News; Nike Kids Magista Obra II FG - Black/White/Paramount Blue Online

Published: Friday 10 March, 2017

08 Earnings Call Transcript Good afternoon, everyone. Welcome to Nike's fiscal 2009 first quarter conference call. Leading today's call is Pamela Catlett, Vice President, Investor Relations. Before I turn the call over to Ms. Catlett, let me remind you that participants of this call will make forward looking statements based on current expectations and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed with the SEC, including forms 8 K, 10 K, and 10 Q. Some forward looking statements concern future orders that are not necessarily indicative of changes in total revenues for subsequent periods due to mix of futures and at once orders, change rate fluctuations, order cancellations, and discounts, which may vary significantly from quarter to quarter. In addition, it is important to remember a significant portion of Nike Incorporated's business, including equipment, most of Nike Retail, Nike Golf, Cole Haan, Converse, Hurley, and Umbro are not included in these future numbers. Finally, participants may discuss non GAAP financial measures. The presentation of comparable GAAP measures and quantitative reconciliations are found at Nike's website. Now I would like to turn the call over to Pamela Catlett, Vice President, Investor Relations. Thank you and good afternoon, everyone. Thank you for joining us today to discuss Nike's fiscal 2009 first quarter results. As the operator indicated, participants on today's call may discuss non GAAP financial measures. Joining us on today's call will be Nike Inc. CEO Mark Parker, followed by Charlie Denson, President of the Nike Brand, and finally you will hear from our Chief Financial Officer, Don Blair, who will give you an in depth review of our financial results. Following their prepared remarks, as usual we will take your questions and, as many of you know, we'd like to allow as many of you to ask questions as possible in the allotted time. Consequently, we'd appreciate you focusing your initial questions to two and in the event you have additional questions, please do re queue if others do not cover them. With that, thank you very much for your cooperation and it is now my pleasure to introduce Nike Inc. CEO Mark Parker. Thanks, Pam and welcome, everybody, to the first quarter earnings call for fiscal year 2009. Q1 again demonstrated the strength of our brands and our business. We continued to gain share in key markets and delivered growth in revenue and profitability. That said, we're not stopping to celebrate and we're not complacent and we are clear on what's needed to deliver our goals through fiscal year '09 and beyond. Let's go to the numbers first Nike Inc. revenue was up 17% to $5.4 billion. That's 28 consecutive quarters of year over year growth. Gross margins were up 240 basis points. Reported global futures are up 10%, which marks 31 consecutive quarters of futures increases. And diluted EPS was down 8% from Q108, influenced by a one time tax benefit that contributed to $0.20 per diluted share last year. As I've said in the past, Nike will continue to invest in growth opportunities that offer the greatest potential for return. These Q1 results are in line with our ability to leverage those investments, our brands, and our resources across the portfolio. We can't talk about results or opportunity without considering the broader environment. While there is financial uncertainty in some sectors, our results continue to warrant confidence in the power and flexibility of our businesses. We recognize the impact from prices, inflation, and currency fluctuations and we realize that no one is immune, all of which reinforces my commitment to our simply and consistent strategy, manage for continued growth by leveraging the competitive advantages that we control, namely innovation, focus, and consumer relevance. Innovative product is at the core of Nike and practically speaking, it's where consumers cast their vote on your brand. We landed in Beijing with new footwear and apparel for all 28 Olympic sports. We launched Fly Wire technology in the hyper dunk and Zoom Victory Spike. We launched Lunar Light Cushioning in the Lunar Racer. We launched new Swift apparel and we are seeing consumers all over the world embrace these innovations and others. By any objective analysis, we lead in product innovation in our industry and we'll keep that front and center going forward always. Seeing that innovation become reality, a profitable reality, requires focus today more than ever focus on maximizing the potential for growth, focus on leveraging our SG and other resources, and focus on creating value for shareholders. We are just coming off a summer that created tremendous global excitement in sports and we are moving into the season of championships in team sports. That puts Nike in a great position to move through the year capitalizing on that energy. We are also focused on leveraging our resources across the portfolio. Our supply chain is one of Nike's greatest competitive advantages. [Lead] manufacturing, material sourcing, digital efficiencies it all helps us get to the right products to the right places at the right time at the right price and that's good for our consumers, our retailers, and certainly our gross margins. Of course, we focus on deploying capital thoughtfully and returning cash to shareholders. Over the last 10 years, we've repurchased $5.5 billion of stock. As we complete our current $3 billion program, we will begin a new $5 billion repurchase program over the next four years. I can assure you that this management team is focused on leveraging the entire Nike portfolio to meet our goal of $23 billion in revenue by the end of fiscal year 2011. We are relevant with consumers because we understand each other. They know we create innovative products and experiences. They value that performance and authenticity and that's why we continue to gain market share. That's why we've reclaimed our rightful spot atop the running category. When I look at China and the Beijing Olympics, I see a great example of how Nike leverages our innovation, focus, and consumer relevance. Nike Magista Kids I spent a lot of time in China before and during the Olympics. I've never been more impressed with our ability to execute on all levels. Our products were the most compelling and advanced. Our stores and messages were inspiring and our Nike stores did more than just set sales records. They were destinations for hundreds of thousands of Chinese consumers. By every measure, the Olympic Games achieved its promise for China, for sport, and for Nike. We were the clear winner in Beijing and the choice of Chinese consumers. More importantly, now that the torch has been extinguished, the deep consumer connections and experiences we've built set the stage for a strong, sustained, long term growth in China.

And what's happening in China right now is happening in every emerging market for Nike around the world, including Brazil, India, Turkey and Russia. People are embracing Nike as the authentic leader in sports. But it's not all about the Nike brand at the Olympics. Our affiliate business has also delivered a strong first quarter as they continue to grow and become a larger part of the Nike Inc. portfolio. Converse continues to deliver exceptional results. Revenue was up 32%. Our One Star product in Target is performing beyond our expectations, and inventory is lean and the business is executing extremely well. Hurley is gaining some serious top and bottom Nike Kids Magista Obra II FG - Black/White/Paramount Blue line momentum. Revenue was up 38%, the biggest quarter ever for Hurley. The brand really showed its strength at the recent action sports retailer show in San Diego. Action sports, as you know, is one of the fastest growing segments in our industry and with our Nike Inc. portfolio, specifically Hurley, Converse, and the Nike brand, we are well positioned to go after that growth. In total, our ongoing affiliate business has posted overall revenue growth of 20% and pretax income growth of 19%. So growing revenue, market share, and gross margins, growing futures, growing brands I think this shows the power of leadership and a sound strategy in our industry.