly demonstrate the success of our vital growth strategy: the category offense. The power of the category offense is unleashed when NIKE works with our wholesale partners to develop an integrated marketplace. This happens when we have the right product at the right time, presented in a way that clearly differentiates the NIKE brand to consumers.

A key component of this offense is our own DTC business, which is an important complement to the wholesale business around the globe. As I said, we delivered impressive growth in the quarter, with expansion in all three DTC concepts, inline, factory stores, and

Our investments in DTC as a strategic driver are clearly paying off, and we continue to see even greater potential ahead. And we’re investing to create compelling presentations with our wholesale partners around the world, as we expand the potential of the NIKE brand in a holistic and integrated marketplace.

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