Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2019 First 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 reports 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 2019 first quarter results. 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. Last quarter, we described the growing momentum in our business, and in Q1 that momentum continued at a strong pace. We’re capitalizing on the opportunities we see in the near term and we’re diving deeper into the areas that will widen NIKE’s advantages over the long term. Through the Consumer Direct Offense, we’re taking a winning formula and executing it across our complete portfolio and it’s leading to the balanced growth that you see today. For the quarter, NIKE, Inc. revenues grew 10% on a reported basis. Specific highlights include double-digit growth in our international geographies and 6% growth in North America. NIKE Digital is leading the way for differentiated retail, up 36% for the quarter. And we saw acceleration in both our sportswear and performance businesses. While this quarter’s success was broad-based and we’re pleased with our momentum, we know we have even more opportunities ahead. As we’ve described before, a key focus that will create separation for NIKE over the long term is our digital transformation. Ultimately, it’s about becoming more personal at scale. And put simply, it’s how digital is accelerating each of our Triple Double pillars. And that’s how we create through 2X Innovation, how we connect through 2X Direct and how we serve through 2X Speed. So, let’s look at the quarter through each of these lenses. The success we’re seeing today starts with great products. It’s ultimately where the consumer cast their vote. Our innovation platforms are building a foundation for growth over many years. As the taste of our consumers shifts faster, strong platforms allow us to continually bring fresh products to market while extending our storytelling and investments. We’re seeing it with NIKE Air and React. Consumers are drawn to their comfort and performance…

Thank you, Mark, and good afternoon to everyone on the call. We are extremely pleased with the quality of the growth that we delivered in the first quarter. On a currency-neutral basis, we are delivering stronger, more broad-based momentum around the world than the expectations we set entering the fiscal year. We had continued strong growth in international markets, led by Greater China growing at 20%, and our international growth is now being amplified by very strong, sustainable growth in North America. As for the quality of our growth, our momentum continues to be directly tied to execution of the Consumer Direct Offense and more specifically, the Triple Double. First, take, for example, our 2X Direct initiative. 2X Direct is about connecting the NIKE brand more directly to our consumers. And today, the most direct connection to the consumer is through the mobile device in the palm of their hand. In Q1, we continued to enhance and expand our NIKE Digital ecosystem, leading with mobile, and the result was 36% NIKE Digital growth. NIKE Digital was once again our fastest growing channel in each and every geography. Now, while NIKE Digital is leading the way, we believe physical retail will also play an important role in doubling our direct connection to consumers. We see growth in the physical environment being driven by smarter retail, experiences that leverage digital technology to better serve consumers. In Q1, our vision for physical retail became more tangible. We continued to roll out what we’re calling the NIKE app at retail, starting with our own in line stores. And we also launched a new concept called NIKE Live. The NIKE Live concept came to life in Q1 through the opening of NIKE by Melrose in Los Angeles. NIKE Live leverages our NikePlus membership platform and…

[Operator Instructions] Your first question comes from Kate McShane with Citi. Your line is open.

Hi. Good afternoon. Thanks for taking my question. Looking at the 6% North America growth you saw this quarter, I wondered if you could help us understand how much is being driven by ASP growth versus unit growth, and how much of a drag is the undifferentiated retail.

Hi, Kate. It’s Andy. I’ll take that one. In North America, we’re actually seeing expansion in average selling prices as well as units. Our growth is relatively well-balanced, as you saw in our reporting across footwear and apparel. So, it’s very strong and balanced growth. And we see that strong and balanced growth continuing over the balance of the year.

Okay.

And for undifferentiated retail, as I mentioned, we’re seeing growth across all dimensions of the marketplace. We have had relatively strong growth with our strategic wholesale partners being Foot Locker, Finish Line, Dick’s and others. That’s being driven by the elevation of the consumer experience with those partners and also by the extraordinary impact of the new innovation and newness that we’re bringing to our product portfolio. We’re in the early stages of some of the more truly transformational change. But, what we’re really encouraged by is that the learnings that we’re having, particularly with the Nike app at retail and Nike by Melrose, in other words, the Nike Live concept. Those conversations are really picking up steam in terms of new concept development that we see a great opportunity for across that bricks and mortar fleet in wholesale.

Yes. I’ll add that the demand that we’re seeing in North America is actually quite balanced across the portfolio. And on top of that the inventory situation is actually quite clean as that demand has been increasing. So, we’re in a good position here.

Next question comes from Bob Drbul with Guggenheim. Your line is open.

I guess, the question that I have is more of a bigger picture question for you. I was wondering if you could address your demand creation advertising marketing approach. There has been a little bit of news the last couple of weeks and some controversy around it. And I was just wondering if you could maybe address how you approach these types of situations, the concerns that you have but the benefits that you see around certain campaigns?

Yes. Well, just generally, we’re motivated to inspire our consumer to connect and engage and inspire. We feel actually very good and very proud of the work that we’re doing with Just Do It, introducing Just Do It to the new generation of consumers, on the 30th anniversary of the campaign when it first debuted. We know it’s resonated actually quite strongly with consumers. Obviously, here, in North America but also around the world, it’s really transcended to North America market to touch people around the world. We have an incredible line up of athletes in that spot. When you look at the Just Do It campaign and the list of athletes we have there, it’s actually quite impressive including Serena and Odell, Colin, Shaquem Griffin, Lacey Baker, these are actually very inspiring athletes. And again, we feel like that campaign has delivered on that that message in a way that’s really connected with people around the world. Like any campaign, it’s -- not any campaign but many campaigns, it’s driving a real uptake, I think in traffic and engagement, both socially as well as commercially. We’ve seen record engagement with the brand as part of the campaign. And our brand strength, as you well know, is key dimension that contributes to the ongoing momentum that we’re building across the NIKE portfolio. And that’s really how we look at it. It is how do we connect and engage in a way that’s relevant and inspiring to the consumers that we are here to serve.

Great. Thanks. And I guess, the second good question I have is, after this weekend’s golf results, I was wondering if you had any perspective on how Phil Mickelson feels ahead of the match-play event in November with Tiger?

Yes. He’s probably feeling more pressure, I would imagine. It’s great to see Tiger back and the reaction to his performance on Sunday was pretty inspiring. So, yes, I think Phil might be feeling little bit of that pressure.

Next question comes from Lauren Cassel with Morgan Stanley. Your line is open.

First, is there any color you can share on North America DTC growth specifically during the quarter? And then, just bigger picture, there’s been some caution or nervousness in the market about potential slow down in the Chinese economy and consumer spending there. Obviously, you guys delivered some really nice growth there this quarter. But, are there any fines or signals that you’re seeing that would suggest a slowdown there? Thanks so much.

Sure. I will take North America NIKE Direct or DTC, as you put it, growth. I’ll hit it on all three dimensions. We had extremely strong double-digit growth in digital and acceleration in that regard. We have taken a number of actions to remove friction, enhance the consumer experience, allocates product to that channel where we know consumers’ demand is robust. And we’re actually using data and demand sensing to better lineup supply with demand digitally. So, incredibly strong growth digitally. In our in-line stores, we’re actually seeing strong comps as well. We’ve seen traffic up and even more notably conversion. And conversion in the in-line stores we’re seeing as a direct result of two things. One, the brand distinction that Mark mentioned in response to the last question as well as the product that we’re bringing to market; we’re seeing incredibly strong full price sell-through on our line right now, our closeout mix is down in inventory and are off price sales are down as a percent of total. In our factory stores, our factory stores continue to be a very profitable dimension of the business. And frankly, the only challenge I would really highlight in our factory stores is that its full price sell-through is so strong and in-line and digitally, it leaves some gaps in terms of the assortment that we bring to market in the short-term in our factory stores. But, we’ve identified opportunities in that regard and are looking at supply to fill those gaps. So, again, it’s a nice So again, it’s a nice problem to have.

Yes. Let me touch on China. Yes. I mean, as Andy has mentioned in his remarks, we’ve seen 17 consecutive quarters of double-digit growth and really strong underlying fundamentals within the market, things -- factors like the growth of the middle class, sports participation, obviously a very digitally savvy consumer, and we’re well-positioned in that regard in the marketplace. In terms of the NIKE brand and its position, we have a very strong connection with the Chinese consumer. We have for a long time, we’re leading the market in digital, growing 40% in Q1. We’ve had great relationships with our digital partners there; I mentioned Tmall, WeChat is starting up with the tremendous potential there. So, there’s great momentum in the marketplace and across multiple categories, sportswear, running, basketball. The Jordan Brand is incredibly strong in China. So our fundamentals in China are actually quite silent and strong. We’re not seeing any pushback from consumers. On the contrary, our relationship with actually consumers is strong as they can possibly be. We feel confident in our ability to continue to grow, and that’s reflected in our outlook for China over this next year. And we feel like there’s great momentum and that we’re in a good position for that to continue. Now, that said, we’re mindful of the dynamics. But, we are focused on serving that Chinese consumer, strengthening our position there. And I’ll just I guess close by saying, we are the most popular brand with the Chinese consumer.

Your next question comes from Jim Duffy with Stifel. Your lines open.

Good balance in the quarter, a lot of good indicators. The inventory looks well-managed and you’re seeing strong results in DTC and also spoke about improving margin from DTC. I’m wondering, can you speak about some of the elements of cost inflation that are offsetting the mix benefits in the gross margin. And Andy, can you detail the FX impact considered in the gross margin outlook for the year?

Sure. I’ll hit both dynamics, cost and FX. But, let me first give you a little bit of overall context on our margins. We’re seeing strong structural improvement in our margins, and that’s being driven by the innovation we’re bringing to market and in turn the strong full price versus off price mix. Second, it’s being driven by the over indexing growth in our NIKE Digital business. And it’s also being amplified by the initiatives that we have around product cost management. In the first half of the year, there is one element of material so to speak that it’s a bit of a headwind, and that’s in the chemical space, namely rubber. That will ease in the second half of the year. As we look at FX as well, FX is much more of a tailwind in the margin line item of our P&L in the second half of the year, as compared to the first half of the year. So, if I refer back to the guidance that we gave as we entered the year and we reiterated today, we have strong gross margin expansion forecast for the entire fiscal year. At the same time, we see slightly less margin expansion in the first half and more margin expansion in the second half.

Very good. And then Mark for you. Last nine months, particularly strong period for new product introductions and bringing new innovation to the marketplace. Can you talk about how to think about the cadence from here? Will there be a gap or is there a predictable launch cycle you expect to work with as we look out over the next couple of years?

Yes. Our 2X Innovation initiative is really all about a steady flow of innovation. I feel very positive, very confident with what’s in the innovation pipeline and what’s coming. I mentioned a couple of things earlier. The new iterations of our Air cushioning platform with the 720, a very exciting product that’s building on the VaporMax and 270. So, that’s exciting. I also mentioned the adaptable -- adaptive footwear technology coming into performance sport, and you’ll see that on professional athletes very soon. We have an incredible lineup coming I think throughout the fiscal year of product. We’re actually focusing on bringing innovation into the core price points as well. So, we have a balanced portfolio of innovation across both footwear and apparel. And then we have opportunity to further dimensionalize the incredible platforms that we’ve got. I mean, I mentioned Air, React, ZoomX. There’s still a tremendous amount of potential to leverage those, both in performance across categories and then also across sportswear. And then, I have to tell you, I can’t really shed too much light on this at this stage, but my excitement around what’s coming as we, believe it or not, ramp up our portfolio around the Tokyo Olympics. NIKE is -- that’s always a time where we showcase our innovation and the build up to the Olympics is an incredibly exciting time for NIKE, and the innovation that we deliver. So, I guarantee you, we won’t disappoint with some of the things we have coming up. And you’ll start to see some of that ramp up over the next 12 to 18 months.

Your next question comes from Paul Trussell with Deutsche Bank. Your line is open.

Good afternoon. Solid results. Just on North America, given the acceleration that we saw throughout the first quarter, is it fair to assume that the exit rate was more in the high single-digit range? And while I know overall global revenue outlook has not changed, has your thought process on what is achievable in North America maybe been upped a little bit?

Sure. Thanks for the complements, Paul. And I’ll take that one. Our goals for North America are long-term focused. It’s a large important geography. And as you may recall, at our Investor Day in October, we said we were targeting mid single digit revenue growth over the next five years, as we innovate within the marketplace from a digital perspective and transform the broader retail landscape. On that note, we said there might be some disruption in the short-term as well. So, to some extent, we hedged a little bit with respect to fiscal year ‘19. To be clear, we’ve returned to strong growth in North America, even faster than we had expected. We have demand that is outstripping supply. You saw our inventory in North America was flat. And so, what we’re focused on and we’re always focused on, you can rest assured is capitalizing on every opportunity that we see to serve demand in the North America marketplace. We’re not providing specific guidance from a geo perspective. But, I will tell you that the brand is incredibly strong, our product’s resonating, sell-through is strong. And even beyond what’s working and what you can see in our numbers, we see opportunity to go beyond that and potentially even more importantly drive that sustainable growth over that five-year horizon. And those opportunities fall under the overall umbrella of what Mark often refers to as our complete offense. So, at any given time, even when we have extraordinary momentum, there are areas underneath that umbrella where we see greater opportunity than we’re capitalizing on. Specifically in North America, I touched on Jordan. We see acceleration in Jordan over the coming months and certainly out of this fiscal year and into next year. Women’s is growing strong. Women’s was very strong dimension…

Your last question comes from Jamie Merriman with Bernstein. Your line is open.

Thanks very much. Andy, you touched on how you’re using data, a little bit earlier, but I was wondering if you could just talk a little bit more about, is it inventory allocation by channel, by geography, is some of that data starting to help drive your product creation efforts and are there other ways that it’s being deployed at this point? And then, just as follow-up, you talked about the Jet.com partnership. Can you just talked about how that compares to the Amazon partnership? Thank you.

Sure. I’ll start with data and analytics. It is truly an end to end initiative at NIKE. It starts with consumer data and analysis around consumer data. And I’d say, that is manifesting itself right now already and most importantly, in terms of digital demand sensing. Us continuing to leverage the intuition that we have, but amplifying that intuition with real data as to what consumers preferences are. And one of the best examples is NIKE by Melrose. That store, that NIKE Live store in Los Angeles, the entire assortment is based on data that we’re analyzing around what consumers in those ZIP codes have purchased and are interested in and some of the key themes. You move from digital demand sensing to digital product creation. So, taking that insight and designing and creating product leveraging digital technology that allows us to bring that insight to life in a product faster. And then, absolutely, we’re using data in our supply chain to tighten our demand and supply management. And you see that already beginning to impact our full price versus off price sell-through. On the very front end, of course, from a consumer perspective, data and analytics helps us personalize the consumer experience on the NIKE app, as well as the SNKRS app, and even in our physical retail environment, as we use things like the NIKE app at retail. And in that regard, one of the most notable successes or pilots early on has been connected inventory. So, using RFID and using data and analytics, in terms of where inventory is and where consumers are looking to buy to get them the product they want more seamlessly. And then, as for your second question, you asked about Jet.com and how that might compare to some of our other partnerships. And I’ll say that -- Mark will probably want to add something here, we’re excited about this partnership with Jet because it is a partnership that is really about creating a compelling consumer experience around the NIKE brand, leveraging NIKE membership to help better serve consumers in that channel, helping ensure that there’s a clean assortment of product that’s presented to that consumer across the marketplace. So, there are several aspects of it that we view as distinctive in terms of the offering that we’ll make to consumers. At the same time, it’s one of several initiatives across a range of digital commerce platforms.

Yes. I’ll just add on Jet. We’re starting off with a more focused pilot as we look at offering a select amount of product in key cities across North America. It’s an assortment that’s tailored to those consumers, what we would call a brand friendly shopping experience. We’re looking at our digital partners to help co-create elevated consumer experiences and how they partner with NIKE. And so, we can work together on advancing our connection to consumers through digital commerce. We are looking at how we partner with these digital platforms to advance the consumer connection in terms of product selection, in terms personal service, in terms of how the brand is presented online. And we’re optimistic and feel very strong that the relationship with Jet.com is going to offer us those opportunities. So, we’re excited about that. Amazon, our business with Amazon is performing well, not a huge update here, other than we’ve seen really good sell-through on a limited selection of products that we’ve offered. We’ve said before that we want to work together to elevate the consumer experience, and that’s important in any digital partnership that we enter into. We get the most out of our relationship when we work together to elevate that brand presentation. And one of the things we’re going to continue to focus on is how we share data with our digital partners to advance that consumer experience. But we feel like the partnership with the Amazon is working or moving toward a mutually beneficial space. So, we’re actually feeling good about where we are. And it’s important that we stay focused and continue to look for those opportunities together.

Excellent. Thank you. Thank you, Jamie. All right. Well, that’s the allotted time we have for today. Thank you everyone for joining us. We look forward to speaking with you next quarter. Take care.

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