Welcome to NIKE's Fiscal ’16 first quarter conference call. For those who need to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Kelley Hall, Vice President Corporate Finance and Treasurer. Before I turn the call over to Miss Hall, 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 Forms 8-K, 10-K and 10-Q. Some forward-looking statements concern future orders that are not necessarily indicative of changes in total revenues for subsequent periods. Due to mix of futures and at-once orders, exchange rate fluctuations order cancellations, changes in the timing of shipments, discounts and returns which may vary significantly from quarter to quarter. In addition, it's important to remember a significant portion of NIKE Inc's continuing operations, including equipment, NIKE Golf, Converse and Hurley are not included in these futures numbers. Finally, participants may discuss non-GAAP financial measures, including references to wholesale equivalent sales. References to wholesale equivalent sales are only intended to provide context as to the overall current market footprint of the brands owned by NIKE Inc, and should not be relied upon as a financial measure of actual results. Participants may also make references to other nonpublic financial and statistical information and non-GAAP financial measures. Discussion of nonpublic financial and statistical information and presentations of comparable GAAP measures and quantitative reconciliations can be found at NIKE's website, investors.nike.com. Now I'd like to turn the call over to Kelley Hall, Vice President Corporate Finance and Treasurer.

Thank you, operator. Hello, everyone and thank you for joining us today to discuss NIKE's FY ‘16 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 and at our website, investors.nike.com. Joining us on today's call will be NIKE Inc's President and CEO, Mark Parker, followed by Trevor Edwards, President of the NIKE Brand. And finally, you'll hear from our new Chief Financial Officer Andy Campion, who will give you an in-depth review of our financial results. 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 two. In the event you have additional questions that are not covered by others, these feel free to re-queue and we will do our best to come back to you. Thank you for your cooperation on this. Now I will turn the call over to NIKE Inc's President and CEO, Mark Parker.

Thank you, Kelley and hello, everyone. Before I move into a discussion on our business, I want to take a moment to introduce our new Chief Financial Officer Andy Campion. As you know, Don Blair retired from the CFO role as of July 31. I'm happy to formally welcome Andy into his new role. Andy has been a key member of the NIKE leadership team for the past eight years and brings to his new role both a passion for the brand and a commitment to driving shareholder value. You'll hear from Andy at the end of the call to discuss our results in detail, but let me start with a few of my thoughts as we begin the new fiscal year. Last year at this time, I talked about our focus on three key areas. The depth of our relationships with our athletes and consumers, our fast-paced culture of innovation and the power of our portfolio, we strengthened all of these areas throughout last year and we delivered tremendous results. In Q1, we carried that momentum forward with an outstanding start to FY ‘16. Let's take a look at the highlights from the first quarter. NIKE Inc. revenues grew 5% to $8.4 billion, despite significant FX headwinds. On a currency neutral basis, NIKE Inc. revenues grew 14%. Gross margin expanded 90 basis points to 47.5% and earnings per share increased 23% to $1.34. Ultimately, NIKE continues to succeed because of the deep relationships we have with the athletes and the consumer. Relationships we know we must earn every day. And we have a thoughtful long-term growth plan which we continue to execute at the highest level. We invest in our biggest opportunities and we have built a diversified portfolio to give us the flexibility to pull the right levers…

Thank you, Mark. It's a new fiscal year, but the strong results continue for the NIKE Brand. Q1 proved yet again the sustained power of the category offense. As we have said, the category offense drives deep and meaningful relationships with consumers. This provides us with great insights to create innovative products, rich services and inspiring experiences that our consumers love. For the quarter, on a constant currency basis, NIKE Brand revenue grew 15%, with double-digit growth across nearly every geography and most key categories. NIKE Brand DTC revenue increased 21%, driven by new store expansion, continued strong growth in online sales, up 46% and comp store growth of 7%. We’re very pleased with global futures up a strong 17%. Clearly, the category offense continues to drive growth around the world and it remains the foundation of our strategy as we look ahead. As always, we use power of our vast portfolio to target the best growth opportunities for the brand. And what gives us that flexibility is the breadth and depth of our category expertise. To see these dynamics in action, let's first take a look at running. Our obsession with speed has driven us for years, so we never settle, always looking to shave off that extra second. This relentless focus on innovation can be seen in the momentum of our Zoom Air technology. Propelling the runner forward with an ultra-responsive step, Zoom Air technology drives key product styles like our Pegasus 32, Vomero 10 and the Elite 8. In Q1, Zoom helped ignite our global community of runners through a special event we called the Fastest Day on Earth, in which we challenged runners to run their fastest mile ever. The event concluded with NIKE celebrating each runner's fastest mile with a personalized video that included the…

Thank you, Mark and Trevor and hello to our stakeholders on the call. I've had the pleasure of meeting many of you over the last several years and I very much look forward to deeper engagement over time. With this being my first earnings call, I would like to take a moment to reinforce a few of our long-standing guiding principles. And also briefly touch on how we will continue to evolve and innovate. Our primary financial objective has been and will continue to be delivering extraordinary value to our shareholders. Delivering value to shareholders is first and foremost a function of creating value for consumers. As consumer expectations continue to accelerate, NIKE will evolve and innovate to exceed those expectations. At NIKE, innovation is in our DNA, that applies to all dimensions of our business, from the products and services that we deliver to consumers, to the operating and business models that we employ. That is what we call being on the offense always. As we create value for consumers, we will continue to capture that value through disciplined and consistent financial management. NIKE knows how to grow. We’re also deeply committed to ensuring that our growth is profitable, sustainable and capital efficient over the long term. We do that through robust gross margin management, continually enhancing the productivity of our resources and investing surgically and strategically in those opportunities with the highest potential for return. Finally, as we create value for consumers and we capture that value financially, we will also deliver that value to shareholders through capital management, risk management and consistently increasing our cash returns through both share repurchases and dividends. Having worked very closely with Mark, Trevor and my predecessor Don since joining NIKE in 2007, I am deeply invested in the strategies that have…

[Operator Instructions]. Your first question is from Bob Drbul with Nomura Securities.

If I'd like to focus on one area, Mark or Trevor, could you guys address -- in China, the results were outstanding. There has just been a lot of headline news around the Chinese consumer, China economy, the currency pieces. I was wondering if you could just elaborate a little bit in terms of the puts and takes that you are seeing in the Business from a financial perspective and really how you are seeing such great demand with the futures and the current quarter revenues?

The piece that we continue to look at is the brand in China is extremely strong. And that's a piece that we have known for a while. As we went through the reset strategy, we wanted to be really focused on how to make sure that we could drive the Business. So, we're very mindful of the macroeconomic volatility in the marketplace. But we continue to really focus on the things that we can control which is how we continue to bring excitement to the marketplace and also continue to align the marketplace around our category offense and we're seeing success from that perspective. So, we saw growth in really all key categories from sportswear, to running, to basketball; we saw it in our wholesale and also in DTC. In DTC, our business actually grew 46% in DTC. And in our wholesale partner’s accounts, the stores that have been re-profiled, those doors actually continue to outperform the actual entire fleet, increasing both productivity and profitability. So, we feel very, very good about the business and we stay really focused on delivering, as I said, great product into the marketplace and really driving the category offense.

And just a follow-up question on that, In terms of gauging industry wholesale inventories, can you just comment on that a little bit in terms of what you're seeing in the marketplace from -- your own product seems really good at wholesale, but just competitively?

I will speak to ours. We have a very healthy position in inventory, so we feel good about that. As I said, we continue to really monitor that and we put a lot of discipline in place as we went through the reset. And we continue to employ that discipline across the organization. So, we’re in good shape.

The next question is from Kate McShane with Citi.

My first question is on North America inventories. I just wondered if you could give a little bit more detail on the composition of the inventory elevation by category and by channel? And how long do you expect this to put some pressure on gross profit margin?

As I think we discussed in the prepared remarks, the brand again in North America is very strong. And demand for our products continues to be very strong in the marketplace. What we're working through is the impact of the west coast port congestion from earlier this year. And what we have done is we have seen the actual flow of product from the port normalize. At the same time, we're working to efficiently clear the excess inventory to keep the in-line channel healthy. We also put on our own North American distribution center and we're working to actually put that capacity in place. That will be fully online. We expect both of those efforts to be complete by the end of Q3 and that is really where we’re around it. So, again, we continue to feel very confident about the Business in North America and this is obviously a very well-developed market where we have the ability to efficiently clear the inventory.

And all I would add, Kate, is that as we work to expeditiously clear that inventory, you do see that impacting our Q2 gross margin guidance. That is just a near-term impact.

My second question is on the supply chain and also a gross margin question. With all the investment that you've made into the supply chain and the effort to make the process more automated with your factory partners, when do you expect to see cost become less of a meaningful offset to gross margin?

Kate, from a supply chain perspective, obviously our manufacturing revolution initiatives we believe will create tremendous value for us over the long term. Those initiatives range from initiatives that are more evolutionary such as optimizing product costs, reducing waste, getting productivity enhancements through Lean and then as you touched on, automation to the more revolutionary initiatives like new methods of design and make and Flyknit is a great example of that. We're beginning to see some of the benefits of those initiatives in margin, but its early stages. We’re still very optimistic about those benefits over the long term.

The next question is from Omar Saad with Evercore ISI.

I wanted to ask a question on SG&A demand creation. I think it was down 6% or 7% this quarter and I think you were expecting it to be down. Wonder if there's any underlying change in trend or attitude towards demand creation? I know you've got some events coming up. And then, broader picture on demand creation investment, SG&A investment, we take out the currency out of the equation and you look at just the total gross profit dollar growth is at such a high rate looking forward and in the Business right now. Are there ample investment opportunities to keep the SG&A investment level in line with that revenue and gross profit dollar growth that you're seeing? It just seems like a really big number to keep up with on the investment side. Thanks.

Omar, I will hit that question. First, in terms of demand creation, Q1, the biggest driver of what you saw in Q1 was comparisons to World Cup investment in the prior year. As we have spoken about in the past, there are some dynamics in SG&A across demand creation and operating overhead that have changed. Those aren't drivers of some of the impact in Q1. That's more along the lines of how we engage with consumers. I think we've spoken to you about that over time that how we engage with consumers now expands into things that fall into that line item operating overhead. In terms of SG&A, as you know, we look to deliver modest SG&A leverage over the long term. But in any given period, our actual investment may be higher or lower. Our guidance for this year reflects continuing to make investments in consumer engagement that we believe drive great returns from a revenue and margin perspective. One example of that would be in nike.com. We're also continuing to make infrastructure investments that we believe are required to support the growth that we're delivering and we're delivering on a consistent basis. And at the same time, enhance the efficiency and effectiveness of our operations. We’re also increasing the productivity of our existing resources and infrastructure. So, we do see greater productivity going forward and currently from our existing resources. That does add, as you noted, potentially to profit expansion; it also gives us greater capacity to invest strategically.

The next question is from Chris Svezia with Susquehanna Financial.

Andy, a question for you, when you mentioned with regard to the guidance on the year, about feeling better about the revenue growth rate, yet you're still looking for reported mid-single digits, just maybe you could walk through that. It's just based on a currency neutral basis, you feel better about the revenue growth or just maybe you can walk through that a little bit even though you're up 9% on the futures number on a reported basis.

Yes, a couple things. The headline from a revenue perspective is we do see strong demand around the globe. You see that reflected in our futures. I did note in my remarks and I will reiterate it, that our futures are weighted more heavily toward the back half of the window. As for our full-year expectations, I think I also noted but just to reiterate it, our outlook is slightly improved. It's just that from a reported basis, our guidance is still squarely within that mid-single digit range.

And then I'm curious, Western Europe continues to put up really good performance and I just really want to go a little bit further into the margin performance which was really strong, even against a tough comparison from last year. Is it just a function of the execution on the category offense, the product, the pricing? Maybe just talk a little bit more about that and maybe the sustainability at that level if you could?

Chris, are you talking about operating like EBIT margin?

Revenue growth a bit, yes, a little bit of both. Revenue growth and I guess more specifically the operating margin being at that level which we have not seen in some time and the sustainability around that.

Just jumping in there just to say, again, as you pointed out, we’re seeing great results out of Western Europe. It really goes back to the work that we did to reset the marketplace along the line of the category offense. We're seeing great growth in the territories. So, whether it's AGS which is Austria, Germany and Switzerland, southern Europe, UK and Ireland, as well as France, all of those territories are performing well. We're also seeing strong growth across the categories, from sportswear, basketball, to running. So, when you look at it from different dimensions, what we’re seeing is just strong demand in the marketplace and then we also continue to work with our wholesale partners to deliver the category offense in the marketplace and that's working real well. So, all the dimensions that we're seeing continue to point to just really strong demand, really strong positioning with our consumers and we've been able to really translate that into the Business.

I will just quickly add, we're seeing incredible brand strength, too, across the major cities across Europe. And I think that is helping as well. The product that we've been introducing to the market has resonated -- sell-throughs are strong. Western Europe is a great example of a complete offense, not just the category offense working, but the complete offense. So, we really feel good about executing across the categories up and down the price point spectrum and across the major channels as well. e-commerce

The next question is from Robbie Ohmes with Bank of America Merrill Lynch.

Trevor, I was hoping you could talk about the Jordan brand, maybe remind us how big it is. And then, I think the commentary on the new areas for the Jordan brand is really interesting. Can you give us some insight on what these areas could be? How soon we could see things happening? How that's going to play out for you with partners at retail and in your own stores? Anything you can give us on that would be great.

The Jordan brand continues to be a key part of our basketball strategy. And as you know, we don't actually report specifically the size of the Jordan business today. But what I can say is that we continue to see tremendous success in the marketplace. So, this summer, in Paris for example, the team was there really executing the anniversary of the Jordan business there. Michael actually went over there, as he's going to go over into Shanghai also. So, it's a sense of a global phenomenon that we’re seeing as really just driving great sell-through and just great demand for the products and the brand. At the same time, we see an opportunity around the training business which is where, as I think Mark spoke to which is we’re expanding the Business beyond basketball into the training segment. And so, that's another area that we continue to see opportunity and potential growth around the world.

I want to add, Jordan is a tremendous brand globally. It's not just a subset of NIKE basketball. It's a stand-alone brand with tremendous potential to resonate beyond basketball as a category. So, it's largely been basketball-based and that will always be the core of the Jordan brand. With that though, we see tremendous opportunity to expand that brand, not just here in North America, but around the world.

And just my second question, the North America apparel growth, what channels are leading your apparel growth in North America? Is D2C accelerating in NIKE apparel or is it department stores? I would just love to get a sense of how you guys are driving such great growth.

Again, our apparel business continues to strengthen. And we're seeing growth really across different segments within the category offense. So, for instance, our running business continues to be a great growth driver. Our sportswear business with our Tech Pack products just continue to be really successful. As you pointed out, we're also seeing great growth through our own DTC doors and also online which are really just key elements. And the other part that we do talk a lot about which is the women's business and so you are seeing great growth come from women's business. So, again, dimensionally, through the category offense, we’re able to really grow our apparel business, really across a broad spectrum of the marketplace. But it's driven by our ability to drive a complete offense through the category offense.

Your next question is from Lindsay Drucker Mann with Goldman Sachs.

I was hoping, as we think about the Olympics ahead, if you guys could put into context how you think about the Olympics as a platform to introduce new products and maybe just give us an historic context for where you had particular success?

Clearly, the Olympics are a great sport moment for the world, but certainly for NIKE. These global events at this scale, the Olympics and the World Cup really stand above and beyond all sports events. And for us, there's an opportunity to really bring our best product, the best innovation, our best storytelling out, serve the athletes at the highest level. The expectations I think on NIKE are extraordinarily high, as they should be. I think this year we will not disappoint. I feel incredibly confident and excited, frankly, about the innovation pipeline, what's in the works, excited about sharing some of that later in the fiscal year with everyone, but I think this Olympics will be one of the best, if not really the best ever for NIKE. I've never seen an innovation pipeline so full and we will be ready. First and foremost, for the athletes but also the consumer and the shareholder, I think everybody is going to benefit from our performance at the Olympics.

Maybe just a follow-up on pricing, can you update us on how much pricing you were able to take this quarter and how we should be thinking about your approach to pricing over the next few quarters?

Sure, I'll take that one, Lindsay. In the first quarter -- we do not report that number at this stage, but in the first quarter, our pricing increases were about what you have seen over the recent quarters. So, we continue to see average gross selling price growing in the low to mid-single digit range. You see that in our futures. So, that is also a proxy for that rate. The way we think about pricing, I think we start first with the consumer. Our approach is to enhance the price value equation for consumers with innovation, design, inspiration and increasingly, service, that expands that average gross selling price. We have not seen any resistance to that from consumers overall. Certainly within our broad portfolio there are greater opportunities than in other areas. But we've seen consumers demonstrate a willingness to trade up for the innovation, design, inspiration and service that we're bringing.

And the next question is from Michael Binetti with UBS.

I might have missed it. Did you give the comp-store sales in North America? And I apologize if I did miss that.

I'm not sure that we did. But comp-store sales in North America were low-single digits in the quarter.

Okay. And I'm trying to correlate that I guess the EBIT margin in the U.S. was a little lower and you talked us through some of the inventory. I'm trying to think if that's related to some of the inventory clearing activities, the slight deceleration in the same-store sales number in North America. And I guess maybe if you think that the EBIT margins will still expand after you guys finish getting the DC up and running and get through some of this West Coast inventory.

I think your inference is correct. The flow of inventory can impact revenue growth at the store level, certainly in the near term. Obviously, as we work to expeditiously clear some inventory that will also impact margin.

Okay. And then just a question on -- as we think about your direct business and your e-commerce business, obviously it's been a great growth business for you. But maybe if you look at a single category, running or basketball just as an example, can you talk a little bit how you balance the strategy there as far as what product you want presented on your own e-commerce site versus what you choose to have presented on your wholesale partners' site? Even if you think about some of your pinnacle distribution which is I know a big focus for you on your own sites. How do you think about the difference and what product is best represented where? And how we should think about the overlap between the two?

I think as we said a number of times, we really view ourselves as being a better retailer so we can be a better wholesale partner. So, what we do is we actually drive what we call our integrated marketplace strategy. And that is a sense of working to differentiate the points of distribution through some of our wholesale partners, through some of the concepts that we have, whether it's House of Hoops with Foot Locker or it's the Chelsea Collective we're doing with The Finish Line. All of those are opportunities for us to provide really great different experiences there. When you go online, our Business continues to grow really at an accelerated rate. And certainly, we're seeing a dimension of the Business, particularly the women's business, is growing at a faster rate than our overall business and also our men's business. That's really where we really see just tremendous growth and that's how we differentiate. It's actually through the concepts that we actually do in the marketplace.

The last question is from Jim Duffy with Stifel. Your line is open.

Andy, question for you, the gross margin expansion in overseas regions is impressive given the FX headwinds. Can you talk to some of the factors supporting that? Is pricing a key variable there or are there other dynamics behind it?

Yes, you're speaking specifically to gross margin or to operating margin?

Speaking to gross margin in overseas markets, you mentioned in your prepared remarks, expansion in Europe, in China and in emerging markets. Given the FX headwinds, I find that impressive.

We’re actually seeing very common trends. And by trends I don't mean fleeting, I mean long-term trends, across the globe. We’re proud of the gross margin expansion that we have delivered consistently over the past several years and we believe we can sustain those longer term and that's not only with respect to select markets, that's really a reflection of our strategy. Our strategy is to bring innovation to the product and to be premium overall and premium at every price point. So, no, there are not unique factors relative to any particular market. We're continuing to see great demand at these prices which we feel great about because it's reflective of what we're bringing to the product.

And to be clear, have you taken any adjustments to prices in overseas markets to try to manage the gross margin?

In reaction to what's going on from a foreign exchange perspective, not directly. The way we think about it is, we’re very well positioned to deliver growth and profitability, all in, under a wide range of circumstances, including FX volatility. We have a very sophisticated foreign exchange risk management program and a trading company structure that afford us the time to plan fully and strategically execute the same way we would absent the volatility. It gives us time to do that and to stay on strategy. So, not directly related, of course, in certain inflationary markets, that can have an impact on price. But no, not directly correlated to foreign exchange.

Thank you, everyone. Appreciate you joining us on this call and we will talk to you next quarter.

This concludes today's conference call. You may now disconnect.