NIKE(NKE) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3, NIKE, Inc. revenue was up slightly on a reported and currency-neutral basis, with low single-digit growth in the NIKE brand, partially offset by declines at Converse [25][26] - Gross margins expanded 150 basis points to 44.8% on a reported basis, driven by strategic pricing actions and lower ocean freight rates, despite higher product input costs [25][26] - Diluted earnings per share was $0.77, and excluding restructuring charges, earnings per share would have been $0.98, up 24% versus the prior year [26] Business Line Data and Key Metrics Changes - NIKE Direct was up slightly versus the prior year, with NIKE stores up 6% and NIKE Digital down 4%, while wholesale grew 3% [25][26] - Performance footwear grew high single digits, with double-digit growth from franchises including Kobe and Ja in basketball, Metcon and Motiva in fitness, and Structure and Vomero in running [19][27] - Women's fitness footwear grew double digits, and key apparel franchises such as $100-plus leggings continued scaling with strong sell-through [19][27] Market Data and Key Metrics Changes - In North America, Q3 revenue grew 3%, with NIKE Direct growing 2% and wholesale growing 5% [26][27] - EMEA revenue declined 4%, with NIKE Direct declining 4% and wholesale down 5% [27] - In Greater China, Q3 revenue grew 6%, with NIKE Direct declining 1% and wholesale growing 12% [29] Company Strategy and Development Direction - The company is focusing on sharpening its emphasis on sport, driving continuous product innovation, and enhancing brand marketing [6][9] - NIKE is increasing investment in wholesale to elevate the brand and grow the total marketplace [9][10] - The company is transitioning its product portfolio towards newness and innovation while managing key franchises for long-term health [22][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the need for adjustments in strategy to better align with consumer demand and market conditions [6][16] - The company is optimistic about its innovation pipeline and expects to see growth in the second half of fiscal '25 [41][49] - Management highlighted the importance of strong brand positioning and consumer engagement to drive sustainable long-term growth [48][55] Other Important Information - The company is committed to its purpose and sustainability goals, making progress against its 2025 targets [16] - NIKE's innovation platform, particularly Air, is a significant competitive advantage and is expected to drive future growth [10][11] Q&A Session Summary Question: Fiscal '25 commentary on operating margin and changes in the operating model - Management discussed the adjustments made to focus on consumer and sport, integrating the best of category offense with a gender umbrella [37][39] Question: New multi-year innovation cycle and growth profile - Management emphasized the robust pipeline of innovation and the importance of newness in driving consumer impact and long-term growth [44][49] Question: Pricing power and markdown opportunities - Management noted that strong brand strength allows for strategic pricing, which is expected to continue driving profitability [53][55] Question: Trends in the Chinese market and franchise management - Management highlighted strong growth in China and the importance of physical retail, while also managing franchises for long-term health [58][61]