The operator welcomed everyone to the NIKE, Inc. Fiscal 2023 Fourth Quarter Conference Call and introduced Paul Trussell, VP of Investor Relations and Strategic Finance. Paul reminded participants that there are risks and uncertainties that could cause actual results to differ from forward-looking statements, and that non-GAAP measures and non-public financial and statistical information will be discussed. He then handed the call over to NIKE, Inc. President and CEO, John Donahoe, who reported that Fiscal 2023 was a milestone year for NIKE as they set new records and achieved their operational and financial goals.

NIKE achieved strong growth in fiscal 2023, surpassing $50 billion in revenue with 16% growth on the year. Jordan was particularly successful, growing mid-30s in all areas of men's, women's, and kids footwear and apparel. The company also returned to healthy inventory levels and increased digital share of the business to 26%. NIKE is investing in digital experiences to create a truly distinctive experience and serve billions of customers.

NIKE has seen strong digital growth and is expecting this to continue as they add new capabilities and serve consumers at scale. They have expanded their membership base, increased frequency of engagement, and have been deepening consumer relationships. NIKE also works with a variety of multi-brand partners to provide access to consumers across different segments and price points. They are investing in retail experiences, connected digital membership, neighborhood authenticators, and NIKE store concepts.

NIKE recently unveiled the NIKE Well Collective, a rebrand of NIKE Live, to better serve female consumers. During the 6/18 shopping holiday, NIKE was the number one sports brand on Tmall. To further expand their competitive separation, Heidi Oneill and Craig Williams were elevated to become NIKE Brands' two Presidents. Their new roles will focus on innovation and integration to drive growth and results.

NIKE is focused on growing the world of sport, and has achieved success in the area of Global Football in particular. This includes partnering with top players such as Erling Haaland, and providing the most comprehensive women's football collection ever. The new Phantom Luna boot features a proprietary cleat pattern to provide peak traction and stability for female players, and the World Cup kits will feature fit and material innovations tailored to a woman's specific movements.

NIKE is focused on driving energy and connecting the next generation of fans to football, and has significant market leadership in basketball. They have a portfolio of brands, NIKE, Jordan, and Converse, and all three were represented in the All-NBA first team. This year marks 20 years of LeBron’s signature shoe. In addition, the Sabrina 1 is resonating strongly and Kobe brand will relaunch in advance of Kobe Day. The NBA season concluded with Nikola Jokić taking the Denver Nuggets to their first ever title, Brittney Griner made her return to the court, and A'ja Wilson was named an All-Star team captain. Guo Ailun won his third CBA Championship in China.

Jordan Brand is known for its authenticity and connection to sport, which has allowed it to build a strong cultural identity. Recently, the brand has seen success with product launches like the Women's Teyana Taylor AJ 1 High and collaboration with the movie Spider-Man: Across the Spider-Verse. Jordan has also launched the Tatum 1, Luca, Zion, and the Game Shoe to build a foundation for future growth. Additionally, the brand has seen success in women's and kid’s footwear and apparel, and is now seeing growth in performance footwear. Jordan also has opportunities to increase its presence internationally, as its penetration is lower in other geos than it is in North America.

Nike has seen growth in their running footwear business and is continuing to innovate and develop new styles to appeal to everyday runners. They have recently launched the Invincible 3 and the Infinity Run 4, both of which have been performing well. The Infinity 4 features the React X, a sustainable and responsive innovation. They are also driving the lifestyle of running with the Vomero 5 and the Motiva.

NIKE has had strong sell-through for its Motiva walking shoe, becoming a top 5 performance footwear style globally. The company has driven competitive separation through product innovation, storytelling, deepening consumer connections, and actively managing the marketplace. For the full year, NIKE delivered mid-teens revenue growth with accelerating momentum in its performance business and sustained strength and lifestyle. North America, the company's largest and most mature market, added $3 billion in revenue. The top franchises also drove strong full-price sales with mid-single-digit price increases, as well as growth in units and ASP.

In Q4 of the previous year, the company saw strong consumer demand, resulting in double-digit growth in total retail sales. The company also saw a decrease in total marketplace inventory units, with NIKE Inc. inventory dollars being flat and units down double-digits. The company is confident in its future growth due to its sports marketing portfolio, digital platforms, and global reach.

NIKE has great opportunities for growth due to the increasing consumer interest in sport, health, and wellness. The company is investing in innovation to create value for athletes, and is also accelerating direct consumer relationships across its digital platforms. NIKE is also seeing potential growth in international markets such as Korea, Central and South America, Southeast Asia, and India.

In the fourth quarter of NIKE, Inc., revenue grew 5% on a reported basis and 8% on a currency neutral basis. NIKE Direct grew 18%, NIKE Digital grew 14%, and NIKE Stores grew 24%. Gross margins declined due to higher product input costs and elevated freight and logistics expenses. SG&A grew 8% on a reported basis due to wage-related expenses, variable NIKE direct costs, and increased demand creation expenses. In North America, Q4 revenue grew 5%, NIKE Direct was up 15%, and NIKE Digital grew 17%. Wholesale declined 3% due to reduced sell-in. EBIT declined 6% on a reported basis, but strong consumer demand drove total retail sales up double-digits across the marketplace.

NIKE had strong growth across its portfolio in Q4, with double-digit increases in store traffic and revenue in North America. In EMEA, NIKE Direct was up 28% and NIKE Digital grew 24%, while in Greater China, Q4 revenue grew 25% and NIKE Direct grew 19%. Performance and lifestyle products drove growth, with Vaporfly and Alphafly topping shoe counts at the Paris and London marathons, and strong full price sales for Mercurial and Phantom. Member engagement and buying frequency were at all-time highs, and the AJ 1's Spider-Verse launch drove the largest ever kids shock drop on the sneakers app.

NIKE experienced a successful quarter with strong marketing activations, product sell-through, and consumer confidence. In APLA, revenue was up 6%, NIKE Direct was up 9%, and NIKE Digital grew 9%. Jordan Brand also grew double-digits with strong performance from Cortez, Vamiro 5, Pegasus, and Invincible 3. Next week, NIKE will kick-off its first athlete tour in China since the pandemic.

NIKE has seen double-digit growth across men's, women's, and kids in global football, and over 40% growth in Southeast Asia and India. In Korea, the NIKE app launch has driven 2.5 million downloads and $100 million in demand. For fiscal 2024, NIKE is taking a balanced approach to planning their business, expecting mid-single-digit growth led by NIKE Direct. This includes four points of headwinds from the prior year from wholesale shipment timing and accelerated liquidation activities.

NIKE expects gross margins to expand by 140-160 basis points, which reflects recovery from transitory headwinds and structural gains from their focus on price value. They also anticipate higher product costs due to inflation and an increase in SG&A due to investment in demand creation and their operating model. Other income and expense is expected to be between $225-275 million and the effective tax rate is expected to be similar to the previous year. The first quarter is expected to have flat to low-single-digit revenue growth due to their decision to restrain marketplace inventory.

NIKE is expecting to see an improvement in their gross margin and an increase in their SG&A due to investments in demand creation and efficiency. They are expecting a busy year of sport, and are ready to answer questions. John Donahoe then explains that their decision to partner with certain retailers was driven by their desire to create more opportunities for their athletes.

Nike's marketplace strategy is driven by the consumer and is focused on providing them with digital and physical access to their products. They are building out stores, particularly in underserved segments like women's, and have multi-brand wholesale partners such as DICK's, JD, Foot Locker, and Sports Direct. They are also authenticating neighborhood doors and have accounts to serve different consumer segments and price points.

John Donahoe explains that NIKE's marketplace strategy will help it gain market share and grow the market by being where consumers are. He also mentions how important their mobile apps are to the company, as they have over 500 million visitors in the US, APLA, and EMEA, and that this gives them an advantage by being on consumers' phones.

NIKE has launched the NIKE Well Collective, which is a branding and retail strategy to appeal to female consumers. This includes opening NIKE Live Doors, which are focused on women's performance products, fitness, leggings, bras, and lifestyle. This strategy is intended to make NIKE more accessible to female consumers. In FY2023, the company saw 16% growth on a currency-neutral basis, with even higher growth in North America and EMEA.

NIKE Direct saw 18% growth in the fourth quarter, and the company is expecting to see mid-single-digit growth in revenue for the full year. This growth is driven by the company's approach to assessing marketplace health and consumer trends, as well as their decision to tighten first-half buys. NIKE is also expecting retail sales to the consumer to continue to grow over the year, with new product introductions and the energy around the Paris Olympics helping to drive growth. This growth is despite the four points of non-comp headwinds from wholesale shipment timing and accelerated liquidation activities.

John Donahoe states that the marketplace remains highly promotional, but NIKE is happy with their inventory levels, which are ahead of plan and the competition. NIKE is focused on recovering full price, profitable growth in the upcoming fiscal year, but recognizes that the environment will continue to be promotional, putting pressure on their wholesale partners in terms of managing inventory.

Matt Friend explains that the company is expecting to see a recapture of transitory cost headwinds in FY 2024, with a gross margin expansion of 140-160 basis points, including a 50 basis point FX headwind. The majority of the expansion is from the recapture of transitory headwinds, while the remainder is from structural benefits, partially offset by higher product costs and inflation in parts of the supply chain.

The company has negotiated rates for ocean freight that are near pre-pandemic levels and will start to see that tailwind in the second quarter of the fiscal year. They are also planning for an improvement in full price mix and markdowns. They are expecting to operate at or around the 65% level of full price realization, but there may be more opportunity than that. These two factors will provide structural tailwinds that will help the company achieve their long-term margin goals.

John Donahoe recently visited China to observe the recovery that is taking place and the success of NIKE and Jordan brand in the country. He noted the strong performance across different categories, and the success of the NIKE formula of the best innovation combined with great local storytelling and the marketplace connecting with Chinese consumers, particularly Gen Z. He also highlighted the use of live streaming, social shopping, and mono-brand stores as key drivers of success in the country.

NIKE is investing in China and is optimistic about the future, due to the growing middle class, increased focus on health and wellness, and Gen Z being the most active generation. They have also improved their inventory position in the marketplace and have seen the highest level of full price selling in eight quarters, which shows the strength of NIKE when they have a healthy marketplace. The first floor of their 6,000 doors is dedicated to women's merchandise and is full of innovation.

Matt Friend discussed the progress the company has made towards their long-term goals for fiscal 2022, which included a high-teens operating margin. He noted that the consumer will decide the ultimate endpoint of the mix shift of DTC and the company is confident that they will be more direct and more profitable in the long-term. The company is making progress towards returning to pre-transitory impacts and they are still seeing benefits from structural opportunities to drive their margin in the long-term.

The company is confident that it is on a path to achieving its long-term gross margin goal of the high-40s, despite headwinds such as foreign exchange and difficulty predicting the timeline. The key to this is innovation, which will fuel both the top and bottom line, and the company is feeling a sense of momentum and confidence as it moves into a more streamlined structure.

This summary was generated with AI and may contain some inaccuracies.