Good afternoon, everyone. Welcome to NIKE’s Fiscal 2016 Second Quarter Conference Call. For those who need to reference today’s press release, you will 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 Ms. 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 is 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 non-public financial and statistical information and non-GAAP financial measures. Discussion of non-public financial and statistical information and presentations of comparable GAAP measures and quantitative reconciliations can be found at NIKE’s website, investors.nike.com. I would now like to turn the call over to Kelley Hall, Vice President, Corporate Finance and Treasurer.

Thank you, operator and happy holidays everyone. Thank you for joining us today to discuss NIKE’s fiscal 2016 second 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. President and CEO, Mark Parker, followed by Trevor Edwards, President of the NIKE Brand, and finally you will hear from our 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, please feel free to re-queue and we will do our best to come back to you. Thanks for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, Mark Parker.

Thank you, Kelley and hello everyone and happy holidays. Q2 was another strong quarter for NIKE. We continue to show that we have the ability to drive both profitable growth and significant shareholder value over the long-term. Let’s take a look at the highlights from the second quarter. NIKE, Inc. revenues grew 4% to $7.7 billion, despite continued FX headwinds. On a currency-neutral basis, NIKE, Inc. revenues grew 12%. Gross margin expanded 50 basis points and earnings per share increased 22% to $0.90. The success you see today and the opportunities ahead are driven by the strength of our portfolio. NIKE has many dimensions to our business and together they are operating powerfully and efficiently. We are connecting deeply with consumers through products and experiences and capturing value through our strategies and investments. Our complete offense, which includes our brands, geographies and categories, makes us flexible and keeps us close to the consumer so we can see AND act on new opportunities in real time. We see it in the markets we transform like China and Western Europe and in the businesses we accelerate like Women’s and the Jordan brand. Our operational scale is second to none. We have the power to grow the entire marketplace and innovate through a global supply chain that shipped roughly 1.1 billion units last year. And as we have shown consistently, everything we do is executed with a sharp focus and a financial discipline. We have a proven track record of delivering top line growth; expanding profitability; and maintaining a high return on invested capital. And because we drive consistent, profitable growth, we are able to deliver strong returns to our shareholders. For example, we recently announced a 4-year, $12 billion share repurchase program. We increased our annual cash dividend for the 14th year…

Thank you, Mark. Happy holidays everyone. The NIKE Brand delivered another impressive quarter demonstrating the tremendous momentum of the NIKE Brand. Let’s take a look at the numbers. On a constant currency basis, NIKE Brand revenue grew 13%, with double-digit growth across every geography and most key categories. NIKE Brand DTC revenue increased 26%, driven by 13% comp store growth, continued strong growth in online sales, up 49% and new store expansion. And we are very pleased with the continued strength in Global Futures, up 20%. As always, these results are due to NIKE’s world class ability to understand the consumer, what they need and what inspires them. Those connections let us see the biggest growth opportunities and then sharpen our focus to best attack them. It’s these powerful relationships that drive our Category Offense providing us insights to create the innovative products, meaningful services and inspiring experiences that athletes all over the world love. Let me highlight three categories that demonstrate this powerful consumer focus. Let’s first take a look at running. Running is our largest performance category and continues to deliver strong results, with Q2 revenue growing at a double-digit rate. At NIKE, we know that running never stops. No matter the season, no matter the conditions, we provide solutions to help runners get out and pursue their goals. This quarter, with winter setting in, we released our Flash Pack collection, which offers a reflective print to keep runners visible and warm in low-light conditions. The Flash Pack includes apparel such as the Aeroloft Flash Vest and the Shield’s Flash Running Jacket, as well as great footwear, including the popular Air Zoom Pegasus and the Air Zoom Structure 19. All told, this collection offers yet another great example of how NIKE innovates to expand the market. Other running…

Thanks, Mark and Trevor and happy holidays to everyone on the call. Q2 was another strong quarter for NIKE. We delivered on our goals in terms of both top line growth and profitability. We also continued to have strong momentum across our uniquely diverse global portfolio of businesses. We are driving and delivering these strong financial results even amidst a volatile macroeconomic environment and we continue to do so by one, staying relentlessly focused on creating value for our consumers, leading with innovation; two, effectively managing all of the operating and financial levers within our business to capture value for NIKE; and three, deploying our capital strategically to fuel long-term growth while also consistently expanding total returns to shareholders. I will briefly touch on how we delivered against each of those three dimensions within the quarter. First, by executing the Category Offense, we continue to more deeply serve and create value for our consumers around the world. In Q2, that translated into double-digit revenue growth in all of our geographies on a currency-neutral basis. As both Mark and Trevor highlighted, we served consumers through the launch of innovative new products in multiple categories and we also scaled recent product innovations such as Tech Pack, Aeroloft and Flyknit more broadly across our performance categories and Sportswear. At the same time, we continue to transform where and how we serve our consumers leading with the expansion of NIKE.com while also scaling premium category-oriented retail experiences with our partners around the world. In Q2, we also effectively managed all of the operating and financial levers within our business to translate our strong top line growth into expanding profitability. That included gross margin expansion through sustained strategic pricing and product cost management as well as leveraging productivity gains to ensure we deliver appropriate near-term…

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

Hi, good evening. Happy holidays.

Hey, Bob.

Hi, Bob.

I guess just a couple of questions. The first one really is when you look at the – I think the futures orders going into the next six months and specifically, China and Japan, can you just elaborate a little bit more in terms of what’s the acceleration that’s going on there? And I guess how you plan to run the business, reinvest in the business or leverage some of that strong revenue growth?

Sure, Bob. I was just continue to say that as it relates actually both to China and also Japan, I think first let’s start with in both markets we have incredible brand strength in both of those markets. And in China specifically, as you recall, we spent time resetting the marketplace and we are now seeing the results of that reset really take place. They had an incredible quarter. I was actually just recently there. We are seeing just great growth across the Sportswear, the Running, the Basketball business, the dotcom business is doing exceptionally well. And so also working with our key partners, the transformation efforts that we put in place are actually now really, really working well. So, we see great sell-through in the market and we see really good health of the inventory. So, all the dimensions really would say that China is in a great place. We feel confident about the long-term potential of the market. Similarly in Japan, with the futures, what we are certainly seeing in Japan is that they went through similar efforts to really make sure we stayed focused on the brand. We have an incredible pipeline of products come in. The DTC, the dotcom business is doing exceptionally well there too, and we continue to work with our partners really well, so a similar story in those marketplaces. Obviously, I think it all stems from great brand strength that gives us real great confidence about the long-term potential of both of those markets.

Great. And I just had like one other additional question. So, when you look over sort of the medium to longer term, do you think you will get more value out of the LeBron lifetime contract or the $12 billion buyback program?

Both of those will add value, Bob.

We are bullish on both products. No question. A fool’s compromise.

Alright. Thanks very much. Good luck to you guys. Happy holidays.

Cheers.

The next question is from Kate McShane with Citi.

Hi, thank you. Happy holidays.

Hi, Kate.

Hi, Kate.

Excuse me, my question was around inventories. I know this has been in North America, something you have highlighted at least in the last quarter. Can you give us any more indication of what these inventories are the composition of them? Is it in a particular category? Is it across the board? Any kind of additional insight and any more detail on how you will be working through that in the third quarter?

Sure thing. Overall, the excess inventory in North America is really current fresh product and the largest portion of that really stems from the residual impact of the West Coast port congestion earlier this year. And it really consists of basically part of that was delayed. We proactively delayed some products in favor of priority products that we felt that would actually work well in the marketplace. A smaller portion of the product is the stuff that didn’t sell through as we would have liked in the marketplace and we are clearing that as part of the normal course of business to really keep the inline channel healthy and at the same time allows us gives us the room to bring in more new fresh products. So, that’s really what you see taking place. So, our efforts in the back half of the year as we continue is to expeditiously clear the excess inventory through our robust network of factory stores and we feel confident with the demand in the marketplace that we could efficiently move through the product.

Okay, great. Thank you. And my second question is on Brazil, I think you used the word reset when you are talking about Brazil in your prepared comments. Is it similar to what you did in China or started in China a couple of years ago that you are starting to see positive results from or is there something else that you are doing in Brazil that is working towards driving that demand again?

Yes, I will take that again. I mean, I would say that on Brazil essentially the brand is again very strong in the Brazilian marketplace. And obviously, with the macroeconomic conditions, it makes for a slightly different way of operating. But what we did say is that some of the fundamental things still remain the same, which is that what we continue to do is work to transform that market along the lines of the Category Offense to ensure that we can bring more compelling consumer experiences to retail and online that will drive both productivity and profitability in the marketplace. So again, similar story, but we are being very, very refined in Brazil. And we see this as a market for the long-term and it has tremendous potential, because it is a sports loving market, but we are certainly working through some of the opportunity that exist in that marketplace.

Yes. And Kate, all I would add is to put it in financial terms, the macroeconomics obviously are impacting overall growth in the market. But specific to NIKE, we are taking share. Inventory levels in the market remain healthy actually and that is due to some proactive efforts in our regard in terms of managing supply and demand. And so to Trevor’s point, when we say reset, we are really talking about positioning that market along the category lines from a distribution perspective in that regard in similar ways as we have done in North America, China and Europe.

Thank you.

The next question is from Omar Saad from Evercore ISI.

Thanks. Good afternoon. Thanks for taking my questions. First question on gross margin, the guidance, I know you are working through some inventory next quarter, down 50 bps. But if you kind of look at your full year guidance, it implies a really nice bounce back in the fourth quarter gross margin somewhere in the 100, plus 100, 150 bps range. A) I want to make sure I am kind of doing the calculation right and b) is that the right way to maybe think about the gross margin algorithm more along those lines once you work through the excess inventory in North America?

Yes, Omar. You have got the different elements of the equation generally in line. As we mentioned, we have had gross margin expansion in the first half of the year fueled by what we do season in, season out, our expansion in average gross selling price, our management of product costs, etcetera. What you’re seeing in Q3 is more of a near-term impact and that relates to us more expeditiously clearing that high-quality but excess inventory in North America so that we can bring new innovative products to market over the balance of the year.

Got it. Thanks. That’s helpful. And then can I ask a question on apparel and pricing there? If you look at your ASPs over the last several quarters, a couple of years in footwear, it’s really been strong. Apparel has been positive too. It seems like there is more innovation and more newness and more new technology you are bringing to the market on the apparel side. Can we maybe start thinking about the apparel business going through some of those premiumization elements that have really pervaded the footwear business or is it premature to think along those lines? Is there something different about the apparel market, it’s more competitive? I don’t know. How do you think about that? Thanks.

Well, the apparel market is definitely different than the footwear market. It’s certainly competitive. We see the same opportunity to bring a premium performance position to apparel that we do in footwear however and that’s our focus. We are actually accelerating our innovation efforts, advanced R&D program and some of our design for manufacturing efforts in apparel are really aimed at trying to elevate our performance position there. So, we see some opportunities and frankly that’s our position of distinction in apparel is to really solidify the performance, the authentic performance position and take that distinction and then drive it across the rest of our business, across the categories and from the performance apparel standpoint and through sportswear. So, that’s definitely our plan and we feel quite bullish about it.

Yes, I will just add that what we also continued to do is we continue to attack segments within the apparel market by category that offer a more premium position. For example in the football market, the Global Football market, the opportunity to go after what we call football training is a great example of how we bring innovation to that segment. Similarly as we have done in Sportswear with the Tech Pack collection, which is a very premium offering, which is seeing tremendous success across the market all around the world. So, these are just examples of ways that we continue to, as you said, see the premium priced opportunity, but make sure we are giving the consumers great value in the apparel business by bringing innovation to the marketplace.

And there is definitely a consumer appetite here.

Appreciate it. Thanks so much. Happy holidays.

Thank you.

Thanks, Omar.

The next question is from Lindsay Drucker Mann from Goldman Sachs.

Thanks. Good morning, everyone. I mean, good afternoon plus good evening. It’s been a long day. I wanted to ask in North America, as you think about the way that you will be able to efficiently push the excess inventory out, how much of that inventory, Trevor, you talked about using your outlet stores? How much of the inventory you expect to go through outlets versus the markdown in your regular wholesale through your regular retail partners versus any of the close out channels? And my second question is in currency, Andy, would you be able to tell us how much you expect the earnings per share impact of FX to be in 3Q and 4Q? Thanks.

Yes, I would just say, we expect that more of our inventory would be liquidated to our factory stores. Like we have said, we have got a robust network and we continue to feel very positive about the demand in the marketplace for the brand. And so for those consumers looking for a value occasion, we think we are providing great value at this – particularly with the recency of some of these products.

Okay. And Lindsay, we don’t provide forward-looking FX impact on earnings per share per se. But as we noted in the first half, FX did have a significant impact and we do expect that it will continue to have significant impact in the second half.

Okay. Thanks very much.

Thank you.

The next question is from Michael Binetti from UBS.

Hey, good afternoon guys. Happy holidays and congrats on a great quarter. A question on China really quickly, if we look at some of the retailer – your biggest retailers over there that are public companies that give us updates, they have done a nice job alongside you restoring their same-store sales growth and that’s obviously come after you guys have restricted inventories into that market to force the pull market, good habits on that market. If we look at some of those, the same-store sales rates have stabilized a bit or even decelerated from very high levels, maybe just a touch, but I am willing to bet that some of those retailers are holding less inventory on hand than they have in the past. And now they are heading into store growth and into an Olympic year. Is there a point where we could think about the growth rate for you in China looking more like the same-store sales rates that we hear out of that market? And put another way is there a point where you would say your growth rate there would stop benefiting from replenishing dated inventory on hand, for example, to your biggest retailers?

Yes, Michael, I will start on that one. Just to add a little bit of dimension in terms of China, we have had strong growth across a number of the dimensions in that market. Our same-store sales growth is strong and remains strong. I wouldn’t necessarily call it as decelerating significantly or call it decelerating significantly I think as you noted. In terms of the prospects going forward, one of the things we touched on at our Investor Day was how much of our retail footprint we have impacted with our new category-oriented strategies in the wholesale marketplace. And if you recall, the number we gave at the time was that we have touched about 20% of that market in terms of our re-profiled doors and our more consumer-focused, category-oriented experiences. Those experiences continue to have very healthy inventory, much faster turns than we experienced years ago, strong comps, margin expansion and again, that’s 20% of the market. We still believe we have a significant opportunity in that market to continue to proliferate that across wholesale. And then again, one of the other things fueling our growth in China is our DTC business and notably, NIKE.com as Trevor referenced.

Got it. And then that’s an interesting segue. When we think about the digital business going to $7 billion in revenues by 2020, would you mind talking to us about which categories or geographies the majority of that growth comes from? And how the mix of digital will look at that time compared to today which is very North America weighted for you? Thanks.

Yes. I mean, the digital business obviously provides a tremendous opportunity for us. And I think as we often talk about, it really touches all dimensions of the company. As you look at the growth rate, the growth rates we’re seeing really will come from all the different dimensions of the business. When you think about the undeserved categories as certainly, as we look at the Women’s business, we look at the Young Athletes business, we look at the Jordan business all of those really provide great opportunity to growth from a category perspective, along with the big categories that are already growing. I would also say the same time that I think from a geographic perspective, while North America is currently one of the larger growing ones China has a tremendous, tremendous growth opportunity. We can see that as being one of the most connected markets out there. Europe has continued growth opportunity. So, we really do see as an expansive opportunity across the board. And obviously then there is Central and Eastern Europe which we have continued to see growth. So, it really is one of those cases where it’s a global footprint and we just see more and more opportunity the deeper we dive.

Thanks a lot, guys.

Operator, we have time for one more question.

The last question is from Chris Svezia with Susquehanna Financial.

Good afternoon, everyone. Thanks for taking my question. I guess, Andy for you, I guess any color by any chance between on the futures number, front half, back half in terms of growth rates, any difference between the cadence?

Yes. The futures are slightly more heavily weighted towards the back half. I would refer you back to some of my remarks in our guidance though. There are a number of factors that are worth taking into account in terms of futures and especially as they relate to revenue. That being the weighting of futures across the season as compared to just across this monthly reporting window as well as shipping timing and other factors. But in short, in terms of just the weighting kind of first half or second half of the year futures reporting window slightly more heavily weighted towards the second half.

Okay. And then I guess my second question as it pertains to the revenue outlook, correct me if I am wrong, but I think you said high single to low double-digit reported for Q3, but sustaining kind of a mid single-digit growth on the year which is similar revenue growth that you gave on the last quarter despite the acceleration of futures, so which would imply I guess a de-acceleration in revenue growth for Q4. Maybe walk us through so maybe why that will be the case or is it just being conservative given the macro volatility? I am just sort of curious for your thoughts about that.

Yes. At first, what I would say is our full year guidance on revenue is consistent. So, very much consistent with our guidance 90 days ago or in other words, unchanged. As we look at it, the balance of the year and you are looking to futures as a proxy again number of factors and I touched on a few of those. There is also the timing of flowing product into the market around events and other factors, the timing of revenue recognition as you ship to wholesale customers as compared to shipping directly to consumers through our DTC business. So, I refer you back to our guidance, but the punch line on our guidance is that it remains consistent in terms of our full year revenue expectations.

Okay. Thank you very much and happy holidays. All the best.

You too.

Thank you.

Alright. Well, thank you everyone. Have a great holiday season. Happy New Year and we will talk to you in Q3.

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