Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2021 First Quarter Conference Call. For those who want to reference today’s press release, you will find it at http://investors.nike.com. Leading today’s call is Andy Muir, VP, Investor Relations. Before I turn the call over to Ms. Muir, 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, http://investors.nike.com. Now, I’d like to turn the call over to Andy Muir, VP, Investor Relations.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.’s fiscal 2021 first 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 website, investors.nike.com. Joining us on today’s call will be NIKE, Inc. President and CEO, John Donahoe; and our Chief Financial Officer, Matt Friend. 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 one. 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 will now turn the call over to NIKE, Inc. President and CEO, John Donahoe.

Thank you, Andy, and hello to everyone on today’s call. Before I get into our Q1 performance, I want to take a moment to acknowledge the passing of John Thompson last month. Coach, as many of us called him, was a beloved member of the NIKE family, having served on our Board of Directors for over 30 years. He was a true leader and an icon in the world of sport and we will miss him. And here on the West Coast, we are continuing to deal with the wildfires that have hit Oregon, Washington and California. Health and safety remain our first priority, so we closed facilities and stores where appropriate. For those teammates who have been impacted by evacuation orders, we have made additional benefits and support available, and the NIKE Foundation has donated $1 million to provide relief efforts for the Oregon wildfires, focusing on both intermediate and longer term needs. Moving to our business results. This quarter we continued to demonstrate NIKE’s full competitive advantage. Over the past several months, we have established clear objectives for our business and we have been relentless in our focus on those objectives and the results reflecting that. Our revenue trend is improving, with Q1 flat to prior year on a constant currency basis. Greater China, EMEA, Japan and South Korea have already returned to growth. But more than the financial results, it’s the continued strength of our brand, the response we are seeing from consumers and our unique position to be able to capitalize on our potential that excites me even more. We are getting stronger in the places that matter most and even in the midst of disruption we are on the offense. We have continued our unmatched pace of launching innovative product, generating a continuous flow of…

Thank you, John, and hello to everyone on the call. NIKE entered the pandemic with unparalleled brand and business momentum, and while we continue to navigate through uncertain dynamics, sport has returned, interest in activity and health, fitness and wellness has never been greater, consumer connection and engagement with our brand is growing and NIKE is transforming the way we operate to better serve all consumers. Looking forward, we believe that NIKE is stronger and now even better positioned to drive separation than prior to the pandemic. As I reflect on the first quarter, there are three key strategic and financial themes that stand out. First, NIKE is recovering faster, fueled by brand momentum and our relentless focus on execution. Second, we are accelerating investments in capabilities and services that will create value for the consumer, while simultaneously accelerating productivity. And third, our consumer led digital transformation is clearly a catalyst for long-term revenue and earnings growth. Let me take a few minutes to walk through each of these points. First, as discussed on previous earnings calls, we implemented an enterprise wide operational plan at the onset of the pandemic. Our teams have navigated with agility and focus to recalibrate supply and demand, to increase digital distribution capacity, to secure liquidity and to tightly manage costs, all while ensuring the health and safety of our employees and consumers. As a result, NIKE, Inc. first quarter reported revenue declined 1% versus prior year and was flat on a constant currency basis. And reported EBIT grew 13% versus prior year, all a sharp acceleration from last quarter and exceeding our internal plans. There are a few elements that are important for me to highlight here. Despite ongoing uncertainty, more countries are emerging from containment and have returned to growth, China, Japan, South…

[Operator Instructions] Our first question is from Bob Drbul with Guggenheim Securities. Your line is open.

Hi, guys. Good afternoon.

Good afternoon, Bob.

I guess just, the first question that I have really is, on -- if you could maybe spend a little bit more time on the gross margin performance. And can you just give us the buckets in the various units, is there any quantification around the promotions the supply chain, the full price selling, just help us get our hands around the various drivers of the gross margin this quarter. And maybe Matt, if you could just a little bit more around and you gave some commentary for the full year, but maybe just the drivers of that performance for the remainder of the year would be very helpful? Thanks.

Sure, Bob. So, in the first quarter, our gross margin was down 90 basis points versus prior year, and obviously, that was a substantial improvement versus the results we had in the fourth quarter, really reflecting the strength of NIKE’s market recovery. However, Q1 did benefit from about 55 basis points of one-time accrual reversals that we had incurred in Q4. The biggest of which related to factory PO cancellations, which we reinstated some supply due to the strong demand we were seeing in the quarter. So if you add that back you get to a gross margin down roughly 145 basis points versus the prior year and that’s driven by markdown activity to work through and normalize our supply. As we look ahead to Q2, Bob, our margin will continue to be a function of supply and demand management, because our top priority is to normalize inventory by the end of the second quarter. And we expect Q2 will probably be more promotional than what we saw in Q1 because of holiday, the seasonal consumer moments like 11.11 in China and then this year we got Cyber Monday in Q2 whereas last year it flipped into Q3. And we also are seeing despite our strong performance a lot of inventory still in the marketplace and so that’s how we are looking at the first half of the year. As we look to the second half, as I mentioned in my remarks, we are expecting sequential improvement with a higher mix of full price sales and we will start to see the benefits in our supply chain from exiting the extra storage that we needed for inventory in the first half. We also expect though that we are going to need to maintain an investment and discounts in our factory stores, because we are not anticipating traffic to recover to prior year levels in the balance of the year. And so we are assuming that there will continue to be some promotional activity in the second half of the year to maintain conversion rates and unit velocity as we keep -- as we continue to operate through the balance of the year.

Great. Thanks.

All-in-all, Bob, that is next to about flat versus prior year.

Perfect. Thanks, Matt. I guess, just a follow-up quick question is, have you guys considered with the Cactus Jack, maybe some sort of collaboration with McDonald’s in terms of do the happy meal with the Cactus Jack and get a pair of shoes or anything like that, is that in the pipeline at all?

Bob, I can give a one-word answer to that question, no.

All right. Thanks very much and nice quarter guys. Way to go.

Thanks, Bob.

Our next question is from Kimberly Greenberger with Morgan Stanley. Your line is open.

Great. Thank you so much. I appreciated your comments, Matt, on the digital margins, obviously, a very nice, I think, you said, 10-point higher gross margin than wholesale in your digital channel. I am wondering if you can just cover some of the key unlocks that you visualize or that you envision happening over the next few years that will basically allow that digital operating margin to track higher over time. Is it an ever lower customer acquisition cost, is it more efficient fulfillment of orders or scale, any of those -- any color on that would be helpful? Thanks.

Sure, Kimberly. You almost answered the question for me there hitting the points. But, yeah, so it starts with where John was in his prepared remarks. We obviously believe that scale for our digital business is going to drive significant financial benefits as we continue to grow the size of that business and leverage the capability that we continue to develop. I think there’s probably three key drivers of operating margin improvement that we see from leveraging scale of our digital business. The first one just relates to leveraging data and the data that we continue to gather as a growing business to create personalized product offerings for consumers. And the benefit that will drive is higher price realization and less markdowns of product that we are selling digitally to consumers. The second piece is also kind of connected to data, which is where do we place our inventory and how do we flow it, so that we can be closer to the consumer, and ultimately, lower our fulfillment costs, and we believe that will continue to -- that will be a driver as well of continued gross margin expansion. And then the third piece kind of ties back to what I referenced on our performance marketing investment in marketing. We have got to move deeper into the funnel, less new member -- moving from attracting and acquiring new members to retaining members, knowing those members and driving more engagement and frequency of purchase within our existing member base. And we believe that by running that offense, we will see more productivity in our demand creation spend and a higher return on our demand creation spend. And by doing that, we should be able to also drive additional operating margin expansion.

Fantastic. Thank you.

Thanks.

The next question is from Michael Binetti with Credit Suisse. Your line is open.

Hey, guys. Thanks a lot for taking my question and a nice job in the quarter in a very tough backdrop. I guess, looking at the North America and maybe, I mean, EMEA EBIT dollar growth significantly outpacing revenue growth in those markets. I guess, dovetailing off Kimberly’s question, how helpful was improving digital markets, I am sorry, digital margins in those markets in this quarter? Is that something that’s already on the move as you see the growth rates that you are seeing in those markets with the digital business?

Yes, Michael. So we are seeing a benefit from increased digital penetration on our margins within those two geographies. But I would also want to highlight that the strategy and the focus on shifting the marketplace, exiting undifferentiated wholesale distribution and focusing on our direct business and our strategic partners drove higher full price realization as well in both of those markets in the quarter, which also fueled our gross margin. And so those two factors in particular were large drivers of gross margin performance in the quarter. And then we also had some SG&A leverage in those geographies in the quarter as we were managing spend and working through new ways of working from a corporate perspective and that also helped to fuel EBIT growth relative to revenue growth in the quarter.

Got you. And then I guess as a follow up, as you look at North America, John, as you have gotten into the business and had a chance to kind of think about the different regions, the sales growth in North America has been very strong for a couple years gathering few billion dollars over the last few years but the margins been fairly stagnant there, despite the brand being very strong, obviously, gaining momentum. As you saw more pronounced shift in the business in wholesale here in the quarter, some of that probably forced on you by the macro backdrop. But what do you think about the margin evolution in North America from here as we normalize and get on the other side of this COVID period and look out to the second half of this year and into 2022?

Well, Michael, if I step back, I would say, the North America market -- the North America retail market is the most fragmented and least far along of where it needs to get to of the major markets in the world. And so in this world, where consumers want a seamless, digital and physical experience, they want to know who they are, they want consistent premium, modern experiences. The North America retail market today is the furthest away from that. And so that’s what’s driving our OneNike Marketplace where we lead with digital, directly connect with them for all the reasons Matt’s already described. We then follow with our NIKE Direct where we have very premium experiences that are often digitally infused and then we work with fewer strategic partners who see the world the same way we see the world. And want to provide these consistent experiences for our consumers, want to provide the same level of knowledge and understanding so consumers know who they are, regardless of where they are shopping. Consumers want what they want when they want it and how they want it and so we are simply accelerating that transition. We are accelerating what probably would have happened in the retail environment on a naturally in the next four years to five years, we are going to try to drive it for our business in the next one years to two years. And that will for all the reasons Matt has described that will have financial benefits, that will have profitability benefits, in addition to having growth and market share benefits, which is what we are really focusing on.

John, thanks a lot for the help.

Great.

Next question is from Omar Saad with Evercore ISI. Your line is open.

Thanks for taking my question. Thanks for all the information. A quick clarification on the digital trends, I believe last quarter when you spoke to us, I think, to the exit rate was triple digits in June, obviously, it’s still a huge number for the overall quarter, but maybe just help us understand did that digital rate slow at the stores and the conversion came back in the bricks-and-mortars part of your DTC business? And I’d also love your -- an updated kind of view on outlook on the return of team in organized sports, the NBA playoffs, NFL is back, do you think this is going to continue to build over time even at the youth and collegiate level as well and how are you guys capitalizing on your integration and deep roots in all those sports? Thanks.

Sure, Omar. Why don’t I take the first part and then maybe John will grab the second piece of it. So, yes, when we had our last earnings call, we referenced that we were seeing strong triple-digit growth in digital in the month of June. And what I’d say is that in North America, EMEA and APLA, we continue to deliver above or at 100% -- triple-digit growth in digital in the quarter. The place where we saw more balanced growth in the quarter was in Greater China, where retail traffic has recovered closer to prior year levels and is approaching prior year levels, but digital was still the fastest growing channel in that marketplace at over 30% growth. So the only thing that I would say that that might even remotely sound like a deceleration is Greater China growth as the marketplace is normalized. But we continue to believe that digital will lead the way of growth for Greater China.

Got it.

And Omar on the second, how cool is it to be able on a weekend to watch literally within hours NBA, NFL, MLB, NHL, college football, U.S. Open Tennis, a major golf tournament. And first thing I’d just add is to just congratulate the commissioners of the major sports leagues who have just done a fabulous job of bringing sport back safely, safely for the players and coaches and then providing what are unprecedented viewership opportunities. And so, we are thrilled about that, we are trying to work very closely with them to help encourage that wherever possible. We think that’s good for consumers and it’s ultimately good for NIKE. Does that continue and does it cascade down to college and high school and youth, I say my prayers every night and hope so. I think the -- I’d say safety is paramount and the more you get in a distributed environment and a less controlled environment obviously the more challenging that is. And so we completely embrace balancing safety but also return to sport. And I think the other part of this is not organized sport but we are seeing is and I think these things are related. People are more engaged as sort of this movement toward health and fitness and wellness, which I think started when people being confined to their homes. We are seeing it continue to accelerate. You watch a game on TV and you want to go out for a run right or you go shoot baskets in the driveway and so I think sport is so healthy for the world right now and we are going to do everything we can, including, by the way, some of the brand moments that we are trying to celebrate to reinforce. I just love the Venus and Serena spot. It just celebrates the power sport has in connecting with consumers and so you hear the excitement in my voice, I can tell you, all 75 people here at NIKE love sport, love sport coming back and we are cautiously optimistic that will continue until we get through this pandemic.

Thank, John. Thanks, Matt. Best wishes.

Thanks, Omar.

Next question is from Jim Duffy with Stifel. Your line is open.

Thank you. Hello, everyone. Terrific rebound in the business. My question, I am hoping you can provide an update on the RFID implementation and any benefits you are seeing with inventory management, demand forecasting? And then maybe talk about how these benefits materialize in the model in coming quarters and years? What are some of the key metrics we should watch for the progress on that?

So, Jim, in the quarter, we continued to rollout RFID across both our supply chain and our stores, and given where things are sitting in the pandemic at this point in time, we were able to leverage the inventory visibility in order to be able to take advantage of some of the -- take advantage of the demand that we had across the marketplace and across our retail stores. We now have 100% of our footwear, as I think, we have told you before and 75% of our apparel tag. So, we got over a 1 billion units at 99.99% readability, which enables us to see our inventory now across all of our factory stores and there lies in our own doors and they help to accelerate our [O2O] capabilities by providing a clear line of sight to the inventory levels. RFID is going to drive improved inventory holding costs and it’s also going to help us reduce our transportation costs, both in direct and in wholesale, and we believe that’s going to be a critical enabler in order for us to create a fully connected marketplace for NIKE products across both our owned stores and our strategic partners.

And I’d just build on that, what Matt talked about last quarter. The real issues -- the real story is data, right? The way data then infuses that with the Celect acquisition, where we are able to forward deploy inventory to be able to predict demand reliably enough, where we can forward deploy inventory, so it’s within one to two day ground shipping to a large number of consumers across the country. And again, that’s where the scale competitive advantage comes from in our supply chain because we will be able to forecast demand, get the right inventory in the right places to get it to consumers quickly both for ourselves and maybe even over time, that’s an added benefit for our strategic wholesale partners.

Very helpful. Thank you, guys.

Thanks, Jim.

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

Thanks very much. John, and Matt, you both talked about some of the examples of the digital investments that you made so far, the app ecosystem, the omnichannel fulfillment capabilities and RFID. So I am wondering as you think about the business from here, Matt, you talked a lot about continuing to invest. Are there particular areas where you feel like you need to invest further? Is it greater data capabilities? Is it just building out more fulfillment options like the one you have on the West Coast or are you now at the point where you can start to leverage some of the investments behind data and RFID, is it really just a matter of scale?

Jamie, it’s interesting, because I have a little bit of an outside point of view of this and I must say from a Board perspective, I saw the investment NIKE was making in digital and boy, you see the result of that, the fact that we have a clear digital advantage today. That said, having had a technology background, I feel like there’s so much opportunity remaining that we are still just scratching the surface of what’s possible. And so in particular, the way we think about it is, consumer facing digital, right? Demand sensing, little things. This quarter, we turned on machine learning on search and a little bit of improvement drove greater conversion. By the way, that’s continuous, so the ability to use AI and machine learning, digital demand sensing, insight gathering, digital marketing, membership personalization, even inventory optimization. I think we still got ample benefits and ample opportunity in the consumer-facing side of things. And those are things like in technology, they are not big bangs. It’s a whole series of continuous and ongoing improvements that by the way are very measurable and enhance growth or improve profitability. And then beyond that where I think we still have huge opportunities we now have one integrated technology roadmap and we are applying that across our entire company end-to-end and so whether it is the manufacturing through supply chain and the automation opportunities that exist, whether it’s using robotics or other ways to improve the efficiency and effectiveness, our whole product creation area. One of the people that is most excited about the opportunity to digitize is our Head of Design, John Hoke and just how digital can really enhance not only the productivity but also the creativity of our designers. And so we now have a clear three-year roadmap that to bring technology to every element of our operation and every element of our end-to-end business, and the nice thing about that is in almost every case, you can define measurable benefits, whether it’s enhanced growth, deeper connection with consumers or improved efficiency with automation and use of -- intelligent use of technology, so I think all of us view this as a real opportunity.

[Inaudible]

Operator, we have time for one more question.

Our last question comes from the line of Matthew Boss with JPMorgan. Your line is open.

Great. Thanks and congrats on a nice quarter. So on the financial algorithm and as we think through the accelerated shift to digital, and I think you had said, within the guardrails of SG&A that you have outlined. Are there any offsetting headwinds constraining your ability to potentially outpace your outlined high single-digit topline and mid-teens earnings growth rates as we think moving forward?

Well. Hey, Matt. Thanks for the question. As I mentioned in the last call, we believe that the Consumer Direct Acceleration is clearly a tailwind or a fuel to our long-term financial model. Our goals and our principles related to how we financially manage the business are really unchanged to deliver sustainable, profitable and capital efficient growth over time, obviously, right now, we are in the middle of a quite an uncertain moment and pandemic. And while we are sharing with you our perspectives on the opportunities that we see as we look toward the future, the reality is that this environment right now is quite uncertain. And so what we are going to be focused on over the next 90 days to 120 days is continuing to clean our inventory, continuing to create those consumer connections like we have been talking about and really focus on our OneNike marketplace strategy, exiting undifferentiated wholesale distribution and focusing on the opportunities that we see for NIKE Direct and our strategic partners. And we believe that this strategy will fuel growth and profitability in line with the long-term financial model that we have previously communicated. Obviously, there are a number of factors that are outstanding that may create disruption over periods of time as we look at it and the most obvious one right now is just the pandemic and the impact it has on consumer demand and consumption in the near-term. And so, we are continuing to focus on the strategy and the shift because we think it’s the right thing to do long-term and that’s where our focus and attention is going to be at this time. We are investing in building this business for the long-term and that’s where our focus is.

Great. Congrats. Best of luck.

Thank you, Matt, and thanks, everyone, for joining us today. We look forward to speaking with you next quarter. Take care.

Thank, everyone.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation and you may now disconnect.