Home » Nike (NKE) Q1 2015 Earnings Results Conference Call Transcript

Nike (NKE) Q1 2015 Earnings Results Conference Call Transcript

Mark Parker: We have a lot of confidence around our ability to leverage and scale best practices around the world, but then also, at the other end, to tailor our product and marketing as needed, even down to the city level. So it’s that combination, I think, that is really a part of NIKE’s strength and our potential.

Michael Binetti – Analyst, UBS

Don, if I could ask you one follow-up. You’ve been seeing nice — you guys have really obviously been focused on pricing and we see the numbers go by with your new disclosure how much that’s adding to the gross margins quarter to quarter. Could you talk about the pricing strategy a little bit there, and what I find to be counterintuitive is how you guys are getting such a nice benefit from pricing while a lot of other categories in the US in particular are seeing pricing pressure. How do you think about policing that to make sure you’re protecting from overheating down the road as you think about your higher-level pricing strategy?

Trevor Edwards: Well a couple of things there. I think one of the things that we, I think, did a number of years ago is we really embedded pricing into the way that we do the business every single day. So we’re working on pricing at a style by style level and a market by market level, and making sure that ultimately we deliver the value to the consumer.

At the same time, we do believe the power of our brand, and our ability to bring more innovation to the market, is really helping to drive a premium position. And we’ve seen it really in every market around the world where the consumer is definitely trending towards premium products. Well made with great innovation is certainly resonating with the consumers.

But again, we do stay very mindful of the market situations in every market to make sure that we remain competitive and attack it at all different price points.

Mark Parker: And I’d add one other thing too. In our organization, the people who are really on the front lines from a pricing and a consumer value standpoint are the merchants. So this is a set of decisions that the people who are at the marketplace are really driving that strategy.

Operator: The next question comes from Eric Tracy with Janney Capital Markets.

Eric Tracy – Analyst, Janney Capital Markets

Mark, if I could follow up on the commentary on the manufacturing revolution. Completely agree with it being potentially game changing. And I think this was kind of the first time we heard the potential that that could be sooner rather than kind of a long term opportunity. Could you just speak to, again, specifically beyond Flyknit, is it 3D printing, is it other disruptive technologies that are in play? Again, the timing of when you might be able to scale that and what that level of penetration might look like?

Mark Parker: Yeah, I’m not going to go into great detail here and now, but I will say that these breakthroughs really come in the shorter term, the midterm, and the long term. You know, we’ve got a steady flow of innovations beyond Flyknit to speed up our manufacturing, to make the whole process of manufacturing more efficient, more sustainable, and offset some of those higher input costs.

Specifically, 3D printing, that has a tremendous opportunity for us. That’s a bit on the longer road side of things. But we intend to be on the forefront of that potential. And there’s other things that I don’t want to get into at this point, that will start to make a more meaningful impact over the next one to three years.

Eric Tracy – Analyst, Janney Capital Markets

And then maybe if I could switch gears. As we think about heading into the Brazil Olympics, clearly a little bit of a macro downtick there as well as just some of the distribution issues across the LATAM region. How do we think about managing the emerging market business into that? Do you double down from an investment in sort of demand creation standpoint? Do you manage back on that? Again, it’s much bigger in terms of showcasing the NIKE brand on a global level, but anything kind of region specific we should think about into that event?

Trevor Edwards: I’d say first that the brand is very strong in Brazil. It’s very strong in Latin America. And in fact, the World Cup obviously was a great example of — it was a tremendous success for us. I think what we’re doing it, what you’re seeing around Latin America right now is certainly some macroeconomic headwinds that we’re working through. And what we’re essentially trying to do is make sure that we’re taking prudent steps to proactively manage the flow of product into the marketplace. To make sure that the market can actually remain healthy for both us as well as for our retail partners. And that’s really what we’re doing. So it’s more about making sure that we balance it.

For the long term, we are tremendously enthusiastic about the opportunity that lies in the Brazilian market and in Latin America. Very high sports markets. Consumers have a very good passion for the brand and certainly passion for sport. So we really are very bullish about that market long term.

Kelley Hall: Operator, we have time for one more question.

Operator: The next question comes from David Weiner with Deutsche Bank.

David Weiner – Analyst, Deutsche Bank

I wanted to ask about the North American running business. I think you gave some color on some of the footwear and apparel SKUs, products that did well. But I was wondering if you could dig a little bit deeper into the consumer and kind of what are they looking for in product, and if that’s changing at all as we go into the holidays. And then also, I’m not sure if you gave a performance number for how North American run did, but if you could, that would be great.

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