Financial Data and Key Metrics Changes - NIKE, Inc. reported a revenue decline of 10% on a reported basis and 9% on a currency-neutral basis in Q1 [21] - NIKE Direct revenue decreased by 12%, while NIKE stores increased by 1%, and NIKE Digital saw a decline of 20% [21] - Gross margins expanded by 120 basis points to 45.4% due to lower product costs and strategic pricing actions [21] - SG&A expenses declined by 2% on a reported basis, with increased demand creation investment offset by reduced overhead expenses [21] Business Line Data and Key Metrics Changes - Revenue from classic footwear franchises, including Air Force 1, Air Jordan 1, and Dunk, declined significantly, contributing to a mid-single-digit headwind on overall revenue [10][11] - New footwear products saw strong double-digit revenue growth compared to the prior year, indicating a positive trend in innovation [17] - The men's and women's lifestyle business was planned down double-digits in Q1, with expectations for continued declines throughout the year [11] Market Data and Key Metrics Changes - In North America, Q1 revenue was down 11%, with NIKE Direct and Digital both declining [22] - EMEA region experienced a 12% revenue decline, with NIKE Digital down 24% [23] - Greater China saw a 3% revenue decline, with NIKE Digital down 34%, although wholesale grew by 10% [25] Company Strategy and Development Direction - The company is focusing on shifting its product portfolio to create better balance and reenergize brand momentum through sport [8] - NIKE plans to introduce and scale new products, particularly in the running segment, which has shown positive growth [14][45] - The company is investing in partnerships to elevate brand presence in retail, such as collaborations with DICK'S Sporting Goods and Foot Locker [20][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in retail sales and elevated inventory levels, particularly in Greater China [32][25] - There is optimism regarding the long-term opportunities in the running segment and overall market growth in China [72][73] - The company expects Q2 revenues to decline in the range of 8% to 10%, with gross margins anticipated to decrease by approximately 150 basis points [26] Other Important Information - The company is undergoing a leadership transition, with Elliott Hill set to become the new President and CEO [6][8] - Full-year guidance has been withdrawn, with plans to provide quarterly guidance instead [8] Q&A Session All Questions and Answers Question: Can you break down the inventory situation regionally, particularly in North America? - Management noted that retail sales have underperformed, leading to slightly elevated inventory levels across regions, including North America [32] Question: What were the biggest challenges that led to unit disappointment in the quarter? - Management identified underperformance in Greater China and general macro softness across geographies as key factors impacting unit sales [34][36] Question: Can you reconcile the lower spring order books with the positive outlook for the second half? - Management indicated that while order books were flat, there is optimism about new product innovation scaling in the second half [41][42] Question: How large are the core franchises being reset, and what are their margins? - Management emphasized the importance of classic footwear franchises while acknowledging the need to reduce their concentration to create better balance in the portfolio [49][51] Question: How receptive are wholesale partners to new launches, and what is the inventory situation? - Management reported positive engagement with wholesale partners and emphasized the importance of managing inventory levels carefully [54][56] Question: How far has the Running business fallen, and what is the plan for recovery? - Management acknowledged market share losses in the Running specialty channel but expressed commitment to reinvesting in that area to regain momentum [61] Question: What are the margin pressures expected in Q2, and how do they vary by region? - Management indicated that margin pressures are expected across the board due to higher promotions and supply chain challenges [64]
NIKE(NKE) - 2025 Q1 - Earnings Call Transcript