Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2019 Third Quarter Conference Call. For those who want to reference today's press release, you'll find it at http://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 Web site, http://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 today to discuss NIKE, Inc.'s fiscal 2019 third quarter results. As the operator indicated, participants on today's call may discuss non-GAAP financial measures. You will find the appropriate reconciliations in our press release, which was issued about an hour ago, or at our Web site 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 re-queue 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 everyone. In Q3, our teams once again drove healthy growth across NIKE’s complete portfolio, leading to balanced results in our key dimensions. In our geographies, for example, the continued growth in North America was fueled by NIKE Consumer Experiences, where we have our most direct connection with the consumer. China earned its 19th consecutive quarter of high-quality, double-digit growth, as the Chinese consumer increasingly makes sport a part of their daily lives. And the NIKE brand continues to accelerate in EMEA and APLA as we go deep into our key cities to seize new opportunities quickly. In innovation, we've led with bold platforms like Air Max in Sportswear and Adaptive technology in Basketball. We kept consumers coming back for more with a fast pace of fresh options in our Power Franchises. And with the energy for sportswear at an all-time high, NIKE continues to stand out in the active lifestyle marketplace through our authentic position in sports. And through our digital transformation, we’re scaling the digital capabilities that’ll serve consumers more personally and we’re driving significant growth through our digital ecosystem making Q3 NIKE Digital’s first billion-dollar quarter. Put together, all of this work led to strong results for the quarter. NIKE, Inc. revenues grew 7%. On a currency-neutral basis, NIKE Inc. revenue increased 11%. Gross Margin was up 130 basis points to prior year and earnings per share was $0.68. Diving into the details, we launched some incredible innovation this quarter. Let’s start with NIKE AIR. The major leaps we’ve made in new designs for Air Max, like VaporMax and Max 270, continue to energize the consumer’s ongoing love for the whole platform. Icons like the Max 95 and 97 and Tuned Air are a hit with both men and women. The Air Max Dia,…

Thank you, Mark, and hello to everyone on the call. In Q3, we once again delivered very strong growth and profitability, with 11% currency neutral revenue growth amplified by 130 basis points of gross margin expansion. Most importantly, our growth was high-quality, strategic and broad-based. Our execution of the Consumer Direct Offense is fueling strong demand across all four of our geographies, led by the 12 key cities that we believe offer the greatest platform to impact the world through sport and create Brand distinction. Our broad-based global growth is being fueled by four underlying strategic drivers; one, editing our product portfolio while amplifying the styles that consumers love most; two, doubling the cadence and impact of innovation that we’re bringing to market; three, operating with greater agility; and four, transforming the consumer experience through digital. This is the Consumer Direct Offense in action, and the direct impact on NIKE’s growth is tangible. First, by editing to amplify, we’ve reduced the total number of styles in our portfolio significantly, while bringing much greater dimension and choice to what we call our Power Franchises. In any given season, our Power Franchises include select icons within Sportswear, such as the Air Force 1 and Air Jordan 1, performance franchises such as the Pegasus, as well as new innovation platforms such as the VaporMax, Air Max 270 and React. The new dimension we are bringing ranges from collaborations with athletes and influencers, to compelling new elements of design, to infusing new innovation into longstanding performance franchises. Second, we are well on our way to doubling the cadence and impact of innovation on our business. Once again, in Q3, new innovation platforms comprised of vast majority of our incremental revenue growth. And, as Mark said, our innovation pipeline is more robust than ever. In…

[Operator Instructions] Your first question is from Omar Saad with Evercore ISI. Your line is open.

I wanted to ask question on the Women's actually. We've noted some greater focus in the marketplace, marketing, messaging and the product side and there seems to be a lot of innovation, obviously, you talked about in the call as well. Maybe give us an update on where you stand on that opportunity, obviously, to keep focus of the company as important part of the long-term plan. Is it growing as a mix of the business, or is the men's business just too strong for women's at this point, still really become a more material next driver? And I had one follow up. Thanks.

Yes, actually, the women's businesses over indexing our men's growth. And we see me, as we've said earlier, tremendous opportunity moving forward. We are under indexed in terms of our percentage of business in the women's area, as you know. So, the upside there, particularly with the consumer, the market being bigger than the men's, is tremendous upside. We had a great quarter in Q3. The good news is driven by balanced growth, I think across footwear and apparel we had particularly great momentum in Greater China and APLA. So this is, obviously, a global opportunity. We see women embracing the sneaker culture more and more every day. So we're scaling up popular models and creating new models for women specifically and the response, like with the Air Max Dia, for example, one of the newer models has been tremendous also, great opportunity in a parallel. We've had real strong response to the NIKE yoga collection and the tight business, driven by the one tight, some innovation there as well. And as I said, the broad business is actually a great opportunity for us and we've expanded the broad collection considerably, particularly in the plus-size area of the business, and we're seeing strong consumer demand there. So, it's really an opportunity across all dimensions of our business. Jordan is another one. Women's in Jordan grew a strong double-digit number this past quarter. And the focus for us, it's a huge priority is editing and shifting the resources we have internally to serve women more completely. We're definitely looking at how we elevate our female athletes and influencers more completely, providing membership and access to sport, being very thoughtful in terms of design and our innovation agenda specifically for women. So again, simple conclusion there is under indexed opportunity for us at this point, huge opportunity for us going forward as we shift focus.

And Omar, an area in which we will deliberately shift investment from a product creation through the retail experiences is to accelerate against what we see as a tremendous growth opportunity.

Understood, that's helpful. And then while I have, maybe bigger picture on the digital capabilities, very clear the company has developed outstanding expertise in a lot of areas and learning how to scale it. When you look at the other brands in the portfolio Converse maybe isn't form as well. Is there something about the digital learnings you're developing in the NIKE brand that's scalable or not scalable across other brands in your portfolio? Is there a way we should think about that, because clearly working with NIKE brand?

Absolutely, lots of opportunities to leverage learnings in NIKE Digital across the portfolio; certainly, in Jordan, we're seeing tremendous success; as I mentioned, our speakers at platform; Jordan is a major part of that energy. Converse, we just launched Converse.com and the early response to that is incredibly positive and we see tremendous upside opportunity for the Converse brand as well. Overall, I think the brands in the portfolio, particularly Converse, Jordan and of course NIKE, are all lined up to share learnings and leverage, the expertise and the capabilities we're building in digital. So, we're going to see a lift I think across the portfolio.

Your next question is from Jamie Merriman with Bernstein. Your line is open.

You've talked a little bit about in terms of the digital investments, the NIKE athletic retail. Can you talk about where you are in that process and what you're seeing in terms of response and connection from consumers as you've done that? That'd be my first one.

Well, first of all, obviously, digital is up significantly for the quarter. So we are leveraging what we're learning and its showing up in the results, up 36% for the quarter. I mentioned the SNKRS app. SNKRS app to me is really a signal of what the future potential of how we connect with consumers in a deeper way with storytelling as part of that effort. And then the connection we're making with physical to digital through NIKE Live in L.A. and then our house of innovation in New York and Shanghai. We're learning a lot. I mean every day we're learning and then we're applying those learnings to the rest of our business across our own direct business, but also in partnership with our wholesale digital partners at the same time. So, we're seeing a healthy lift. And we know membership is a key part of this as well. And the membership is really driving a lot of the increase and improved performance in direct retail same time, and we've seen some impressive numbers on that as well.

And then can you just talk a little bit about apparel in North America? You've talked about women's and apparel as being two areas, particularly where you're focused in terms of driving growth and clearly, seeing great results from women's. But can you just talk a little bit about the initiatives in apparel and specifically just wondering about North America as well? Thanks.

Well, first of all, we continue to see great momentum in our apparel business, not just in North America, but across all geographies. And it's a balance between both performance and sportswear. That said, we see a lot more upside potential, particularly as we 2X our innovation agenda in apparel. We see tremendous opportunity to start to echo much of what we've seen on the footwear side of the business. And we're putting particular emphasis too on the women's innovation agenda in apparel as well. So we've seen some early positive response to some of that product and some of those launches. But we've seen much more upside for apparel around the world really, for NIKE in both sportswear and in performance for women and for men for that matter.

Yes, just to add that one of the reasons we call apparel as such an extraordinary or outsize opportunity for us long-term is. Athletic apparel, as a percent of total apparel, is much smaller than is athletic footwear as a percent of total footwear. And what we're really focused on is the opportunity to go deeper in some of the classifications where we have been a player and had great response from consumers, but we haven't gone as deep as consistently. And that extends to offering product that is well suited for new occasions. Again, think apparel Monday through Friday, as well as on-court, in the gym and over the weekend. And then that extends to price points, up and down the price points from premium apparel through to the more affordable price points. So, we see a pretty extraordinary opportunity to both catalyze the growth of athletic apparel within the broader apparel industry, and also extend the offerings that we're bringing to market.

I'll just add that we're in the infancy stages of apparel opportunity on the Jordan side of the business as well as. We've seen a taste of the response to the women's apparel business in Jordan, but we see a lot of upside opportunity for apparel and their overall Jordan business.

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

Good afternoon. I know it's early in the fiscal '20 planning process, so I appreciate the color given. But just wanted to see if there's any other puts and takes you can provide as we think about maybe the composition of the high-single-digit revenue growth outlook, as well as puts and takes on margins. In particular, your long-term algorithm is inclusive of slight leverage on SG&A, which we haven't seen this year. So just curious on how we should think about that going forward?

We're still in the early stages of our planning process, and I appreciate that you noted that. But we do have increasing confidence in the expectations that we've just shared for fiscal year '20. We have incredibly strong momentum and demand across both footwear and apparel brand heat and as we have shared, an incredible pipeline of innovation that both in the early part of the year, as well as in the latter part of the year as we ramp up to Tokyo 2020. We're already receiving very positive signals from our Nike direct business and our wholesale partners as I shared. All of these really contribute to our competence in our outlook for growth. Our outlook for growth is broad based. We expect growth largely in-line with the guard rails that we've shared in terms of our long-term algorithm across geographies. So continued momentum internationally, as well as continued healthy sustainable growth in North America. Keep in mind that we're operating in a dynamic environment, and so we'll update you with more specifics when we get to our Q4 call. As far as SG&A, we see the investments that we're making, translating into this extremely strong currency neutral revenue growth and margin expansion. And so, that correlation has probably been more direct than ever, which is leading us to continue to invest in the capabilities that are going to drive. The digital transformation we've spoken about and fuel that growth. Our investments in innovation, which we've spoken about and speed and digital, are clearly having a tangible impact. So we'll continue to make those investments. At the same time, as we said at our Investor Day, we do expect to be able to both make those investments and deliver slight SG&A leverage over that five year horizon. So that is very much still a goal in terms of the profitability of our business going forward.

And I'll quickly add that the growth that we're seeing that makes up that high single digit guidance at this stage is a very -- it's as balanced as I think we've seen it in terms of complete offense, men's and women's performance in sportswear, I think across the goes driven by the key cities, categories, price points, we do have some opportunity, I think in core, particularly as we head into fiscal '20 and you're going to see a whole refresh core offering from Nike that we think is going to help to fill in our complete offense there as well. And then as Andy said and we say all the time, that truly it's the innovation pipeline is full and I think it's going to drive some great upside for us.

And the only thing I'd add is I think it is important to note that a lot of investments that we're making are really long-term in nature. They have a compounding impact innovations platform that we can leverage, obviously, and scale faster over time, as well as the investments we're making digitally. As we've said before, from a long term perspective, we see digital comprising the majority of our business. And so these are investments that we think will have a compounding effect as we make them year-over-year.

My follow-up is just to circle back on North America, and I think part of the question Jamie was asking, which was around the apparel. Is there anything from a timing standpoint that led to the deceleration in apparel in the third quarter and any other just comments you can provide in North America around what you're seeing with your wholesale partners?

Yes, very intuitive, insightful question. There were some timing impacts related to our NBA business and the launch of certain products year-over-year. There are always timing impacts in terms of product launches. So yes, nothing in terms of a turn or change in consumer demand. In fact, consumer demand for our apparel in North America is very strong. Frankly to some extent it puts pressure on supply, but that is that's a great point of pressure to have. We've got really strong demand for our apparel in North America. So I wouldn't overly index on the quarterly rate of growth.

Your next question is from Alexandra Walvis with Goldman Sachs, your lines open.

You mentioned in response to the Paul's question that there was some work that you guys were doing, refreshing the core products and driving more growth across different price points. You also mentioned in your prepared remarks that you'd be giving more distinction to some of the core level products that products under $100. And you mentioned that you'd be introducing some new cushioning products to get people -- more people running. I wonder if you could dig a little bit more into or dive a little bit more into those strategies. And then more broadly, why is now the time to bring some of that product innovation and process innovation to those lower price points and broader consumer groups?

Well, it's basically a part of our ongoing complete offense strategy as we see where we have opportunities to improve our offerings and to create more opportunity. And certainly as we look at footwear or our complete footwear offering, not just in North America but around the world, we see the opportunity to strengthen the price to value opportunity for our footwear. So part of that is bringing innovation into that price point, not just taking it down but creating unique innovation for those price points and those consumers. We have to be competitive at every level. And I think as part of our offense and I think there's a great opportunity for us, and I think that can drive some of the under indexing in the marketplace now versus the opportunity. So yes, we have about three quarters of our product at the core level, and footwear is going to be refreshed starting in back-to-school. And it's not a takedown it's making sure that we have that value at that price point and again, creating some unique innovation platform opportunities. And as far as the new cushioning platform goes, I can't really talk a lot about it other than it's incredibly comfortable, and I think it is going to open up opportunity for part of the running population that actually we might not have at this stage, or at least invite more people in to it. I'm actually wearing a pair now. And I will tell you it's one of the most comfortable platforms that we've had, so incredibly exciting and visually very distinctive.

My second question was on Jordan, the brand is back to strong growth and you've called out several drivers of it. I wonder if you could reflect on some of the actions taken there in the last year and a half or so to reset that North American market. How you're feeling about the health of inventory in the channel today and about growth opportunities for that brand going forward?

As you know, we had -- this time last year we're in a reset mode on Jordan. And we're very pleased with where we've come in terms of cleaning up the products in terms of the marketplace. I think we probably over indexed a bit on the retro market. We've got a rein on that, so it's a very balanced management of the Jordan product portfolio, not just in terms of retro but actually balancing that out with performance product as well. And that's the story in Jordan too is we're beginning to see a much more balanced product offering, both performance and sportswear, new performance platforms with retro and retro refresh, but making sure that we're managing that in terms of the marketplace. The inventory is actually quite healthy in a good position right now. Women's is just coming on. So I mentioned women's apparel, but also footwear for Jordan, a big opportunity for us. And there's a lot of great brands energy around Jordan right now, not just here in North America but around the world. It's APLA, EMEA, China, huge brand presence for Jordan in China. So again, we're bullish and we feel like, we've got a good rein on managing that in a healthy and balanced way.

And I'd just add that as we said, the demand for the Jordan brand has been strong, it was strong even when we are in a reset mode it still is strong. And our opportunity was to, as both Mark and others have said, bring new dimension to the brand. Mark touched on women's a couple of other areas of dimension performance basketball product. We've seen extremely strong demand for the Air Jordan XXXIII game shoe, which we amplified with the Chinese New Year and Travis Scott editions. We're seeing incredibly strong demand for Russell Westbrook's signature shoe, Why Not, also on performance silhouettes. And then as Mark touched on in response to the earlier question on apparel, the apparel coming out of Jordan is extremely strong and we see a big opportunity there. In fact, as I talked about in my prepared remarks, the Jordan PSG launch was largely an apparel launch. We did have footwear in that launch. But what was really a shock and surprise to consumers in a very positive way was what we were able to do with the Jordan Brand on football apparel.

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

Just a quick follow-up on Paul's question, looking to 2020 on gross margin specifically. Are there any specific factors if any that would prevent 2020 gross margin from being up as much as they have been here in 2019? And then my second question just bigger picture. How do you guys view the resale markets roll, the StockXs, the Goats of the world, in the context of the overall industry? Do you think there would ever come a point in time where you partner with them directly, whether that'd be for collaborations or exclusive products? Just any thoughts on how you view that that portion of the market. Thanks so much.

Lauren, can you quickly repeat the second part of your question?

Yes, just how you guys view the resale market within the overall industry the StockXs, the Goats of the world. Do you think there would ever come a point in time where you collaborate with those sites?

We'll start with the gross margin question. As we communicated at our Investor Day, our goal, a very ambitious but we believe achievable goal, was to deliver as much as 50 basis points of gross margin expansion over the next five years. Obviously, in this fiscal year, we are exceeding that goal. And that's fueled by number of factors, very strong full price sell through, the continued outpacing growth in our Nike direct business. As we look ahead to fiscal year '20, as I said in our guidance, we expect gross margin to be largely in-line with the long-term objective that we communicated on Investor Day, which is again a robust amount of margin expansion, especially on top of what we've delivered this year. Much like this year as we get into the fiscal year, we may see opportunities to expand on that. Certainly, this year, we've just had incredibly strong brand momentum and incredibly strong product pipeline that have afforded us the opportunity to outperform in that regard. At the same time, it's important to note that there are a myriad of factors within gross margin ranging from the impact of real time foreign exchange rates to the timing of the hedges that we put on from a sourcing perspective. So we'll update you with more specifics when we get to our Q4 earnings call and gross margin. But suffice it to say we are really pleased with the drivers of gross margin expansion that we've had in this fiscal year. And as we shared we expect to see continued strong margin expansion next year.

And just quickly on the resale market. We're not focused on that slice of the market. At this time, we don't have anything to add to that. We're fully aware that we're a huge part of creating that market. And that's our focus is how do we deliver the innovation and the creative energy to the product that ultimately is going to create an opportunity there for others. Right now, we're looking at it but we have no plans in terms of partnerships or business strategy in that particular area.

Thank you, Lauren. And thank you everybody for listening in today. We look forward to speaking with you next quarter. Take care, bye.

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