REMARKS AS PREPARED FOR DELIVERY

Q1FY24 NIKE Inc. Conference Call

September 28, 2023

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Information contained in these remarks was current only as of the date of the

Good afternoon, everyone. Welcome to NIKE, Inc.'s fiscal 2024 first 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 Investor Relations and Strategic Finance.

Now I would like to turn the call over to Paul Trussell.

[PAUL TRUSSELL]

Thank you, operator.

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 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-over basis and are currency neutral,

I’ll now turn the call over to NIKE, Inc. President and CEO John Donahoe.

[JOHN DONAHOE]

Thank you, Paul, and hello to everyone on today’s call.

Nike’s foundational competitive advantages are the envy of the industry.

As the global athletic market leader, our scale and portfolio allow us to create an impact that only

Nike can. Consumers all over the world recognize Nike as the #1 champion for athletes and sport,

And during this time, Nike has grown larger and stronger. In FY19, Nike’s revenues were $39 billion.

Today, we’re over $50 billion. What’s more, our growth has outpaced the overall industry during

this period.

Let me offer a few examples of how we’ve redefined the game over the past few years. The

consumer told us they wanted lifestyle product and we delivered, growing Air Force 1, AJ1 and

Dunk to be the three largest footwear franchises in industry history. We continue to set the bar in

key global sports like Basketball and Global Football. Jordan is now one of the leading brands in

North America, with potential for so much more. We accelerated digital capabilities that fueled

engagement with our brands and deepened direct consumer connections around the world. The

storytelling has driven energy in many areas, but we have opportunity to cut through with more

sharpness and clarity around the performance benefits and distinction of our products. And we

have built a best-in-class marketplace with unrivaled scale and reach but we have opportunity to

deliver more compelling assortments particularly when it comes to serving our Women’s

consumers.

So, across the Company, we are focused and mobilized to address areas where we need to raise

our game, while continuing to drive competitive separation across the board. We’re aligned, we’re

confident and we’ve kicked into a new gear.

Today, I’d like to offer three examples of where Nike showed our best this quarter where we brought

together product, storytelling, and marketplace to connect with consumers and drive results.

Let’s start with this summer’s World Cup.

At Nike, as I’ve said before, it always starts with great product. In Football, that’s led by Phantom

Luna and Mercurial, our most innovative football boots as well as our array of national team kits

designed for elite female players and our style-driven collections that stood out so well this summer.

customization, local co-creator workshops, Nike Trainer-led workouts, exclusive product launches

and more. The response to Dream Arena surpassed our expectations, with some great learnings

we plan to use at scale moving forward.

And all this led to results. In both footwear and apparel, we beat our sell-through plans with strong

double-digit growth across Men’s, Women’s and Kids in Global Football. In EMEA, all our key boot

franchises Mercurial, Phantom, Tiempo and Phantom Luna saw double-digit growth in Q1, leading

Global Football to grow double digits in the geo. In APLA, Football also grew double digits, with

strong growth in Kids-sized kits as we continue to inspire the next generation of fans to fall in love

with the sport. From this summer’s World Cup and the Euros last summer, to the WNBA and our

our latest signature shoe, Devin Booker’s Nike Book 1. It’s a shoe built for comfort and performance,

with a clean, on and off-court style. The Nike Book 1 will hit retail in December, with consumer

energy already building.

The Sabrina 1 continued its very strong sell-through this quarter, across both Women’s and Men’s.

And just a few hours ago, we launched the LeBron 21. The 21 builds on the success of the 20 by

keeping its low-cut profile design and adding premium lightweight materials designed to connect

with younger generations.

Q1 also saw the official introduction of the Kobe Brand. We commemorated Kobe Day on August

This quarter we also brought the energy of basketball directly to the consumer. We hosted

tournaments in cities like LA and Chicago, culminating with the Nike World Basketball Festival in

by bringing Zion, Luka and Tatum to Paris for Kay 54 one of the world’s biggest streetball

tournaments that doubles as a showcase of the culture and growing community of basketball.

Moments like these don’t just grow competitive separation for Nike and Jordan. They are also how

Finally, I’ll walk through the geography where our overall vision comes to life best: Greater China.

In Q1, Greater China grew double digits for the second straight quarter, and we are taking share in

the market.

are aligned.

A highlight in Q1 in Greater China was our three-day sport festival, “Sportchella,” where we

welcomed thousands of women to connect with our three brands through movement and

mindfulness. The team amplified the impact of the festival by partnering with Tmall to create the

first Nike Super Brand Week, which drove more than 2 billion impressions. This partnership

seamlessly integrated the event with a digital shopping journey that generated very strong

consumer response and engagement.

The team also brings our brands to life in our best retail experiences, fueled by strong, meaningful

range of products from footwear with the Motiva and Free Metcon to apparel with our statement

bras and leggings.

in Q1. And they’re expanding connected partnership, which after just a few quarters is now live in

350 doors across 102 cities and is driving substantially higher member demand vs last quarter.

Simply put, Greater China sets the execution standard for us. Our goal is to scale their success

across every geography, every sport and every dimension of our business. That’s how we win over

the long-term.

In the end, as I said, we’re focused and moving with new confidence against the opportunities we

see. The teams are feeling energized, united by our shared passion and urgency for competing at

the highest level.

[MATTHEW FRIEND]

Thanks John, and hello to everyone on the call.

Nike’s first-quarter results demonstrated the impact of staying on the offense when we drove a

quicker return to a healthy marketplace in Fiscal ’23 and leading with operational discipline as we

begin the new fiscal year.

We delivered Q1 results in line with our guidance. Retail sales across Nike Direct and wholesale

continue to grow on top of extraordinary sales this past year. Both Nike inventory and our total

consumer and the marketplace, and where we are driving focus and attention to unlock even greater

potential ahead.

Looking at inventory, we continue to feel very good about our position. Nike inventory dollars are

down 10% versus prior year. Our total inventory units across the marketplace, including Nike and

our wholesale partners, are down double-digits versus the prior year. Partner-owned inventory units

are in line with the previous year, with levels planned to remain lean through our second quarter a

meaningful accomplishment after higher levels of wholesale sell-in during Fiscal ‘23.

On the whole, we are very comfortable with the level of inventory in the marketplace in relation to

the retail sales we are seeing, as we begin increasing levels of wholesale sell-in our second half.

average order values.

Our Stores delivered an especially strong quarter, with traffic up double-digits from last year and

members driving an increasing share of business, as consumers shifted from our digital to physical

channels. This is similar to what we are seeing across the industry, and after seeing this trend

building in early June, our team was nimble in transitioning inventory to capture higher full-price

sales across our entire store fleet.

Nike Digital grew 2% with non-linear comparisons to the prior year including liquidation actions and

a higher number of product launches on the SNKRS App in Fiscal ‘23.

Meanwhile, within wholesale, we see largely positive results from our most important strategic

partners. Specifically, we were pleased to see high single-digit to low double-digit retail sales growth

Ultimately, we have a segmented portfolio of strong partners across price points and channels, with

no single partner representing more than a mid-single digit of Nike’s total business. And looking

across the entire marketplace, we are confident in our brand momentum as we accelerate direct

consumer connections, elevate our Brands, and create capacity for long-term growth.

Looking ahead, our priorities start with our product pipeline. And over the coming seasons, we will

build on the market share gains that we have accelerated in recent years by scaling newness and

innovation across our portfolio, while carefully managing the health of our most iconic product

franchises.

grow the Kobe brand. We will ignite the next chapters of Pegasus, the Jordan game shoe, and Tech

Fleece while continuing to grow powerhouses like Dunk and Metcon.

And as we look toward the second half of this fiscal year, and beyond from the 10

Air Max Day to the Paris Olympic Games we will introduce our next wave of Nike Air innovation.

This will bring our most comprehensive evolution of the Air platform in years one that we expect to

catalyze both our brand and business. We will deliver pinnacle performance innovation to athletes,

while also scaling into new lifestyle franchises over the next several years.

Ultimately, we are focused on scaling a deep, diverse, and distinct product portfolio not just for one

digital split shipments and improved digital fulfillment costs enabled by investments in our regional

service centers and a new transportation management system. In addition, Nike Brand ASPs are

Finally, we are focused on improving our marginal cost of growth, with more modest increases in

operating overhead this fiscal year following two consecutive years of double-digit growth in this

area. We are doing this by unlocking speed and productivity as we transform our operating model

to build a faster, more efficient Nike.

Now, let me turn to our NIKE, Inc. first quarter results.

In Q1, NIKE, Inc. revenue grew 2% on a reported and currency-neutral basis.

product costs and approximately 90 basis points of unfavorable changes in net foreign currency

exchange rates, almost completely offset by strategic pricing actions.

SG&A grew 5% on a reported basis, primarily due to increased demand creation expenses around

World Cup ’23, and more moderate increases in operating overhead benefiting from shifts in timing

of technology investments to the remainder of the year.

Our effective tax rate for the quarter was 12.0%, compared to 19.7% for the same period last year,

primarily due to a one-time benefit provided by the recent delay of the effective date of U.S. foreign

tax credit regulations.

following our restrained sell-in of marketplace supply. Nike Direct was up 7%, as Nike Stores grew

wholesale partners is a great indication of the health of our inventory and our ability, especially in

this first quarter, to flow a complete assortment and season into our retail stores in the marketplace.

And we that's NIKE at its best, our most premium elevated retail experiences, high levels of

seasonal assortments where we can tell stories and really bring the breadth and the dimension to

consumers. And we saw that momentum building throughout the quarter. So, we feel really good

about the decision we made to move fast. And even though the marketplace is promotional, we're

on our front feet in terms of the way we're able to present our brand and our stories and our products

to consumers in that market right now.

Perfect. I just wanted to focus on kind of the running innovation that you guys highlighted a number

of times on the call across areas. I think you had said you launched some running in the last few

years, but perhaps it didn't connect as much as you wanted, or you wanted to scale it more

effectively. So, could you just touch on maybe what changed in NIKE's approach in the last few

years and then what you plan to do differently to kind of reignite that?

[JOHN DONAHOE]

Yes, Alex. As I said, we we're at our best when we align innovative product with distinctive

storytelling through a differentiated marketplace. And in running, we have 3 different categories in

runner.

innovations in the last couple of years. The Invincible took some of the performance benefits from

our road racing shoes, particularly ZoomX, and brought them into an everyday running shoe along

with some great cushioning, so good innovation.

Similarly, the Infinity 4 brought the React X foam platform, which has got some real characteristics

of low- carbon footprint, better high energy. But we're not yet combining those innovations with

getting in the path of the everyday runner with a really strong ground game, and so that's what we're

focused on. And that starts with distribution, making sure we're breaking through everywhere every

doors play a really important role.

focused on it, and we are moving with urgency to deliver.

[MATT FRIEND]

There's also a meaningful opportunity as running influences lifestyle and sneakers. And as we've

had tremendous success from a classics perspective over the last couple of years, we have a rich

heritage of products in our pipeline related to running for decades. And so, one of the things that

we're also doing is accelerating our opportunity in running lifestyle with some of our best franchises

and capturing on that trend and also the consumer shift to modern comfort. And we feel like that 1,

2 punch, as John mentioned, innovation, performance, and lifestyle, is really going to position us

[MATT BOSS]

just any initiatives that you see to drive further market share gains as we look forward.

[JOHN DONAHOE]

Actually, Matt, why don't you take the first part of that and close in on demand, and I'll take the

second.

[MATT FRIEND]

Sure. Well, Matt, as I referenced, we saw mid-single-digit retail sales growth this quarter. And this

When we look at the big consumer moments this quarter, 618 seems like so long ago at this point

in time, but 618 in Greater China, we were the #1 sports brand on Tmall and saw impressive double-

digit growth over that time horizon. And within back to school, we outperformed the industry. And

when you look at our performance over the quarter, we saw momentum building throughout the

quarter heading into back to school. And so, we were encouraged by what we were seeing from a

consumer perspective.

I mentioned that we saw high single-digit to low double-digit growth in our most important partners

and strong growth in NIKE Direct this quarter given what we're anniversary-ing in the prior year. So,

continue to believe that.

And Matt, if we just extend out, as you asked, a little bit longer term, we step back. We still see the

same fundamentals, which are some structural tailwinds in our industry, right? The definition of

sport is expanding. And so, with the movement toward health and wellness and fitness and new big

areas of movement like dance, one of my favorite we've had a lot of interaction with breakdancing

in the last 3 months here on campus, seeing some of the elite breakdancers who will compete in

the Paris Olympics coming. But dance throughout Asia and other places is a huge market. So, we

just see an expanding definition of sport where movement has become sport, and we're at center

of that.

advantage there. So those are some structural tailwinds.

And then we just do we’re in a great industry with those tailwinds. We've got to do what we do so

well. Innovation plus great storytelling plus great marketplace, we believe will drive real strong

growth. And we see great growth in women's. Jordan, we think, has extraordinary growth. Running,

we think we have great growth; continuing to expand the market in basketball, global football. And

as Matt mentioned, this driving performance and then into lifestyle is something that makes our

industry, our business and our future quite attractive.

[OPERATOR]

[MATT FRIEND]

Sure, Jay. Well, we remain confident in our ability to drive our long-term financial goals. And we still

believe those long-term goals of profitability are achievable. But the timing is difficult to predict. But

the reason why I emphasize what I emphasized this quarter is that I feel I really feel strongly that

fiscal year '24 is a turning point for us and a proof point for NIKE to drive more profitable growth.

The structural things that I referenced, the structural drivers, I should say, that I referenced, it starts

with creating value for the consumer and our products. And we continue to see benefits in our gross

across channels.

And I mentioned a couple of examples like reducing digital split shipments so that a consumer

doesn't get 2 boxes for the same order, the way that we're lowering our outbound fulfillment costs

through the investment in regional service centers that are closer to where consumer demand is.

And so those are just a couple of examples that we continue to see.

And then, of course, we do expect that while the ultimate landing spot of digital and direct isn't as

clear, we do believe we're going to be a more direct and a more digital company and a more

The next question comes from Piral Dadhania, RBC.

said that in Q1, your partners registered a high single-digit to low double-digit sales growth in the

period. I just wanted to understand whether that was their sell-out number or whether that was your

sell-in number. Any clarification there would be very helpful.

[MATT FRIEND]

Sure. That was a sellout number. That was a sales-to-consumer number.

[OPERATOR]

And then bigger picture, if you could just comment on sort of the shape of the recovery of the sales

and the profitability that you're seeing in China and any thoughts as we look to the balance of the

year?

[MATT FRIEND]

Sure. Well, as it relates to the second quarter, what I said was that we expect our growth to be up

slightly versus the prior year. I did answer Matt's question just and I'll connect the 2 together, but

we are expecting retail sales, so to sellout to the consumer, to be in line with the mid-single digit

that we delivered this quarter across the full marketplace. And the second quarter is really the last

margins expanding in the second quarter on an operational basis, excluding the impact of FX, we're

up 150 basis points and are really encouraged as we think about what we delivered in the first

to start to see even more impact from ocean freight because those are rolling in midway through

this quarter. We're expecting to see lower product costs in the second half, and our FX headwinds

are going to abate a little bit as we get into the back half of this year. And so, some of those elements

will drive increasing margin expansion as we carry through the balance of the year.

I think your the last part of your question was on China and profitability. What I would just say is

that we know from a long history of managing this business that when you have a healthy

marketplace and you're driving full price sales and you are driving productivity in your retail formats,

you're -- you've created the environment that's ripe to drive profitability improvement. And as we

look at the momentum that we're seeing in Greater China, another quarter of double-digit growth,

And so, we'll continue to try to highlight the opportunities and what we're driving from a profitability

perspective, but that's one of the reasons why our EBIT was down this quarter in Greater China, as

foreign exchange headwinds as a result of the strength of the U.S. dollar definitely has created a

bit of pressure in the short term. But that's we're focused on what we can control and continuing to

drive a healthy, profitable business in that market and believe the fundamentals for long-term growth

and profitability are strong for NIKE.

[OPERATOR]

We'll go next to Aneesha Sherman, Bernstein.

Do you feel like you are in enough physical retail doors today to appeal to a rebalancing of shopping

habits?

ERP and kind of where you are this fiscal year and next fiscal year?

[JOHN DONAHOE]

Matt, I'll take the first part. Maybe take the second. So Aneesha, again, our entire marketplace