Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2018 Second 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 Nitesh Sharan, Vice President, Investor Relations and Treasurer. Before I turn the call over to Mr. Sharan, 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 the Annual Report filed on Form 10-K. Some forward-looking statements may concern expectations of future revenue growth or gross margin. In addition, participants may discuss non-GAAP financial measures, including references to constant dollar revenue. References to constant dollar revenue are intended to provide context as to the performance of the business eliminating foreign exchange fluctuations. Participants may also make references to other non-public financial and statistical information and non-GAAP financial measures. To the extent non-public financial and statistical information is discussed, presentations of comparable GAAP measures and quantitative reconciliations will be made available at NIKE’s website, investors.nike.com. Now, I would like to turn the call over to Nitesh Sharan, Vice President, Investor Relations and Treasurer.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.’s fiscal 2018 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 or at our website, investors.nike.com. Joining us on today’s call will be NIKE, Inc’s Chairman, 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 question. 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’ll now turn the call over to NIKE, Inc. Chairman, President and CEO, Mark Parker.

Thanks, Nitesh, and happy holidays, everyone. In Q2 we delivered solid results, showing early progress against the long-term strategies we laid out in October. Let’s look at the numbers for the quarter. NIKE, Inc.’s second quarter revenues were up 5%, growing to $8.6 billion. On a currency-neutral basis, NIKE, Inc. revenues grew 3%. Gross margin was 43%, down 120 basis points to prior year, earnings per share was $0.46, down 8% to prior year and we delivered ROIC of 32%. While the athletic marketplace continues to shift, we’re very confident in the factors of our business that we control. Though our Consumer -- through our Consumer Direct Offense, we’re identifying which consumer opportunities have the most upside and we’re over-indexing in those areas to fuel growth. As we outlined at Investor Day, we’re focused on unleashing a relentless flow of innovation at a scale that our industry has never seen, bringing NIKE closer to the consumer in key cities and delivering with speed and using the power of digital to go deep and broad by rewarding our most active NIKE+ members, while expanding that community to hundreds of millions. We’re entering the second half of the year with a wave of new products and concepts. Consumers want fresh, innovative product and they want choice, and right now, our innovation cycle is delivering against those demands. Let’s start with the three distinct platforms in our running revolution. They cover the spectrum of runners and they’re beginning to scale to create a significant commercial impact. NIKE React, for example, is just a few weeks away from being available for runners for the first time with the epic React. The early response to its combination of responsiveness and ride have been very positive. In a sport where every ounce matters, it’s one of…

Thank you, Mark. Happy holidays, everyone. Let’s get right to the results. As always, my comments are on a constant currency basis. For the quarter, NIKE Brand’s revenue grew 4% and revenue for Nike Direct was up 15%, driven by online growth of 29%, comp store growth of 6% and new stores. Mark mentioned how we are identifying our biggest opportunities through our Consumer Direct Offense. We invest in these opportunities through a focused growth agenda, with a focus on 12 key cities, shaping 10 key countries in service of our consumers. It is through the execution of the category offense that we drive brand heat and distinction, which in turn leads to growth in the marketplace. Mark spoke about the great progress we have made in innovation, speed and digital, and at our Investor meeting in October, we discussed how we drive brand heat. In Q2, we created new brand energy and strong demand around the world. From red hot product launches like the Air VaporMax to powerful collaborations like The Ten with Virgil Abloh to creating completely new ways to engage such as the new Nike+ Unlocks, our latest membership service. When we create distinction for our brand and show up authentically, the consumer responds. That brand heat makes us even more confident that we will see continued international strength and underlying improvement in our domestic business, more on that later. Now to the category offense, we create brand and product concepts that generate heat. So let’s review some of the categories where our deeper consumer connections came to life in Q2 starting with basketball. Nike Basketball grew strong double digits in Q2, as we energized basketball culture globally through performance and style. Our new NBA partnership is already energizing our Apparel business, feeding innovation and growth. Both…

Thanks, Mark and Trevor, and happy holidays, everyone. As we said at our Investor Day in October, we are operating in a dynamic environment on multiple dimensions, ranging from geopolitical volatility to the evolving retail landscape here in the U.S., to rapidly shifting consumer expectations around the world. In dynamic times such as these, some will try to do everything they possibly can to change their circumstances in the short-term. But at NIKE, we know that in times like these, you don’t need to do everything, you need to do the right things and the right things are a function of what matters most to our consumers. Our new strategy the Consumer Direct Offense reflects our focus on what matters most to the consumers that we serve around the world, with an emphasis on our top 12 cities and 10 key countries. They are telling us and in fact showing us with their actions, that they want new, innovative products faster and through a more direct connection to NIKE leveraging digital. In Q2 our financial performance exceeded the expectations that we had set 90 days ago, from the topline to the bottomline. But more importantly, our results were amplified by our focus on what matters most. As Mark and Trevor detailed, the launch of new innovative products drove brand heat and strong consumer demand. New versions of the Air VaporMax propelled it to the top selling running shoe globally over $100 and sparked demand for other icons within the Nike Air portfolio. The Zoom Vaporfly 4% propelled runners to the top of the podium at the biggest marathons and it continues to sell out immediately as we bring new supply to the market. And as Trevor mentioned, we saw incredible demand for the Virgil Abloh collaboration with respect to 10…

[Operator Instructions] Your first question is from Omar Saad from Evercore ISI.

Thank you. Great quarter. I really appreciate all the information. There’s a lot there to chew on. Andy, there was a couple comments you made. I wanted to see if I could get you to elaborate on. I think one you said something along the lines of scaling digital to leverage the price value relationship. Are you talking about ASP increases over time, is that -- are you thinking along those lines early in the customer advertising curve, is that something that you guys are prepared to start thinking about again?

Yeah. Happy holidays, Omar. There are couple things we’re scaling there and enhancing the price value relationship. One being innovation. As I referenced, we all know it’s a relatively promotional environment, particularly in the U.S., but even within that environment as we’re launching innovation. At the higher end of the price spectrum, we’re seeing sellouts and incredibly strong demand, and obviously, we have always seen that as an opportunity to expand the entire spectrum of product offerings across price points as we cascade innovation across styles, categories and price points. To your question on digital, we also see digital being opportunity to expand the price value relationship, as well as full price sell-through. So on the first point, we’ve spoken about Editing to Amplify. Digital is where we’re probably doing that most significantly. So editing down our line or our assortment to the products that we know consumers matter -- the products we know consumers love most. Great example we’ve shared in the past would be the Air Force 1 and giving them fewer styles, but better choice and dimension within that and we are seeing strong demand when consumers get what they really want, they’re willing to pay that full price and they’re willing to pay increasing prices as we bring innovative products and new styles. And then we’re also seeing the opportunity as we move forward, as we build new capabilities that leverage demand signals that we get from consumers in terms of how often they buy, what they buy to improve full price versus off price sell-through.

Thank you. Happy holidays, everyone.

Thanks, Omar.

Thanks, Omar.

Thanks, Omar.

Operator, we will take the next question, please.

Your next question is from Bob Drbul from Guggenheim.

Hi, guys. Good afternoon. Mark, you mentioned, the Amazon pilot is going well and your partnership will be expanded. I was wondering if you can talk a little bit about what you’re pleased with so far and what we should be looking for in coming months from Amazon?

Sure. First of all, as I said, the pilot has gone well. We’ve seen good sell-through on the limited selection of products that we have offered. We are extending the small pilot that we’ve got, as I mentioned, we know, I think, when this operates at the highest level that there’s a great opportunity between NIKE and Amazon to serve the consumer in ways that are mutually beneficial to both Amazon and NIKE. So we are extending the pilot. We were bullish on where this can go from here. It’s -- I think the important part is that we advance the brand through better presentation and then the sharing of data, yeah, so we can better serve consumers. I think that’s really what we’re driving for behind the Amazon relationship. And frankly, any digital platform relationship we have. Tmall, I think, in China, we pointed that out. That’s a great example. I met recently with Alibaba’s CEO, Daniel Zhang, a few weeks ago and we’re incorporating our brands on their platforms in ways that benefit both companies, and I think that’s, again, that’s the real opportunity we see with Amazon, as well as we move forward. We’re learning a lot and we’re bullish on our ability to extend that relationship, and continue to grow.

All right…

Got it. I just have a follow-up question for you. On the NFL partnership, you guys have a vote on the competition committee with your partnership and do you have an opinion on the [Technical Difficulty] (45:51)?

Hey, Bob. Sorry, we cut -- I think you cut out there at the end. I caught the NFL part, but that was about it.

I was wondering if you had an opinion on the tax rule. If you’re on the -- do you have a competition committee vote and whether or not Jesse James made that catch last Sunday night, do you have anything?

Okay. We don’t have a vote.

No vote.

No vote. But I am waiting…

Happy holidays, guys.

Yeah.

Happy holidays.

Thanks, Bob.

Thank you. Your next question is from Kate McShane with Citi.

Hi. Thank you for taking my question. Andy, in your prepared comments, I didn’t hear you flag closeout or promotions as a reason for the decline in margin this quarter. So I just wondered if you could quantify that for us and what is your view of the inventory level in the marketplace right now, and is there any differentiation between footwear versus apparel inventories?

Yeah. One of the reasons we didn’t speak about closeout as a driver of margin contraction is that it was not very significant. Almost all of our margin contraction in the quarter was driven by foreign exchange. As you know, we have said time and time again over the last several quarters that what we’re most focused on was tightening supply and lining it up with demand to create a pull market and we feel great about the progress we’ve made there. Overall across the world, we believe our inventories are relatively healthy -- healthier and improving. We still have room for improvement and so we are keeping a close eye on it. And there are discrete pockets, but there is no dimension of inventory that we would call out as risk factor or an item of concern at this point.

Okay. So closeouts in terms of your guidance for Q3, the guidance that you just gave for Q3, are they expected to tick up, because of what they’re comping against or should it be a similar dynamic in Q3 as what we saw in Q2?

No. Actually, there are a couple of factors in Q3. One, FX remains a bit of a headwind, more than a bit, a headwind at about the same level and I spoke to some extent about that. There is another dimension within our margin that I’ll call out. As we launch greater volume and scale of new and innovative products, our tooling and other upfront product costs associated with new styles is amortized in the first season of launch, and that is having a bit of an impact in the second half of the year. In a sense, it’s one of those things you all might often refer to as a weakness that’s really a strength. It is a discrete anomaly within the first season of launch, but it’s really the benefit of this wave of innovation that we’re bringing to market. And so, as we go forward, those products have a very favorable impact on price value and margin. It’s just that this pretty significant shift up in mix of new innovative products in this second half of the fiscal year versus last year is having a little bit of an impact, particularly in Q3.

Thanks, Kate. Operator, we’ll take the next question, please.

The next question is from Paul Trussell with Deutsche Bank.

Good afternoon.

Hi, Paul.

Very strong performance out of the international segments, so congratulations on that, but I do want to better understand the dynamics of the North American market. In particular, if you can just discuss what you’re seeing from a demand standpoint and how you are changing supply into the marketplace and is the commentary regarding anticipating significantly less contraction in second half primary related -- primarily related to the timing of product launches? Thanks.

Yeah. Let me start with North America, your question. First of all, we continue to see as we all do the shift, consumer shift toward digital, and obviously, that’s why we’re over-indexing in that area. In the near-term, as Andy had mentioned, we expect that there’s going be a promotional backdrop and some continued retail consolidation in the North American market. Despite that, and I think, Andy, touched on this as well, there is a real consumer appetite for innovation and new retail experiences, and that has us very excited, particularly as you look at what’s coming in the second half of this fiscal year, particularly ramping up in Q4. Many of the new product innovations that we have and the platforms that I think are very leveraged -- highly leverageable, really ramp up in the Q4 period of the second half. So and the consumer, there is an appetite for premium product and new innovation, and we see that driving full price, and again, a real pull market for us, which is really what we’re driving for in North America especially. So we also have membership. We’re connecting through membership. We’ve seen really strong results as we build our membership base. And then speed, we talked ability our ability to move and our focus on moving closer to market. We know that that’s also a major factor in driving full price demand with the consumer. So, I guess, I would say that disruption really is what’s creating opportunity. So we’re investing in a sustainable platform in North America for long-term growth and we see that wave of growth coming for NIKE in the U.S., building into Q4 and then moving through fiscal ‘19. Andy, do you want to?

Yeah. In short you’re right. I did mention that we did see significantly less contraction in the second half of fiscal year ‘18 than with the first half. The -- what’s beneath the surface of our results is we’re building momentum and we’re seeing -- we are going to see that momentum build monthly over the second half, particularly as we start to launch some of these products late in Q3 and then scale them in Q4. We obviously don’t plan the business on a fiscal quarter basis. We plan it on consumer time lines and we’ve got some pretty impactful consumer moments coming up and product launches. And so just to reiterate with what Mark said, we see accelerating growth in our Nike Direct businesses. We see the early stages of stabilization in a consolidating, but more importantly, transforming wholesale marketplace and that’s really positioning us well for growth as we exit fiscal year ‘18 and from fiscal year ‘19 forward.

Thanks for the color. Best of luck and happy holidays.

Thanks, Paul. Same to you.

Thanks.

Operator, we’ll take the next question, please.

The next question is from Jim Duffy with Stifel. Jim Duffy, your line is open.

Oh! Hi, everyone. Happy holidays. Thanks for taking my question.

Hey, Jim.

Hey, Jim.

Very encouraged by the comments about the anticipated inflection in North America into fiscal ‘19, with respect to focused wholesale distribution resources in North America, I am curious where you are in the process of communicating that to channel partners. Specifically, what’s been the message to those deemed not strategic on a go-forward basis and how are you navigating those kind of delicate communications?

Yeah. I’ll start on that, Jim, and happy holidays, by the way.

Thank you.

As you know and you’ve followed us for a while. We don’t disclose the specifics of our partner investment or trade terms publicly. That being said, one of the reasons is, because it depends on the partner. And what you highlighted is great to mention on what that means in particular right now, which is, where we’re really focused on investing is with those most strategic partners who want to move fast, test and learn with was and prove out the financial benefits of more direct, differentiated retail, with higher levels of service, and that connect the NIKE Brand more closely to the consumer leveraging digital. And to your point, we are shifting investment or funding from more undifferentiated dimensions of wholesale toward those partners that share our vision and both Mark and Trevor discussed some of the examples that we are currently testing and implementing with partners. And we’re seeing great results early on from those experiences that are better serving consumers and giving them more of what they want, leveraging digital and in a more personally-oriented service environment. And so it will be a shift, but we are deep into those discussions, and in fact, we are investing with our partners already in that regard.

Yeah. And what I’ll just add is that, and Andy kind of touched on it. The thing that really grounds us in that discussion is really the consumer. At the end of the day, the shift of the consumer moving to what we describe as differentiated retail is a call for them saying that they actually want to be better served, and we see that digitally and we also see that physically. So that’s the conversations that we have and that’s why when we see the work that we’re doing, when we test, learn and scale with the partners, that actually see that, that’s where the conversations have been really pretty straightforward, which is the consumer ultimately decides. Our job is to create even better experiences. That’s what we’ve been working on. So a lot of the things that we touched on in the prepared remarks, whether it was the Sneakeasy concept or it was the work that we’ve done with Finish Line or JVs in Europe. They are great examples of how we’re better serving the consumer, and as a result, those dimensions are actually driving some more significant margin and better profitability. So that’s the reason why we -- the conversations are usually pretty straightforward.

Very good. My next question is on consumer shift. The pendulum seems to be swinging from casual lifestyle back towards performance. Mark or Trevor, I am curious to what extent you guys think this is serendipitous or cyclical versus simply consumers responding to a more compelling product offering in the marketplace?

Well, I think it’s more B than A. The consumer shift, I don’t think these are cycles as much as a response to specific products and compelling stories behind those products. We find that the esthetic of the product is absolutely essential no matter if it’s performance or sports style. We are, as you know, the largest lifestyle business in the industry with, I think, we’re at $8.5 billion in revenue in fiscal ‘17 and in Q2, our Sportswear business was the largest in our history as a company, and that was driven by both footwear and apparel. That said, the appetite for pure performance product is incredibly high. It also drives opportunity in Sportswear. So there’s a symbiotic relationship between performance and Sportswear that we are very focused on creating and leveraging. That’s really what sets NIKE apart I think in the end is our ability to take performance insights to drive unique product designs that we can then leverage for everyday lifestyle. And I feel really good about where we are right now as far as that’s concerned, and then as we look at the new platforms and products that we have coming Q3 and ramping up in Q4, I think, we’ll even be in a better position.

Thank you, Jim.

Thank you.

Operator, we’ll take one last question, please.

The last question is from Jonathan Komp with Robert W. Baird.

Yeah. Hi. Thank you. I want to actually ask about the strength on the direct side of the business. I think Trevor mentioned it accelerated and it was broad-based across nike.com and the same store sales globally. So any more color on where you’re seeing the strength globally across geographic segments and any more detail on the color would -- on the drivers would be great?

Yeah. Hi, Jonathan. Happy holidays. I’ll start on that. It’s broad-based. We’re seeing growth in nike.com in every geography and outpacing growth in almost every other dimension in every geography. In particular, where we really see the strongest dimensions of growth are in the key cities and key countries where we’re really focusing execution of our offense. And that go a little even more narrow than that is Nike+ membership. We re-launched that in November. I would say the strongest rates of growth within digital were in the number of new members we got in the month of November alone, in the number of big members in November alone and what’s great is we were really closely tracking what types of offerings the member unlocks and other services were resonating with them most.

Yeah. And I’ll just add that one of the things that we did talk about is, we’re clearly seeing the consumer shift to digital commerce and buying stronger online, as well as buying through the app. So one of the things that we have done and which, I think, is helping to fuel that growth is certainly as we rolled out the sneakers app in Europe, as well as in seven of the 10 key cities or key markets in Europe, we actually, it will go into Japan at the back end of this year. So we’re really excited. International business is again exceptionally strong and we see just continued growth rates. Also, we are also seeing strong growth with our partners like Tmall and Zalando and ASOS. All of those are really key drivers also in terms of how they’re actually working with us. So the fact that we’re on their platforms, we’re working with them very closely and we’re certainly seeing them be able to grow in particular segments, whether those are premium segments or those are specific category segments.

Okay. Great. And then, I just wanted to follow-up with a question on the mix of growth overall international versus North America. And I think, Andy, you highlighted the Analyst Day guidance for the next five years at 75% of the growth will come outside of North America. And I am just wondering how to think about when you’re expecting the shift to start to meet that metrics of growth. So starting in 2019, do you see that mix of growth starting to play out or it’s about three quarters of international and North America returns to growth or how soon do you think…

Yeah.

… that’s the right way to think about it?

Yeah. From a growth perspective, one of the things that we are feeling great about and increasingly confident in, based on the success we were seeing in Q2 with the execution of our new strategy, lines up with what we communicated at Investor Day. We said at Investor Day we see North America being a mid single-digit revenue growth geography, we said we see Europe being mid-single digits to high-single digits, Greater China in the low to mid-teens and APLA in the high-single digits to low-double digits. And as you’re seeing this year, we are -- we have actually greater momentum than that in our international markets. And while we not at that current -- at that rate of growth in North America currently, the underlying momentum we’re building and the -- and that we see ramping in Q4 and then positioning us for fiscal year ‘19, we think gets us back close to that targeted range in North America. So I’ll tell you that’s one of the things we’re most excited about in North America. While we talked about less contraction in the second half, it’s really about the momentum that we see building as we get to fiscal year ‘19 and being more in line with that long-term growth algorithm that we shared at our Investor Day.

And as we look forward too, we say that it’s never linear, right. So a huge part of that comes down to, in North America, we will continue to help transform that marketplace with the work that we’re doing with the consumer experiences. So we think that that will clearly have impacted, whilst at the same time, we’re obviously driving the digital business. So, we believe that, to Andy’s point, it will over time look in that way, but it won’t necessarily go just quarter-by-quarter.

Thank you, Jon. That’s all the time we have for today. Thank you all for joining us. Happy holidays and we’ll speak with you next quarter.

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