Nike (NKE) Q1 2025 Earnings Call Transcript

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Nike (NKE 0.83%)
Q1 2025 Earnings Call
Oct 01, 2024, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone. Welcome to NIKE, Inc.’s fiscal 2025 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, vice president of corporate finance and treasurer.

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

Paul Trussell — Vice President, Investor Relations and Strategic Finance

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.’s fiscal 2025 first quarter results. 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. Joining us on today’s call is one speaker, NIKE, Inc.’s executive vice president and chief financial officer, Matt Friend.

We will start with prepared remarks and then open up for questions. Today’s call will be abbreviated as compared to past earnings calls. In order to allow as many of you to ask questions as possible in our allotted time, we would appreciate you limiting yourself to one question. I’ll now turn the call over to Matt.

Matthew Friend — Executive Vice President, Chief Financial Officer

Thanks, Paul, and hello to everyone on the call. Before we get into a review of the first quarter, let me acknowledge that we are reporting our results in a transitional moment as John retires as president and CEO and Elliott Hill joins us as our new president and CEO on October 14. First, we deeply appreciate John’s contributions to NIKE. He has served on our board, led our company through a global pandemic and meaningful supply chain disruption, accelerated our digital transformation, and initiated new NIKE community investments around the world.

We thank him for all he has done to move NIKE forward. As we look ahead, we’re excited to welcome Elliott back to NIKE. Elliott is a beloved NIKE veteran who brings a powerful connection to our employees and culture, a deep love for our brands, and a passion for sport. Over his 32 years with the company, he built a proven track record of leading our global teams, brands, and businesses with significant expertise in delivering growth by bringing product and storytelling with impact into an integrated marketplace.

Our board believes that Elliott is the right leader to drive NIKE’s next stage of growth. Having had the opportunity to work closely with Elliott for many years, he leads with a passion that inspires the best from the team. Our employees’ response to this announcement has been tremendous. You can feel the energy and the enthusiasm walking around campus.

And we’ve heard nothing but excitement from our teammates around the world, including our alumni network as well as our partners. We all look forward to working with Elliott as he leads NIKE’s next chapter. Given our CEO transition and with three quarters left in the fiscal year, we are withdrawing our full-year guidance. We intend to provide quarterly guidance for the balance of the fiscal year.

This provides Elliott with the flexibility to reconnect with our employees and teams, evaluate the current strategies and business trends, and develop our plans to best position the business for fiscal ’26 and beyond. To that end, we have also decided to postpone our Investor Day. Now, let me turn the discussion toward our current business. NIKE’s first quarter results largely met our expectations set last quarter.

We are moving aggressively to shift our product portfolio, create better balance in our business, and reenergize brand momentum through sport. That said, a comeback at this scale takes time. And while there are some early wins, we have yet to turn the corner. Today, I want to provide a deeper insight into the trends we saw in our first quarter.

Then I will speak to the portfolio shifts that we are driving and the implications for our near-term performance. I will also touch on some of those early wins, including indicators to track our progress. And last, I will review our financial performance and Q2 outlook. Let’s start with a deeper look into the first quarter.

While Q1 revenue was largely in line with our plan 90 days ago, we delivered lower unit sales than we expected, partially offset by a higher ASP. Traffic declines across NIKE Direct were more significant than we anticipated. We saw particular softness in traffic on NIKE Digital as well as in our partner stores in Greater China. As a result, retail sales underperformed our plan, including our wholesale partners, with slightly elevating marketplace inventories requiring higher levels of promotional activity in Q1 to drive conversion.

This included the back-to-school period as our results underperformed the market. We saw store traffic improve in August and growth in factory stores in Q1, but the overall period fell short of our expectations. However, Q1 showed that we took an important step forward as we shift our portfolio to create better balance in our business. We have been intentionally reducing the proportion of our business driven by our classic footwear franchises, Air Force 1, Air Jordan 1, and Dunk.

And as expected, NIKE revenue in Q1 from these franchises decelerated, declining more than the total business as we tighten marketplace supply. We expect this trend to continue tempering our reported revenue over the coming seasons. Our timelines differ across each franchise, each geography, and each channel. Overall, we have taken the most aggressive actions in NIKE Direct and especially Digital.

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