Good afternoon, everyone, and welcome to NIKE, Inc.'s Fiscal 2025 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 2025 fourth quarter results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill; 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 risks 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 nonpublic 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. Thank you for your cooperation on this. I'll now turn the call over to NIKE, Inc. President and CEO, Elliott Hill.

Thank you, Paul, and hello, everyone. I'll kick it off with a reflection on Faith Kipyegon's attempt to run the mile in under 4 minutes today called Breaking4. While she crossed the line at a personal best of 4:06, today's attempt will always represent more than the pursuit of a specific singular time. We're super proud of Faith, our teams and everyone who supported her and we were all inspired by her effort. The Breaking4 journey will live on as a symbol of courage and ambition. You have to dare to try, and I deeply admire the monumental effort. What it showed is that no other brand offers athletes the depth of expertise that we can. No other brand dreams as big as we can, and more than anything, no other brand inspires 8 billion potential athletes to believe. Faith's historic attempt comes at a unique moment for NIKE and our consumers. as the sportswear industry continues to operate under geopolitical volatility and tariff uncertainty. Specifically to our business, the results we're reporting today in Q4 and in FY '25 are not up to the NIKE standard. But as we said 90 days ago, the work we're doing to reposition the business through our Win Now actions is having an impact. From here, we expect our business results to improve. It's time to turn the page. Just look at the pace of change we've embraced and the progress we made over the last 8 months. It all started on October 14, my first day back at NIKE, with an all-employee meeting and a declaration to our teammates that we are a sport and a growth company and that we will put the athlete at the center of everything that we do and every decision that we make. In December, we…

Thanks, Elliott, and hello to everyone on the call. In fiscal '25, we reclaimed our identity through sport and implemented the Win Now actions to reposition our brands and business for future growth. While in line with our expectations, we are not pleased with our financial performance. However, as I said last quarter, the fourth quarter reflected the largest financial impact from our Win Now actions. We expect the headwinds to revenue and gross margin to begin to moderate from here. Today, I will review our financial results, highlighting progress made against our Win Now actions. Then I will explain our approach to the newly issued tariffs. Last, I will provide guidance for the first quarter of fiscal '26 as well as additional insight for how we expect Win Now to shape our financial performance over the next fiscal year. I'll begin with our financial results. For the fourth quarter, revenues were down 12% on a reported basis and down 11% on a currency- neutral basis. NIKE Direct was down 14% with NIKE Digital declining 26% and NIKE stores increasing 2%. Wholesale was down 9%. Gross margins declined 440 basis points to 40.3% on a reported basis due to higher wholesale discounts, higher discounts in our NIKE Factory Stores, supply chain cost deleverage and channel mix headwinds. SG&A was up 1% on a reported basis. This was driven by increased investment in demand creation, up 15%, partially offset by a 3% decline in operating overhead. Our effective tax rate was 33.6% compared to 13.1% for the same period last year due primarily to decreased benefits from stock-based compensation and onetime items. Earnings per share was $0.14. For the full year, revenue was down 10% on a reported basis and 9% on a currency-neutral basis. Diluted earnings per share was $2.16.…

Before taking questions, I want to share some final thoughts on another historic sports moment this past quarter, Rory McIlroy's Masters win. I was lucky enough to be at Augusta earlier that week, and I couldn't help but relate Rory's experience to NIKE's recent journey. To me, his final round performance was a master class on the power of the athlete mindset. And I've been asking my NIKE teammates to hold on to some of the lessons he taught us. For those of you that don't know, Rory has been chasing a Masters victory for 14 years. It would complete his career Grand Slam, the holy grail of golf, something only 5 others have ever accomplished. He was also battling a decade-long drought of winning a major. He's had his share of close calls and heartbreaks and more than enough doubters. Sunday's final round at Augusta was no different. What made it so fun to watch was how aggressive Rory was playing. He was taking the shots that others wouldn't, putting the pressure on the rest of the field, but one time he did play it safe, he laid it up on the 13th and rolled it into Rae's Creek for a double bogey. Lesson learned. He played better when he was attacking. Despite another up-and-down round, the win was still in his grasp. All he needed to do was sink a 5-foot putt on the 18th. He stepped up and missed, wide left. He was heading to a playoff. His caddie, Harry Diamond, his lifelong friend and biggest supporter, knew just what to say. "You would have given your right arm to be in the playoff at the start of the week." And that was it, the mindset shift Rory needed. He didn't have to play a playoff. He got to play a playoff. It was his for the taking, an amazing reminder for NIKE that no matter the situation we face, we're the leader in an exciting industry. It's a privilege to get to compete every day and with all of our advantages we have, we're in control of our own destiny here. Rory went back to the 18th, stuck his second shot 4 feet for the pen. And this time, he sank the putt, dead center. Rory, finally, had his green jacket and his career Grand Slam. And we were all treated to one of the most memorable Sundays in golf. For over a decade, his patience was tested, but he stayed the course. Whether it was Rory, Alcaraz, Shai or Faith these past 90 days, we worked alongside some of the most mentally tough human beings on the planet. And lately, I've been talking a lot about the athlete mindset, that special ability to keep believing, to keep competing. I'm asking my teammates at NIKE to do just that, to show up with passion, commitment and determination and to compete every day. I think we're on our way.

We're ready for questions.

[Operator Instructions] Our first question will come from the line of Matthew Boss with JPMorgan.

So Elliott, could you maybe elaborate on the accelerated actions under your sport offense realignment and maybe speak to the phasing of innovation into the back half of the year in FY '26? And then, Matt, if you could just speak to the cadence of revenues this year or puts and takes to consider in terms of items impacting the first quarter revenues relative to the back half of the year?

I'll take the first part of this around product. And what I will say, we will lead with a sharp focus on sport. That's why we're moving to the sport offense. But before I dive deeply on products, I just want to make certain that we hit on the unmatched portfolio that we have with depth and dimension, 3 brands, NIKE, Jordan and Converse. And what we're doing, Matthew, is we're organizing into sport-obsessed teams through our sport offense, which will drive a relentless flow of innovative product across all 3 of the brands, performance, sportswear, men's, women's, kids, footwear, apparel, accessories, and up-and-down price points. We will differentiate each brand by sport and create a -- which we believe will create sharper distinction and dimension. And we do know, Matthew, when we focus on sport, we win. The best example that we have right now from a product perspective is our running, which is up high single digits. We have innovative and coveted products across our 9-box matrix that we've been talking a lot about, 3 silos, Pegasus, Vomero Structure, times 3 price points. We also have trail and race. In terms of performance, Peg Premium, Vomero 18, our Swift and Stride apparel, they're all selling well at retail and we're getting positive feedback from our partners. I mentioned it in my script that the Vomero has already become a $100 million business with growth in all geos. And so in addition to what I just touched on, we have Vomero Plus and Vomero Premium coming, which both those shoes are beautiful shoes and incredibly innovative and distinctive. So best example is running, continuing on in our focused sports. Training would be next in line with momentum and sell-through in MetCon and 24/7 Apparel Collection. In basketball, we've got…

And Matt, I would just add that, as Elliott said, we're pleased with the progress we're making on the Win Now actions and the fourth quarter reflected the largest financial impact of our Win Now actions. And so our guidance for Q1 in revenue down mid-single digits, it's really reflective of a continuation of some of the trends that we see in Q4, such as the classics, our classic footwear franchises. We expect to continue to see headwinds from the franchise management actions that we're taking there. We expect to continue to be liquidating excess inventory through our factory stores and through some value partners on the wholesale side. And we expect digital traffic to be down as we spend less money on performance media and also manage our classic franchises. That's being offset in the first quarter by what I highlighted last quarter, which was our fall order book. We said last quarter that our fall order book almost offset the decline that we were managing in our classic footwear franchises. And now with our holiday order book being up with North America, EMEA and APLA only partially being offset by Greater China, and newness across performance and sportswear that Elliott just referenced offsetting our classic franchises, we're seeing improvement in the revenue trend. As we look to the back half, I highlighted that we expect that the franchise management headwinds will heavily be focused on the first half, but we do expect our actions on the Dunk to continue throughout the full year. We expect Digital to continue to be a headwind for the full year as we reposition the channel. And I highlighted that we expect a modest headwind to revenue as we lap aggressive clearance activity in the second half of the prior year. But we do expect to see continued momentum building with our wholesale partners. And our wholesale partners -- momentum with our wholesale partners is indicative of us cleaning the channel and confidence in our product portfolio. And it's 2 important elements of the building blocks of us returning to growth.

Our next question will come from the line of Brian Nagel with Oppenheimer.

So I'm just going to put two questions together, if I could. They are, I guess, relatively short. I mean, first off, with respect to the continued sort of, say, cleanup of the marketplace that you're telegraphing now through the first half of fiscal '26, the question I have is, is that consistent with your prior plans? Or have you found something new as you've continued to work on the business? Then the second question I have, with regard to tariffs, the way that you described it, this could be an impact here in Q1. But then over time, you'll be able to mitigate that, I think it was $1 billion you said. Is that as simply saying that it takes time for these mitigation efforts to take hold? Is that why we're expecting this -- the Q1 impact?

Yes, Brian. So as it relates to inventory, we remain on track. No change relative to what we communicated 90 days ago. We remain on track for a healthy and clean marketplace by the end of the first half of '26. And as I highlighted, North America and EMEA have made more progress. We've made significant progress managing down our classic footwear franchises as I highlighted. And so all I'm trying to say is that we are -- we will continue to be liquidating that extra inventory, but it's consistent with the plan that we had before. The quality of the inventory in the marketplace has improved relative to where we were 90 days ago. And just to reiterate something I said to Matt, the fact that our holiday order book is up, I think, in wholesale also shows that the channel is getting clean and our partners are investing behind the newness that we're bringing into the market. As far as your second question goes on tariffs, yes, I think you summarized it well. Larger impact in the first quarter primarily because as I laid out the 4 different actions that we're going to take to offset the $1 billion headwind, we're implementing those at different points in time throughout the fiscal year based on taking into consideration the consumer, the back-to-school holiday season, the conversations we're having with both our suppliers and our retail partners. And so we're confident in our ability to fully mitigate these over time as these actions that we're talking about are fully implemented and annualized. But just within the confines of the fiscal year, it will be a 75 basis point impact on our gross margin.

Our next question comes from the line of Lorraine Hutchinson with Bank of America.

I wanted to focus on gross margin for a minute. Are you expecting the pressures to abate sequentially as the year progresses? And can you talk about the back half if there's an opportunity to return the gross margins to growth?

Yes, Lorraine. Taking all of the comments that we've made into consideration, we do expect our margins to remain under pressure in the first half of '26 as we finish executing our Win Now actions. We expect that our first half to be impacted from the strategic actions we've outlined, but also the timing of the tariff implementation relative to the actions that we're implementing. But we do expect that to moderate in the second half of the fiscal year. When I think about our '26 margins, I sort of step back and think of 3 dynamics that we have. One, we've got short-term product and channel mix headwinds that we're going to navigate through the year as we manage our product portfolio and shift our marketplace portfolio towards our wholesale partners. We've got the transitory impact of the Win Now actions which are largely impacting the first half of fiscal '26, and then we've got the newly implemented tariffs. And I said that's a 75 basis point impact on the year. It's a 100 basis point impact in the first quarter. And we expect to see those headwinds begin to moderate from there.

Our next question comes from the line of Jonathan Komp with Baird.

I want to follow up. There's obviously too many dynamics to think about guiding past Q1. But just given that wholesale is the largest driver of your business today and you are seeing the inflection in order growth, are there any scenarios where you could get back to total growth at any point in this year? Just trying to get a sense of how you're looking out on the horizon here.

I'll take that, Jonathan. Let me start with -- what I would start with is, I've been here now 8 months and I'm even more convinced that the path back to sustainable profitable growth is through our Win Now actions and now implementing our sport offense. We're seeing signals that the actions are working. Our teams are energized, inspired and competing. The actions are resonating with our partners. Matt already touched on the order book and the reaction we're getting from our partners. And it's with our consumers. We're having good sell-through as well. We've walked through some signals. Inventory actions are back on track. We're elevating NIKE Digital, the user experience, less promotional, et cetera. We're having good brand impact and sport moments and product launches. The product pipeline, which I already hit on, we're feeling good about that and it gets better with each season, and we're having an improvement in our order book. So overall, what I would tell you is that each geo is in a bit different stage of executing those actions. North America and EMEA began executing them the earliest, and they are demonstrating the clearest progress and Matt hit on some of those financials. We're making good progress in APLA. It does, Jonathan, vary a little bit by country. And then in Greater China, we're still cleaning up the marketplace with the nuance of it being a monobrand marketplace, but we continue to work closely with the team to drive progress there. So we're seeing momentum. Matt's already hit it and our holiday order book is up. And right now, just because of everything that's going on, we're going to take it 90 days at a time because we believe full recovery will take time.

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

It's nice to see the progress at wholesale. Elliott, I guess I'm going to start on that topic. Can you talk about the marketplace at a high level, kind of where DKS, Foot Locker, JD kind of sit in that specialty retail and then the segmentation with the newly added Amazon expansion of distribution? And then Matt, along the same line, when did you start shipping or recognizing wholesale revenue? I know you're going to be on board there in late July. So just wondering how that revenue -- is that part of the revenue wholesale order book being kind of having more visibility as we go into the back half with the addition of Amazon?

Okay. Adrienne, our biggest competitive advantage is our ability to elevate and grow an entire marketplace. And again, we are challenging our teams to make certain that we're serving consumers wherever and however they choose to shop for our brands. I will say this, we do have an unbeatable footprint, 40,000 points of distribution, nearly 190 countries, digital, physical, wholesale, and direct. What we are doing, we are making certain we are moving across multiple channels, our own NIKE Direct channels, specialty, sporting goods, athletic specialty, department store, family footwear. As you know, each one of those channels and the partners that sit in each of those channels, they all serve different consumers. And so we -- with this new flow of innovative product, we're segmenting and we're differentiating in the marketplace. When we do that across wholesale partners to serve different consumers, that's how we drive growth and profitability. And again, it does start with our own NIKE Direct and elevating that, making it less promotional. But we are working closely with our partners across the entire marketplace, our 3-year growth plans, translating that into annual plans and quarterly plans. And we continue to invest in elevating the presentation of our assortment. So I'm feeling good about where -- how the teams now are embracing, looking across the entire marketplace to serve different consumers at different points of distribution. In terms of Amazon, they serve a very focused consumer, and we're using them as part of -- and partnering with them as part of to grow the overall integrated marketplace. And we're excited about the partnership. You heard it in my script, we're working on the right assortments that will go in there. We'll have a featured brand store on the platform. We'll be offering footwear, apparel and accessories through running, training, basketball and sportswear.

And I would just add, Adrienne, that as Elliott said, as we're serving consumers across [indiscernible] number of the examples that he gave in terms of how we've expanded distribution, we typically start small. So we will go live on Amazon in Q1, but it's not a material needle mover. What I would say is that wholesale overall and the commentary around our order book, I think, is an important leading indicator of the progress our teams are making to transition our product portfolio and also get our business back to growth. There's obviously going to be some noncomp items, like I've highlighted, the liquidation in the first half, the work we're doing in order to continue to work through our classic footwear franchises. But wholesale and the progress that we're making in wholesale, I think, is a strong indicator of the progress we're making in our Win Now actions.

Our next question comes from the line of Jay Sole with UBS.

Matt, you just talked about a modest headwind to the second half of '26, revenues as you lap promotions. Can you just talk about maybe what modest means? Can you talk about the trade-off between boosting gross margin as you get back to full-price sell, you lap those promotions versus what it means for unit volumes as you try to run a more full-price business?

Sure, Jay. What I was specifically referring to there is, we started our Win Now actions as Elliott came back 8 months ago. And we highlighted them on our Q2 call, and it set us on an accelerated path to change the trajectory that the company is on. And one of the things that, that required us to do is to move quickly to shift our product portfolio and address some of the aged inventory that was sitting in the marketplace. And so we started to move more aggressively with that through sales-related returns, through more discounts to our retail partners so that they could mark down that inventory and move it through, and as well as selling off-price product to our value partners. When we get into the second half of fiscal year '26, we expect to be in a clean marketplace, a healthy marketplace. And so that business in the second half will be more full price, it will be more profitable, but there will be a revenue headwind from the compare to the higher level of off-price liquidation in the prior year.

Our next question comes from the line of Brooke Roach with Goldman Sachs.

Elliott, I'm curious on your thoughts on the China marketplace and the opportunity to drive full recovery there over time. I understand there's some unique characteristics of the marketplace that are making it a little bit more difficult to clean it up as quickly as the other geos. Can you talk about the time line and the cadence of what we should see over the course of the next fiscal year as you look to return that to growth? And how are you thinking about the competitive and operating environment for the brand there today?

Thanks, Brooke. Let me start with making certain that you hear this, that we do believe in the long-term opportunity in China. There are some structural tailwinds which will continue to unlock further opportunity. And I think our biggest opportunity is, from a brand perspective, to inspire and invite the 1.3 billion consumers into the world of sport, lifestyle sport and to fitness. That said, we're not happy with where we are. And Matt went through the results. They are in line with what we planned. I want to make sure you guys hear that as well. We're confident in the Win Now actions, but as you've already pointed out, Brooke, China is on a bit of a different time line. And part of it is because of the structural differences in the marketplace. It's monobrand. The good news is we've been operating in China for more than 40 years. We have deep relationships there. Matt and I have both been involved in turnarounds in China, and we're working closely with the team there. The team is focused on taking the right actions to clean up the marketplace, similar to what you've already seen in North America and EMEA and now is taking place in APLA, cleaning up the big 3, elevating digital. The key here is we're investing in testing some new retail concepts. At the same time, we are resetting and -- resetting some of our consumer-led concepts in existing doors, but we have work to do. The key to winning, and I am confident in the team, the key to winning is that we need to connect locally. We've got to elevate the consumer-led product concepts. Performance running, we touched on, is working there, but we also have some China-specific product through outdoor basketball, the ST Flare and that we're leveraging our geo Express Lane to create China-specific product. And you will see more of that from us as we move forward. And then it is getting the right consumer-led retail concepts in place. We've got a plan around renovating and upgrading throughout '26, launching new concepts and getting the right assortments, consumer-right assortments and the right depth, presentation and storytelling. That's how you return to drive revenue and profits there. It's through driving productivity. And so we're doing it. The team's hustling. But here's what I'd say, the changes are going to take time, but we're focused on pulling the right levers to return to growth.

Our final question will come from the line of Alex Straton with Morgan Stanley.

Perfect. Maybe for Elliott or Matt, as you think about kind of once the smoke clears through this year, just structurally, is there any reason why this business like should not be a double-digit margin business? Or maybe just high level, can you walk us through perhaps what's changed? And like as you think about clearing these actions and those all getting behind you, if anything has really changed in like the structural margin of the business longer term?

Well, Alex, we've consistently been a double-digit margin company over our history, regardless of the size of our business or the composition of our portfolio. And so I think we believe that, that is still a goal that's worthy of pursuing. I highlighted the actions that we've got -- that we've taken in '26 associated with Win Now and the timing of them between the first half and the second half. And we believe the Win Now actions are the right actions to reposition NIKE as a full-price brand in a healthy market. And they're the right actions to reignite brand momentum and growth. And so when I think about the longer term, our goal is to return to sustainable organic revenue growth and to see the recovery of these transitory impacts that we've been talking about as we've been repositioning the business. And with disciplined expense management, it should yield operating leverage as we return to growth, and so that's where we're focused.

I think the only thing that I would add to it is our teams, leadership team and teams around the world have embraced the Win Now actions. We believe by lining up against the sport offense, that will further accelerate those actions. And over time, we absolutely have the ambition to get back to double-digit operating margins.

And that will conclude our question-and-answer session and our call today. Thank you all for joining. You may now disconnect.