Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2024 Fourth Quarter Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I would now like to turn the call over to Paul Trussell.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE Inc.’s fiscal 2024 fourth quarter results. Joining us on today's call will be NIKE Inc. President and CEO, John Donahoe; and our CFO, Matt Friend. Before we begin, 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 risk and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE's reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and non-public financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral, unless otherwise noted. We will start with prepared remarks and then open up for 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 question to one. Thanks for your cooperation on this. I'll now turn the call over to NIKE Inc. President and CEO, John Donahoe.

Thank you, Paul. And hello to everyone on today's call. I want to start by briefly commenting on our financial results. For full year fiscal 2024, revenue grew approximately 1% on a currency neutral basis and earnings per share grew 15%. Q4 revenue was flat. For the quarter, we saw strong gains within Performance product. However, this was more than offset by declines in lifestyle. These declines had a pronounced impact on our digital results. These factors, when combined with increased macro uncertainty and worsening foreign exchange, have caused us to reduce our guidance for fiscal 2025. Matt will provide more detail on our results and outlook later in the call. While fiscal 2025 will be a transition year for our business, we continue to make real progress on our comeback. Over the past year, we've highlighted the strategic shifts we're taking as a company, including leadership and organization changes, kick-starting a multi-year innovation cycle, and creating capacity to invest in consumer-facing activities. As I mentioned in last quarter's call, we're making a series of adjustments to position us to compete and win. We're sharpening our focus on sport, accelerating our pace and scaling of newness and innovation, driving bigger, bolder storytelling, and elevating the entire marketplace to fuel brand distinction and be in the path of the consumer. This is our playbook, and we're seeing momentum build in all four areas, particularly on the Performance side of our product portfolio. We have work to do, but we're on it. Our teams are moving with energy and urgency against the opportunity we see in front of us. Now, as we've discussed over the past few quarters, we've been accelerating our innovation pipeline, including pulling forward several innovations, some more than a year. We're moving aggressively to reestablish our innovation edge.…

Thanks, John. And hello to everyone on the call. For NIKE, fiscal 204 was a pivotal year to get back on the offense in sport with consumers, led by an urgency to accelerate our pace of innovation and scale newness across our product line. Today, our playbook is in motion. Our teams are focused and hustling to deliver, and we're seeing positive signals from consumers and retail partners across the world. That said, this quarter we have been navigating several headwinds, which we now expect to have a more pronounced impact on fiscal 2025. Although the next few quarters will be challenging, we are confident that we are repositioning NIKE to be more competitive, with a more balanced portfolio, to drive sustainable, profitable long-term growth. Let me provide some deeper insights into the fourth quarter and the implications we see as we look forward before reviewing our financial results and our outlook. First, after double-digit growth over the past several years, our lifestyle business declined in Q4 across men's, women's, and Jordan, more than offsetting strong growth in our Sport Performance business. Second, NIKE Digital declined 10% in the quarter. Although our digital business has grown at an approximately 26% CAGR since fiscal 2019, we missed our Q4 plan on softer traffic, higher promotions, and lower sales of certain classic footwear franchises. More specifically, these franchises underperformed our overall digital business results in the quarter, especially in April and May, and continuing on into early June. This is even as these franchises continue to drive retail sales growth at high full price realization in multi-brand retail. Third, we experience meaningful shifts in consumer traffic in key markets, particularly in Greater China, where brick-and-mortar traffic declined as much as double digits versus the prior year. We also continue to see uneven…

[Operator Instructions] Our first question will come from the line of Matthew Boss with JP Morgan. Please go ahead.

Great, thanks. Maybe John, just to summarize and think about relative to three months back. I guess, how would you rank changes on the macro front and similarly on NIKE execution that impacted the change in your 2025 outlook today relative to three months ago? And then Matt, just on the gross margin, could you just help break apart maybe the puts and takes to consider over the course of 2025 and how best to model the cadence from a gross margin perspective?

Well, thanks, Matthew. We set out our -- what we're calling our comeback plan a year ago. And in the last 90 days, I would say our execution continues to stay on pace. Matt, you can talk about macro and the franchise management impacting the numbers, but on the fundamental things we set out to do four things that we are moving aggressively on. One, put sport back at the center of everything we do, serving the athlete, And over the last 90 days, we've completed completely aligning our organization along the lines of sport, are co-locating those teams, and now end-to-end have clear, what we call, field to play -- sport-based field to play teams end-to-end, which is accelerating our pace and also improving our execution. As we talked about the last couple quarters, we've reignited our innovation pipeline, including pulling several innovations forward. So in addition to launching DN and Peg 41 during the quarter, early this quarter, we'll also pull forward key innovations like the Peg Premium and Vomero 18, which are just two examples of what's coming in spring 2025. And as I mentioned earlier, speed is a capability we're building, which we feel increasingly strong about. And brand is getting strong. With [Eurochamps] (ph), you see our awaken your madness campaign, which is really the first of the bigger bolder brand voice you're going to hear and then we're very excited about the Olympics coming. A lot of the work that went into the Olympics happened in Q4, but you're going to get to see it in a few weeks. And then on marketplace, we've spent a lot of time leaning in with our wholesale partners. We've had several wholesale partner summits. We've had RSG groups, neighborhood partners and authenticators to campus. We're exposing our three-year product innovation pipeline to them. And feedback's been very strong. Our order book for holiday spring 2025, holiday 2024, spring 2025 is strong. And so our confidence is building. So on the fundamentals that we are executing against is proven playbook on a comeback that will take time, we feel like we've made strong progress.

And just hitting the financial implications relative to 90 days ago. Last quarter we said that we thought revenue was going to be down low single digits in the first half and that included a more pronounced impact in the first quarter. We also said that we expected revenue to grow. And what we saw in the fourth quarter were really two things. One lifestyle, our lifestyle business declining more pronounced on NIKE Digital, specifically in April and in May, and those trends continuing into June. And what I highlighted in my prepared remarks is that, those specific classic franchises that we were talking about underperformed our overall digital business results in the fourth quarter. And so, when we look at our updated guidance of down mid-single digits for the full year, there's really three things that are driving the change. One, I'll start with FX, our outlook on foreign exchange and the strength of the US dollar had a one-point impact relative to 90 days ago. We've softened our outlook for greater China, and that also similarly had a level of impact for the full year guidance. And then the majority of the remainder of the change is related to the more aggressive actions that we're taking on our key franchises across the total marketplace, but really with the compounded impact on total digital. And the bigger impact of this will be in the first half of this year, but we are planning for meaningful sequential improvement in the second half of the year. And that's how I think about the revenue differences relative to -- the revenue differences relative to what we said 90 days ago. On the first quarter, the other impact was timing. And we saw the 6/18 period come earlier into May than we had in the prior year, and that had an impact on Q4's results, but also an impact on Q1's results. And we saw some favorable shipment timing in North America as we prepare to go live with our ERP and also just better general product availability. So that also had an impact on the first quarter numbers.

And I just want to add 1 more thing that you, Matthew, you've heard Matt and I both talk about it. It's an intangible thing, but I think it's just so important, which is, the heart and hustle of our team, which has just been extraordinary over the last year, but also in the last 90 days just accelerating both Heidi's and Craig's teams, the teamwork of how they're working together end-to-end the focus and focus on the consumer, the increasing speed, pulling things forward. There's a palpable shift in the confidence and forward-looking nature of our team. So I want to give huge credit to them, but also just recognize that is so important in NIKE and our teams are, I think, feeling more confident as each day comes along.

Our next question will come from the line of Lorraine Hutchinson with Bank of America. Please go ahead.

Thank you. Good afternoon. Can you provide some numbers that might help us have confidence in the meaningful second-half improvements? How much less of a headwind is there from the sun setting some of these franchises? How the total order books look? And anything you can provide numerically that helps you to get to that back half improvement.

Well, Lorraine, as I mentioned, we've looked at a number of different factors and scenarios as we've updated our guidance for the year. And that ranges from looking at different slopes of different curves of different products over time and developing a perspective on how we think the trends are going to play out as it relates to some of our largest franchises. But those franchises continue to drive retail sales growth and high levels of full price realization in the marketplace. And so the bigger impact on the first half are the adjustments that we're taking to manage the health of those franchises starting first with NIKE Digital. And that has a pronounced impact on revenue, which is creating a more meaningful first half impact. We want to continue to let those franchises in the multi-brand environment continue to have the impact that they're having for our partners. And one of the ways that we maintain the health of those is by reducing what we're offering to consumers through our digital channel. As it relates to the second half, we highlighted a couple of things, but we are planning for meaningful sequential improvement in the second half versus the first half. And it starts with the confidence that we have around the new products that we're bringing to market, the Peg 41, the Peg premium, the Vomero 18, the order book for Air Max DN, plus the next Air Max iteration that's going to be coming to market, plus our plans to scale the innovation and the newness that we've been discussing. And so, when we look at where we are today and the ways in which we're working to drive this plan through the balance of the fiscal year, our scaling of newness is on track. And our teams are hustling to see whether there's even opportunities to accelerate the scaling of that newness in the second half. We are confident in the indicators that we're seeing in the marketplace right now. We gave you a couple of specific numbers as it relates to running and running specialty. But what I will tell you is that, our initial read of our spring order book is in line with the guidance that we're providing. And so we feel confident that we're creating better balance across our portfolio and also building momentum with our wholesale partners.

Our next question will come from the line of Bob Drbul with Guggenheim Securities. Please go ahead.

Hi. Just two questions for me. I guess the first one is, when you look at the visibility of the business, I think in some of your answers to Lorraine's questions. When you look at the visibility of the business today, with the shifts that are occurring, can you just talk about how you feel looking at that versus what you saw over the last 12 and 24 months, just in terms of your ability to predict? And then, just the second piece of this is, when you look at the channel shift that is going on wholesale to direct or bricks-and-mortar, the digital pieces of the business, can you just give us any more framework around how to think about the P&L impacts at a higher level?

Sure, Bob. Well, as it relates to the visibility with the shifts, I mean, we were surprised at what we saw on these larger franchises as we are navigating through the fourth quarter and that is what's caused us to revise our guidance. I would say in general, we've driven incredible growth in our digital business over the last four years, and we've had a lot of confidence in our ability to continue to drive those results against the consumer opportunity that's in the marketplace. I think most recently, in the context of managing our overall franchises, the dynamic of increasing supply of these franchises in the wholesale marketplace relative to having the supply of them on digital and the relative balance between those things are -- those factors are what drove some of the volatility this quarter. And looking at the trend in retail sales, but also looking at our overall plans for how we manage franchises, based on our experience of doing this, we've made the adjustments in this forward-looking guidance. And we've been more aggressive with it on NIKE Digital. And so, we're continuing to improve with the capabilities that we're building in terms of demand sensing, leveraging data and insights in order to have better predictability of our owned business. But I feel really good about the adjustments that we're making at this point in time and the aggressiveness through which we are -- the rest of the way that we continue to manage it. I'd also just say that, when I look at the digital business overall, we were already planning for lower launches in Q4, because we had an extraordinary number of launches in the fourth quarter of the prior year. And if I exclude the impact of the biggest franchises on our digital…

And I'd add to that a healthy marketplace, where it's -- channel mix is driven by consumer demand. We said we want to be where the consumer is, whether that's digital or outdoor or wholesale. And so, we're embracing a more balanced approach to growing the whole marketplace. And a couple of nice evidence points of what I think health looks like is, we've mentioned that performance grew double digits in the quarter. It grew double digits in wholesale and it grew double digits on digital. The first couple of weeks of Peg 41 sold through well in wholesale and it sold well in NIKE Direct, both digital and outdoors. And so, over time, our channel mix should be driven by consumer being -- at the consumer at the right time and given shopping occasion. And so, we think it'll settle out in a consumer-friendly way.

Our next question comes from the line of Adrienne Yih with Barclays.

Great. Thank you very much. I was wondering if you can talk about the amount of newness that is coming down the pipeline, kind of over the next six to 12 months. Has there been another time when NIKE has historically launched this magnitude of newness? And how do you read sort of the second degree of the consumer rates as going into the wholesale channel first? How do you read the success of that at the end consumer as it goes through the wholesale pipeline? Thank you.

Well, as we've said, we've said it for now for a couple quarters, we are very excited about this multi-year innovation pipeline and cycle. And it's just -- if you've seen some early examples of it in this past quarter with DN and Peg 41, and as we are saying, as we move into the end of this -- second half of this fiscal year, which we talk about is spring 2025 and summer 2025 of this season, the amount and breadth and depth of the innovation is just accelerating significantly. And at our size and scale, we know we need to both innovate broadly and deeply, but also provide innovations that can scale. And so, we've set a goal of doubling the growth of our new innovations by the end of 2025 versus the beginning of 2024. And we're on track to achieve that. And one of the ways when you ask how do we know that, the wholesale partner feedback on what they see both in the second half of this year and into 2026, because we're showing them three year roadmaps in many cases around running, around basketball, around lifestyle. The wholesale feedback has been strong and their order books, as Matt mentioned a minute ago, are reflecting that. And so, we view our job to be able to deliver season in, season out, strong innovations, also the ability to scale those innovations over time, both to delight consumers and also bring us to healthy and sustainable growth. So we feel very good about the track we're on, and we think it will accelerate as the year goes on.

Adrienne, I would just add that one element of newness is also in the lifestyle side of the business. Over the last four years, we have driven double-digit growth and created an extraordinary amount of energy. We've created iterations and dimensions to Air Force 1, to Air Jordan 1, to the Dunk business. And as a result of that, we've created extraordinary consumer demand. And so, one element of us bringing newness to the market is actually going into NIKE's vaults, what no one else has, and being able to create energy the way that we've done over the last four years to be able to move consumers on to a new place. And it's something that we can do, that we have a proven track record doing. In fiscal year 2019, the Dunk represented 0% of NIKE's business. And we’ve scaled that dramatically with strong consumer appeal and response over the last three years. And now we're managing that franchise back to continue to ensure that demand in the marketplace is greater than the supply that we're offering. And that is how we're managing these franchises. And so, on the one hand, there's certainly a performance innovation side. And what we showed in Paris and what John was highlighting in terms of what's coming, we feel great about. But there's also an element of NIKE taking advantage of its vault of assets and bringing new innovation, new stories, new partnerships to bring new products to market to capture an incredible amount of sneaker demand out in the marketplace.

Your next question comes from the line of Brooke Roach with Goldman Sachs. Please go ahead.

Good afternoon, and thank you for taking our question. I wanted to follow up on Adrienne's question and your comment about the franchise management that you're focused on for FY 2025. Can you contextualize the importance of these larger classic franchises in relation to NIKE's current sales in comparison to historical averages? Do you expect to be remixed to typical franchise penetration rates by the end of the year as you scale these new innovations? And then perhaps a follow up for Matt. Can you provide some additional color on how you're thinking about the gross margin bridge and the tailwinds that you expect from input cost, and pricing relative to some of the headwinds that you see? Thank you.

I mean, these franchises are the largest franchises in industry history. And so -- and they've gotten that way based on consumer demand. And so, we certainly started managing these franchises a couple years ago. And what we were most focused on was the fact that we needed to restrict supply of these franchises into the marketplace, because we didn't -- because we had a gap in innovation in our pipeline, which we've talked about over the last couple of calls. And so, the intentionality around managing these franchises is that, newness is what's moving the consumer, and we wanted to move to more newness. And so, the significance of it is the impact that it's going to take in fiscal year 2025 on our financial outlook as we're pulling the amount of supply down and creating better balance in our portfolio. And when I say that, I don't mean that lightly. I mean, better balance between performance and lifestyle, better balance between high price points and lower price points, better balance between wholesale and direct, even within wholesale, between sporting goods and athletic specialty or other channels. And so, that is where our focus is. And I think the actions that we're taking and the guidance that we've provided is to follow through on those actions. And I've been at NIKE for over 15 years, and we've gone through these product cycle transitions before. And while this is challenging, and it's going to be challenging over the next couple of quarters, our history has demonstrated that when we take action and we do it aggressively, and we get behind the things that are new, and we build marketing and storytelling around it, we move the consumer fairly quickly to a new place. And what we're doing here is nothing different than that.

Our next question will come from the line of Michael Binetti with Evercore. Please go ahead.

Hey, guys. Thanks for taking our question here. And thanks for all the details as we look out for 2025. I guess as we look beyond 2025, you've given us a work -- a year where you've got a lot of work you're going to do here. As you know, you’ll have classics cleaner, you'll have the channel mix more stable, you'll have the innovation working. Can you just help us think about within a historical context in the past, I think you spoke to a NIKE that could grow high single digits, but I think in the future wholesale plays more of a role. China maybe doesn't grow what it once did. So a few things like that that are kind of different than the old world. Maybe you can help us think about what you see as the longer term opportunity for this business as channels, geos, and franchises come back into alignment. And then I guess just at a bigger picture, we could see the lab is back at work bringing out new technologies on the performance side, but maybe walk us through how you can use innovation and performance and how you can create the halo for lifestyle, which is really just more cyclical product. I'm curious how you guys look at the catalog and how you lean on innovation to try to drive the lifestyle stuff back to growth.

Well, I might just start, Michael, by saying as we get to a more -- through some of this portfolio adjustment, we still have significant tailwinds in our industry. The fact is, sport is growing. The definition of sport is growing. Healthy lifestyles is becoming embraced globally. I was in China a couple weeks ago. It was very striking, the focus on healthy lifestyles. So I think there's a structural tailwind for the industry. I also think where sport happens, it's one of the derivatives of the post-COVID environment. You don't have to go to the gym or the field. You're working out in your backyard or working out or taking a walk or -- So sports happening in many more places. And that line between sport and lifestyle is blurring with that leisure. And so, people want to look, have great style while they're doing sport, and they want to have sport inspired style when they're not doing sport. And so we view all those things as tailwinds. And you ask about lifestyle innovation, we want to be sport-based in our lifestyle innovation, both in footwear and apparel. And we think there's a tremendous opportunity to do that across men's, women's, and kids, and Jordan. Jordan Streetwear being an example of it.

Yes, I'll just finish up this question, and then I'll come back to the start, Michael, where you asked. I would also say that the lines that blur between performance and lifestyle are really as much about how consumers are using products. The one thing that's undoubtable is that the consumer wants more comfort. And you can see that across the marketplace. Our teams are absolutely focused on fit and comfort as we bring these new iterations to market. And I think that when you look at products like Peg Premium or even the Peg 41 or the Vomero 18, I think you're going to start to see consumers carrying those over into lifestyle because they're new, they're fresh, they've got a particular look. And so, we're balancing the fact that the consumer is voting for performance and innovation. And we need to make sure that we've got performance and innovation that they can wear every day, in addition to leveraging the vault, as I said before, leveraging the vault to bring classics back, because there will always be a classics business. There will always be an energy business around classic lifestyle products. And we've got a great vault to be able to leverage doing that. As it relates to your question about the long-term model, I guess here's what I would say. We're focused on driving unit growth. And I think I said that a couple quarters ago and the importance of that point was that, it wasn't about one particular channel or the other, it's growing the overall marketplace. And so, we're focused on driving unit growth where the consumer is. And given where we see the dynamics in the marketplace right now, we're also focused on taking back market share. And we see opportunity in the performance dimensions in particular to come strong with a strong pipeline of innovation to come back and to take market share. But this product transition is going to take a little bit of time for us to work through. And so, over the course of the next couple of quarters, we're going to execute the plan that we've laid out here for fiscal 2025. At Investor Day in November, we will provide an updated outlook on growth and profitability, taking into consideration the marketplace dynamics that we're dealing with across the portfolio, where we are in the product transition, and also some of the strategic shifts that we've put into place over the last year.

Your next question will come from the line of Aneesha Sherman with Bernstein. Please go ahead.

Thank you. I have a -- I start with just a quick follow-up. Matt, you talked about the challenge for the next couple of quarters on private life cycle management. Can you clarify, are you expecting this reset to be done by the end of the fiscal year? So are you expecting to exit FY 2025 at a normalized run rate on the top line without the headwind? And then second, I'm curious about where you are on the organizational reset and kind of shifting of the cost base. How much of that $2 billion cost reallocation do you expect to be done with by the end of the fiscal year? Is it going to be front loaded or is it going to be spread out for the next couple of years? Thank you.

Yes, no problem. So on your first question, the actions that we're taking on NIKE Direct and Digital are more aggressive. And so, the adjustments that we're making to our plan, specifically as it relates to our own channels, are going to be largely taken into consideration in the first half of this year. We will continue to manage franchises, because you can picture a curve that goes up and a curve that comes down. And as the curve comes down, it doesn't happen in a moment. It happens naturally over time as consumers react to supply coming out of the marketplace. But the actions that we're taking are also causing us to look at the broader marketplace in the second half of the year and ensure that we're reducing supply there as well to maintain a healthy marketplace and also to ensure that we've got capacity in the market to bring newness in. So I mentioned that we're planning on scaling newness, that newness is scaling as we make our way up through the year from minus 10 in the first quarter to down high single digits in the first half to finishing the year at down mid-single digits. And the largest driver of that is going to be on the full year basis, the scaling of newness that we're bringing to market. We expect to exit the year with momentum. And that means that we expect the new things that we're bringing to market to begin to outweigh the franchise management that we're navigating through in this year. And as we look forward to 2026, we'll continue to manage these franchises in line with consumer demand. But what's going to make it -- what makes that possible is the fact that we've got more new things coming that we're driving energy around that will be more than offsetting the way that we manage those franchises.

And then, Aneesha, on your second question, the way you asked it, I want to just distinguish one thing. You mentioned organizational reset. That's behind us. And as I mentioned earlier, we are now completely aligned across the organization around sport, field of play. And our teams are focused, they're excited, there's just a tremendous amount of hustle throughout the organization and you can feel it. And so, that's going to continue. So the headcount dimension of the Save to Invest is behind us. And now those teams are focused on driving for the consumer innovation and execution. We'll look to other areas to provide ways of savings, non-labor areas. Matt, you can describe some of these, but the organization is now 100% focused on driving the growth and innovation we've been talking about through our call. And I can, again, just reassure you that everyone's got energy, hustle, and excitement about the future.

Yes, I mean, we've been focused -- as we've been talking about, about building an operating model that with greater speed and cost productivity as we grow. And so, the actions that we've taken over the past year has enabled us the opportunity to make some bold swings in fiscal year 2025. We've reallocated a billion dollars into consumer facing activities. That includes teammates that we've invested in and product design, building out the merchandising function. To John's point, we have sport focused teams now at global and in the geographies in order to be able to execute this new offense. And we're putting more of our investment dollars in demand creation, while we're managing operating overhead tightly. We did that in fiscal year 2024. You saw even with the restructuring charge some significant effort to manage operating overhead so that we could reallocate resources, as I've referenced. And while these investments will take some time to drive a return, they're absolutely the right thing for us to do to reignite brand momentum and to get us back on the offense with consumers. And so, that's what we've done, and we will continue to manage SG&A tightly, leveraging this program and this initiative to create the capacity for us to invest, to push us forward with the consumer.

As we wrap up, Paul, just one – maybe just one final comment. This is -- and this is intended for NIKE's team around the world. This has been a challenging last year and so much hard work and energy has gone into it. And I want to just thank everybody on NIKE's team globally for how you've led through this and how you've operated through this. It's so clear to me, and I'm saying this on behalf of Matt and Heidi and Craig and our whole leadership team. NIKE's real competitive advantage at the end of the day is NIKE's people and NIKE's culture. And so, those people and that culture is alive and well and ready to compete and hungry to drive the kind of execution and growth we've been talking about all call. So I just want to wrap up with thanks to everyone on NIKE's global team.

Thank you for joining our fourth quarter fiscal 2024 call. We look forward to hosting many of you here at the headquarters for our Investor Day in late November. More details to come. This concludes our call. Good evening.

Thank you all for joining today's call. You may now disconnect.