Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2018 Fourth Quarter Conference Call. For those who want to reference today's press release, you'll find it at https://investors.nike.com. Leading today's call is Nitesh Sharan, Vice President, Investor Relations and Treasurer. Before I turn the call over to Mr. Sharan, let me remind you that participants on 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 the Annual Report filed on Form 10-K. Some forward-looking statements may concern expectations of future revenue growth or gross margin. In addition, participants may discuss non-GAAP financial measures, including references to constant dollar revenue. References to constant dollar revenue are intended to provide context as to the performance of the business eliminating foreign exchange fluctuations. Participants may also make references to other non-public financial and statistical information and non-GAAP financial measures. To the extent non-public financial and statistical information is discussed, presentations of comparable GAAP measures and quantitative reconciliations will be made available at NIKE’s website, https://investors.NIKE.com. Now, I would like to turn the call over to Nitesh Sharan, Vice President, Investor Relations and Treasurer.

Thank you, operator. Hello, everyone, and thank you for joining us to today to discuss NIKE, Inc.’s fiscal 2018 fourth quarter and full-year results. And sorry for the brief delay in getting started. As the operator indicated, participants on today's call may discuss non-GAAP financial measures. You'll find the appropriate reconciliations in our press release, which was issued about an hour ago or at our website, investors.NIKE.com. Joining us on today’s call will be NIKE, Inc. Chairman, President and CEO, Mark Parker; and our Chief Financial Officer, Andy Campion. Following their prepared remarks, we will take your questions. We would like to allow as many of you to ask questions as possible in our allotted time. So, we would appreciate you limiting your initial questions to two. In the event, you have additional questions that are not covered by others, please feel free to requeue and we will do our best to come back to you. Thanks for your cooperation on this. I’ll now turn the call over to NIKE, Inc. Chairman, President and CEO, Mark Parker.

Thanks, Nitesh, and hello and good afternoon, everyone. We had a strong fourth quarter with results that confirm why we’re so excited about potential of the Consumer Direct Offense. The shifts we’ve made to our business and our deeper focus on the three core areas, innovation, direct and speed are igniting the next phase of growth and profitability for NIKE. Here are the key areas where we’re driving momentum in our business. First, we’re winning with new innovation. We’re leading with platforms, not just products. For example React and Air Max are scaling through multiple styles and across categories. They’re driving extraordinary growth and brand heat with consumers. Second, our Digital Offense is transforming NIKE from how we connect with consumers to how we deliver products. This is a major shift from operating models of the past to a new digitally powered model of the future. And third, with a more focused strategy, we’re running a more complete portfolio with better balanced growth across geographies and categories. For the quarter, NIKE, Inc. revenues grew 13% on a reported basis. Specific highlights include our international business growing 23% with Greater China up 35%. We returned to healthy, sustainable growth in North America. Sportswear, a $10 billion business for NIKE had another quarter of double-digit growth. We saw a solid momentum in key performance categories and digital, NIKE Digital was up 41% for the quarter. The key to accelerating our strength is to continue to sharpen the execution of our Triple Double. And looking at our progress this quarter, I’ll start with 2X Innovation. The lineup of fresh, unexpected products that we shared with you last fall at our Investor Day, has entered the marketplace. And as I noted, the consumer has responded. NIKE React for example is living up to big…

Thank you, Mark and hello to everyone on the call. Fiscal year ‘18 was a strategically significant year for NIKE. As we began the fiscal year last June, we communicated our new strategy, the Consumer Direct Offense, which we believed would ignite NIKE’s next horizon of strong, sustainable, profitable growth and transform the company in the process. Then, at our Investor Day. This past October, we showcased how our new strategy was already beginning to come to life. We displayed the pipeline of innovative products that we plan to bring to market in the second half of fiscal year ‘18 on our path to 2X Innovation. We immersed our stakeholders in the relaunch of our NIKE and SNKRS app experiences and the new membership services that would ignite 2X Direct. And we shared several of the manufacturing and supply chain initiatives that will help 2X our Speed and ultimately cut our time to market in half. Of course we also established a new long-term financial model. But, perhaps even more notable than the financial goals we established were some of the key operational measures of success that we shared. Those measures of success better define how we will transform NIKE into a digitally-led enterprise that connects more directly with our consumers globally through our key cities and countries. And as we now close Q4, we are thrilled to see our strategic execution, translating into strong financial performance, as both revenue growth and profitability exceeded even our own expectations. At the same time, what’s even more exciting is that we also delivered across all of our key operational measures of success. And, it’s worth highlighting a few examples, as these are proof points that NIKE’s strategic transformation is underway at an accelerated pace. So first, we said that new innovation platforms…

[Operator Instructions] Your first question comes from the line of Bob Drbul from Guggenheim. Your line is open.

Hi, guys. Good afternoon. I guess, the question that I have is on the North American market, you talk a lot about the sustainability of the growth in the U.S. Can you just -- as you look for the -- throughout the next fiscal year, in terms of -- is expectation for like the low single-digit increase, is it expected to accelerate based on what you're seeing? I was wondering if you could just comment a little bit more around the outlook in the North American market.

Sure. We do see sustainable momentum in North America. As you know, our investor day guidance for North America was that we believe it was a mid single digit growth market over the next five years. And so, we don’t typically provide geographical specific guidance, certainly by quarter or for the full-year. But I would say that we have momentum going into the year, and that's really primarily fueled by new innovation platform that we are scaling, NIKE Direct, certainly NIKE Digital which accelerated to well over 30% growth, driven by strong results on SNKRS and through the membership. And then, I’d note that importantly, we have returned North America to healthy pull market. Inventory is clean, up only 2%; full price sales are accelerating; off price sales are declining; and gross margins are expanding. So, we do see strong momentum, sustainable momentum going in to fiscal year ‘19, but we aren't providing specific guidance by a line item by geography.

And much of what you saw in terms of Q4 in terms of the momentum that has been building, we'll see that continue throughout the fiscal year. And I'll put an exclamation point on the products as being a driving force beyond just executing some of the basics better across the board.

Okay, great. And I just have a follow-up question I think for Mark. The LeBron Watch, can you just give us some insight into where you expect LeBron to land in free agency this year?

I'm not going there. I think, wherever he goes, he's going to help his team more than anybody else, I think in the league. So he's -- yes, everybody wants to know that question but I can't give you any more insight.

Your next question comes from the line of Kate McShane from Citi. Your line is open.

Hi. Thank you. Thanks for taking my questions. My question's centered around Jordan. You made a couple of comments in the prepared comments about the brand. But, I was curious, could you remind us now like you're back into the pull model, how big that business is in terms of dollars? And could you also maybe walk us through size of a retro versus the marquee business, and if there's been any significant change in the pricing structure within Jordan?

Yes. Kate, if you refer to our earnings release, this is the time of the year where we actually report our revenue by category. And what you would see in the release is Jordan brand for the 12 months ended this fiscal year was about $2.85 billion.

Sorry, Kate. Can you repeat the second part of that question related to pricing?

Just if there was any change in the structure of the pricing, now that you're back to the pull model for the brand?

From a pricing perspective, I'd say that the leading indicator in terms of the strength of the Jordan brand is that we're seeing strong full price [ph] sales. In fact, it might be an understatement to say that our inventories are clean in North America. And that was not a result of adjusting prices. That was entirely about right sizing supply and within distribution channels. And what we've seen is that certainly with respect to the hottest styles and the most iconic styles, we've had extraordinary demand, again the demand that outpaced the supply that we had planned, particularly with respect to our digital experiences like the SNKRS approximately. So, we continue to feel that there's great price value there and certainly as we bring innovation and storytelling to those icons and across the rest of the Jordan line.

Your next question comes from the line of Jamie Merriman from Bernstein. Your line is open.

Thank you very much. I had two questions related to digital. Andy, you talked about the investments that you're making in digital and the visibility that you have in terms of the results that is delivering. Can you talk a little bit about how you think about the ultimate opportunities from a profitability prospective, as that business does scale? And then, the second part would be, you mentioned Tmall I think really setting the bar in terms of your digital partners. You didn’t talk about Amazon. And so I’m just wondering if there are learnings from the Tmall relationship that you could work with Amazon to apply or if there is an opportunity there? Thank you.

Sure. I will off start with your question around the impacts of Digital. It’s a great question and a timely question. As both, Mark and I detailed, we saw acceleration in Digital that quite frankly exceeded even our own expectations. It wasn’t by accident, we have certainly been investing both organically in digital experiences such as some of the experiences we have shared with respect to our membership initiatives as well as in capabilities. You’ve heard us refer to our acquisitions of Virgin Mega, Invertex and Zodiac over time. And so that acceleration is definitely a result of the investments. In terms of our evolving view of the impact of Digital on our economic model or how we create value for shareholders, we do see Digital being a platform that helps us better optimize supply and demand. We obviously get a very direct read and signals from consumers in terms of which products they are most interested in, and that ultimately helps us amplify revenue growth through full price sales. When we're leveraging digital in a more direct way, we obviously capture more of that revenue at the retail price. When we are leveraging digital with our partners, we do see a benefit from a full price sales and win-win relationship with our partners. Digital Commerce also has margins that are favorable from a mix perspective relative to our traditional wholesale brick-and-mortar business. From an SG&A perspective, I would suggest there are two ways to look at it. One is short, medium and long term, and then the other one is specifically more in the shorter term. I think short, medium and long term, what we’re finding is that the capabilities or experiences we’re building in digital are very scalable and they are scalable in efficient way. You think about creating experiences around the SNKRS or NIKE apps, and to the extent we have success in the markets where we launched that we’re then able to take that investment we’ve already made and leverage it in markets around the world. And we’re certainly seeing that for example with the SNKRS app, which is number one in Japan. In terms of free applications, we’ve seen millions of downloads of that app since launch in China, leveraging a lot of that upfront initial investment. So, we think it's a source of leverage. At the same time, because we’re focused on long-term and we do think digital has the ability to really inflect our value creation. We’re accelerating investments that we’re making in digital now to accelerate as down that path.

And quickly on Amazon, I would just say that our partnership is progressing well. We remain focused on elevating the consumer experience on the platform, we’re learning a lot, applying, and you mentioned Tmall, we did call that, partnership out in our prepared remarks, Tmall has been an exceptional partner for us. I think, the main focus is on elevating the brand profile and experience on the platform, and that will continue to be the focus as we explore next steps with the Amazon. And I'll call out our other digital platform partners to Zalando and Asos, and some of the others I mentioned earlier, this is a critical part of our digital opportunity going forward beyond what we're doing direct.

Your next question comes from the line of Jim Duffy from Stifel. Your line is open.

One of the things that jumped out of me from the call is that notable success you're having in capitalizing on sneaker culture for women. How far are you down the runway on this and can you highlight some things to look for in fiscal ‘19 and beyond?

Well, I would say that we're in the early stages here. To be frank, the demand that we've created from our SNKRS app has greatly exceeded our expectations and done so quickly both for men and for women. This is -- I mentioned this before but one of the biggest upside opportunities, I think we have over the course of fiscal ‘19 and beyond. The response has been phenomenal, and it's truly an area that we’re excited about catching up, meeting end-to-end, being in a position to serve that incredible increase in demand that we've got from sneakers and the whole sneaker culture which is now a global and connected community that is creating again incredible buzz around the world and incredible demand. In some way, it's just a great problem to have but we've got a lot of upside opportunity here.

And then, Mark, levering data, clearly a focus, where are you do you think in the process of providing data to some of the upstream operating units like design and demand planning and putting them in a position to use that data to inform business decisions?

Yes. That’s a great question I'd say we're on the early stages. I mean, this is a constantly moving opportunity for us, design and product creation and the express line, the supply chain they are all connecting digitally; it's predictive demand planning -- sensing and demand planning is absolutely a critical part of advancing this capability moving forward. I feel like we're making a tremendous product - or progress in that respect. I think this next fiscal year will be an acceleration, the use of data to inform product design and capabilities going forward. And then, it's actually impacting how we do our -- manage our supply chain in our manufacturing flexibility in response time. So, I think you'll see a lot of scaling of the data and analytics capabilities for NIKE here in the months and quarters ahead.

Our next question comes from the line of Simeon Siegel from Nomura Instinet. Your line is open.

Just looking further out over that multiyear mid single digit North America number, is there any color you could share on how you view footwear and apparel in any distinction there in terms of how you see the competitive dynamic? Thank you.

Yes. Actually, we see strength across both product types, footwear and apparel, both are competitive, market sizes for NIKE in North America but around the world. The health of the business both on the footwear and the apparel side is actually quite strong, and demand that we’re seeing, we’re equally focused on innovation, both in performance and lifestyle, and footwear and apparel. But, we see the results that we’ve rated I think in Q4 and the momentum it’s building. We’ll see that continue throughout the fiscal year, very bullish on both footwear and apparel, both performance and certainly Sportswear.

I’ll just note that in the quarter, in North America, the return to growth was fuelled by growth in both footwear and apparel with a slightly faster rate of growth in apparel and part of that rate of growth was impacted by our new partnership with the NBA and Mark referenced some of the new styles that we brought the assortment with the NBA and then more broadly across our line in basketball.

And I’ll mention too, it’s across both men's and women’s. Women’s is a major growth area for NIKE, in both footwear, we mentioned SNKRS, and the sportswear success that we’re seeing, but likewise in apparel, again particularly in the sportswear area.

And so, to the point -- and to the point about the digital strength, do you see any distinction between apparel and footwear online as that business grows or is it broad-based?

It’s actually fairly broad based. We see it both in physical and digital, direct, and wholesale. But certainly on the footwear side, we’re seeing incredible spikes in demand as I mentioned with our Direct business, particularly around the SNKRS mobile approximately, and again, expect that to continue. On the apparel side, I think it’s more balanced.

Your next question comes from the line of Chris Svezia from Wedbush. Your line is open.

I guess, just first, western Europe, just curious beyond the World Cup, what’s your ability to maintain some of the momentum you’re seeing, whether it’s in footwear or apparel, maybe any color by region, digital or DTC, just sort of what you’re seeing in that market, that might give you some confidence that that momentum can continue, once you get through the World Cup event?

Yes. I think the underlying health of the business for NIKE in Europe is actually quite strong, beyond what we’re seeing in World Cup, and again, I think that’s both in footwear and apparel. Similarly to the North America, we have a clean marketplace seeing growing full-price sales, we’re outpacing the marketplace, overall. It’s the same dynamics. New product innovation is resonating, especially in the some of the key styles we mentioned like the Air Max franchise, the Air Max 270, the VaporMax. We’re editing our product mix, we’re creating more choice, but focusing on key products, and that’s really helping to drive our strength in the marketplace. I think the focus too on the key cities, with hyperlocal products, and a lot of it’s fuelled by Express line, it’s really clicking into gear in Europe. So, we’re over-indexing Europe. And again, beyond the World Cup, we expect that to continue.

And Andy for you, you outperformed Q4 on the gross margin. You guided to roughly 50 basis points for fiscal year ‘19, but it seems like some of the drivers are accelerating around products, favorable channel mix, and I believe also FX starts to become an incremental tailwind here. Can you just maybe just walk through with other pieces we might be missing that go into that gross margin to get through our product cost? But any color around that will be helpful.

Sure. As I said, we see strong gross margin expansion in fiscal year ‘19, you know that our long-term financial model is to deliver as much as 50 basis points as expansion. And we have updated that outlook to be 50 basis points or slightly greater that’s led by stronger full price selling as well as over-indexing growth in our higher margin NIKE Direct businesses. While FX headwinds are now behind us, we are not forecasting significant FX tailwinds based on current rates. And based on FX volatility being renewed of late, we are being measured in that regard even as we look at to the second half of the year. We are forecasting, as you noted a bit of pressure on gross margin from select input cost headwinds within labor, oil, freight materials. And I should note that our margins -- within our margins different than many of our peers, we capture a significant portion of our supply chain costs, where some of our peers capture those costs in SG&A. And so, as we're investing to 2X Speed, we do have some investments in revolutionizing manufacturing and other initiatives that are in that line item of our P&L.

And your last question comes from the line of Matt McClintock Barclays. Your line is open.

Andy, I wanted to follow up on something that you said in your remarks. You said supply was only a fraction of the demand, and that sounds like a pretty good problem to have. But, I was wondering, in the content of 2X Speed as you were just saying, how do we think about optimizing the total value or the total projected value of a new shoe or new sneaker in a world where you have 2X Speed and consumer demand is changing at accelerating rate?

Yes. As you put it -- I think, you said it was a nice problem to have. We see it as a great opportunity to really serve the consumers who have extraordinary demand for that product better. So, frankly, along the lines of -- the notion of 2X Speed, we are attacking that opportunity with a lot of urgency, not just because it is a revenue upside potential driver which it certainly is. As I said, the supply that we had, again, some of the demand we saw on some of the hottest styles was as I said a fraction of that demand. We also see it as a great opportunity to both serve in terms of product they want but also connect in a deeper way with passionate consumers, many call them sneaker heads who have chosen to connect with us as members on the NIKE app and SNKRS. In terms of 2X Speed, I think maybe even elevating, as Mark said, the digital transformation at NIKE is really an end to end notion. And when we think about demand sensing, the greatest opportunity we have is to sense the demand and even in a more nuance way, the signals and the preferences from the consumers that we are connecting with directly on SNKRS. We use things like notify me initiative, draws, preorders and we are coming up increasingly with even more creative ways to get a sense for how robust the demand is, either for specific products or for types of products that we may be planning to bring to market.

Great. Thank you, Matt. Again, thank you everyone for joining us today. I'd like to again just apologize for the technical difficulties we had earlier. We were receiving some noisy feedback. It was a great quarter though. So, if you have some business related feedback or questions related to that feel free to reach out to the Investor Relations team. We look forward to speaking with you next quarter. Thank you very much.

This concludes today's conference call. You may now disconnect.