Good afternoon, everyone. Welcome to Nike, Inc.'s Fiscal 2020 Fourth Quarter Conference Call. For those who want to reference today's press release, you'll find it at http://investors.nike.com. Leading today's call is Andy Muir, VP, Investor Relations. Before I turn the call over to Mr. Muir, 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 the 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 Web site, http://investors.nike.com. Now, I would like to turn the call over to Andy Muir, VP, Investor Relations.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss Nike, Inc.'s fiscal 2020 fourth quarter and full year 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 one hour ago or at our Web site, investors.nike.com. Joining us on today's call will be Nike, Inc. President and CEO, John Donahoe; and Chief Financial Officer, Matt Friend. Following their prepared remarks, we will you’re 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 one. 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, John Donahoe.

Thank you, Andy, and let me congratulate you on your new role leading Investor Relations. I also want to congratulate Matt on becoming our CFO and express how deeply confident I am in Nike's financial management under Matt's leadership. Before I get into our Q4 performance, I want to take a moment to acknowledge the environment in the U.S. right now. Over the past month, we've seen racial tragedies expose systemic prejudice and injustice in America. And Nike has a long history of standing up against inequality, driven by our values and rooted in the power of sport. Today, we are uniting behind our black athletes, teammates and community as Nike continues to lead with purpose. And we're taking action to help create lasting change to address systemic racism in our society, including a combined $140 million commitment from Nike, Converse, the Jordan Brand and Michael Jordan. And while we continue to lead externally, we also strive to be even better internally to meet the high bar we set for ourselves to be a truly diverse and inclusive company. We're also continuing to deal with the COVID-19 pandemic, which has had a profound impact on the lives of so many across the globe. And throughout all of this, we have led with our values. We have executed with empathy and decisiveness. We prioritized the health and safety of our teammates by closing stores, offices and other facilities. We committed to provide pay continuity for all of our teammates, even while our facilities remain closed or had altered schedules. And we have maintained this important investment over the past 12 weeks. Our innovation teams designed and delivered personal protective equipment to health systems across the country. We donated footwear and apparel to help frontline workers around the globe. And we've committed…

Thank you, John, and hello to everyone on the call. I also want to take a moment to welcome Andy Muir to her first call that she expands her responsibilities and provides leadership over Investor Relations. Before discussing our fourth quarter results, I must recognize and thank our incredible team around the world. I have personally been inspired to watch everyone come together to face our current challenges, embracing new ways of working, and decisively taking actions to serve our consumers in the face of unprecedented conditions. I could not be prouder to be a part of this team. This quarter was certainly like no other in Nike's history. As John mentioned, to protect the safety of our employees and to help prevent the spread of COVID-19, 90% of our own stores outside of Greater China and South Korea were closed from operation for roughly eight weeks in the quarter. Similarly, our wholesale partners largely followed the same pattern and the sale of product through physical retail channels came to a halt. Digital quickly became the primary channel that we could engage with and serve consumer demand, and Nike was well positioned to respond. We accelerated growth of our digital business to 79% on a currency neutral basis and drove nearly triple digit acceleration in member digital demand. All told Nike digital represented nearly 30% of our total business in the fourth quarter, and reached $5.5 billion for the full year. The net result of these two marketplace dynamics was that Nike, Inc. Q4 revenue declined 38% on a reported basis. And yet, even in the midst of this global pandemic, we saw the power and distinction of the Nike brand translate into growing business momentum throughout the quarter continuing into June. Greater China returned to growth in Q4 and…

[Operator Instructions] Our first question comes from Alexandra Walvis with Goldman Sachs. Your line is open.

Good evening. Thanks so much for taking my question here. And thank you for all the comments in the prepared remarks; very interesting on the longer term outlook for the business. I wanted to dig a little bit more into the consumer direct acceleration that's hit out in your remarks there. Can you talk about the plans for new stores? Do you have any color on the number of new stores that you're planning to roll out? And can you talk about, what is being planned for the wholesale business perhaps in terms of points of distribution, or partners that you're targeting over time?

Sure, Alexandra. In a funny way, I would characterize this investment in these new doors as a continued investment in our digital future. And we look at everything through the eyes of the consumer. And consumers as you know are becoming accustomed to getting what they want, when they want it, how they want it, right? And this pandemic is really demonstrates a shift toward digital being at the center of everything they do. But they want modern and seamless experiences. They don't necessarily just want to buy digitally and have it shipped from home, you're seeing during the pandemic and we believe it will continue. They want to buy it on their digital device and go pick it up in the store, or with soft goods like apparel, they may want to reserve it online and try it on in the store. They may want to be in a store and buy something that is not in the store because of inventory. And the associate uses a digital device to buy it and get shipped home. And so consumers increasingly want a consistent, seamless physical and digital experience. And so that's what we're committed to providing and we're committed to providing those through; first and foremost, our own digital capabilities, as well as our own digital stores, both factory or I'm sorry, own physical stores factory and direct. A very important piece of this is our strategic partners, our strategic wholesale partners we envision having fewer of them, but focusing on those that will share our vision of providing a seamless experience a consist seamless experience with physical points of presence. And then we think there's an incremental opportunity in the market and a need to provide a mono brand experience, particularly around women's and apparel. We have actually…

And I might just jump in Alex and say that, as John mentioned, we've been testing the Nike Life concept. We started in Melrose in Southern California. We've opened a store in Long Beach and in Glendale. We've also been testing the concept in Shibuya in Tokyo. And in the first half of the year, we intend to ship to Nike owned doors in New York to the Life concept. And as we've continued to test the concept, we've been testing the assortment, we've been testing member engagement, we're seeing that members engage more frequently. It's serving to help us retain members. And so as John mentioned, this is why we see this as being a catalyst to digital growth having local stores that members can engage with.

That Tokyo store inventory driven by consumer demand, digital demand is constantly changing based on what's moving. So it's a great example of a digitally connected future.

Our next question is from Omar Saad with Evercore ISI. Your line is open.

Thanks for taking my question. I'd be interested to hear you talk more in a category offense has such a strong initiative at the company for many years. I'd love to hear you talking more about the shift to men's, women's, kids. How does category offense fit into that maybe a little bit more behind the impetus behind that. And what's the end result here is that higher revenue growth, better margins, more dynamic product lines. Thanks.

Omar, the first thing I'd say is the category offense is working, right? And triple double makes complete sense and our growth drivers are spot-on. And they were working, frankly, when we came into the pandemic. And the pandemic, in many ways was a stress test for them. And it really proved that our current strategy is working. So what we're talking about here is how do we take -- how do we take what might have taken us three to five years to make it happen in two. And we think there is some pretty fundamental shifts in consumer behavior that give us this opportunity to accelerate our progress. One shift is digital, right? As I said a minute ago, digital is now fundamental and central to everything consumers do. And we are the clear leader in digital, we'll double down on that. The second I just talked about was the marketplace of the future, right, where we believe we can drive for OneNike marketplace with our own capabilities and those of our partners. But third, and directly your question is, aligning our organization against, A) a more simple construct of men's, women's and kids, but also ones that help us unlock what we think are great growth opportunities, right? Women's apparel, kids and frankly, the emerging health and wellness of the opportunity. So this is not to be crystal clear not abandoning the consumer direct offense. This is accelerating it and refining it so that we're more directly connected to the biggest opportunities. Like women's, great example women's, we have less than 10% of the women's apparel market in the U.S. Women's grew this quarter, two times the rate of men. And this will allow us to align our organization and focus our resources more directly on that opportunity, as well as on others. And so we view it as an acceleration and I think will result in more directly connecting and building deep consumer relationships which will result in higher growth market share. And as Matt said in his remarks, we believe also, this is also healthy for profitability.

Yes. And Omar, I would just add to the category offenses has enabled us to sharpen our focus on performance sport and the lifestyle of sport. And this shift is going to enable us to specialize and get deeper insights to the performance category. And the lifestyle sport categories through the gender lens. And so if you think about it from innovation to the way we create products or the way we bring it to market, we believe that this is an opportunity to move from insight to innovation and creating products specifically for the consumer, and ensuring that we did it to market the way that we intended, when we captured the insight and created the product, which we believe will accelerate growth against these big long-term opportunities.

Our next question is from Erinn Murphy with Piper Sandler. Your line is open.

I guess on new customer acquisition you talked about real strength in the quarter. I guess if you look across the suite of apps in your own dot-com. Where did you see the highest uptick of new customers, if each of you can share a little bit more about what you saw from that as well? And then, how has that shaped your growth strategies around your app and just your broader digital ecosystem?

Erinn, this gets to membership and why we think membership is at the center of everything we do. And if you think about it, in simple terms, membership is a big word but in my mind it breaks down three simple things. Do we have a one-on-one relationship, an identified one-on-one relationship with a consumer? Can we increase our level of engagement with that consumer in value-added ways? And then, does that increased engagement lead to greater retention and share of wallet if there are other purchases? And in terms of acquiring new members in a quarter we had a phenomenal quarter, 25 million new members registered that's up over 100%. Half those came from our activity apps and half the new members were women, which is a very encouraging sign. And then, those new members and our existing members were highly engaged, particularly around Nike Training Club, Nike Running Club, our Sneakers App. The stats are just -- I think I listed a few of my remarks and Matt did, but NTC weekly active users which is a really important metric, because someone may only buy footwear and apparel a few times a year, but engaging with us each week maybe even each day brings Nike into their lives and so we grew weekly active users triple digits in the quarter, 25 million workouts with women alone in Q4 and that which is -- and so we think the activity levels and the engagement's growing. And then it's really clear that increased engagement leads to increased purchases. And so the Nike commerce app saw triple-digit growth in both downloads and monthly active buyers, as well as the Sneakers app over $1 billion in first time use. And so directly connecting with consumers, engaging them with our powerful portfolio of activity apps, and then translating that into the kind of both digital and online and offline relationships where they purchase more is kind of core to the strategy that the OneNike marketplace, if you will, is designed to address that direct need.

Your next question is from Matthew Boss with JPMorgan. Your line is open.

So maybe as we think about the acceleration of the Consumer Direct strategy that you outlined, how best larger picture to think about the impact on gross margin annually, as we think about 50 basis points a year prior. SG&A, I think the prior target was slight leverage multiyear or maybe just said differently, is there any constraints hindering this overall acceleration being a relative acceleration of your mid-teens bottom-line annual algorithm?

Well, Matt, the way I would answer your question is that our long-term financial model has always been principled. And it starts with creating value for the consumer which then translates into creating business value and ultimately value for the shareholders and our focus is on creating sustainable profitable long-term growth. As I mentioned in my prepared remarks, the shift to digital is financially accretive to Nike, and we believe that this will be an enabler for us to sustain that momentum longer term. In the near-term or in any given period, obviously, we deal with foreign currency, we deal with anomalies that can have an impact on an interim period, but we're very confident in how this strategy will enable us to sustain that growth long-term. What I would tell you because you asked the question about investment. We've been this quarter in particular was indicative of an opportunity for us where we managed SG&A very tightly but we actually accelerated investment the way we needed to, to enable our employees to work-from-home, to enable digital demand, to do the things that we needed to do in order to be able to accommodate the environment in which we're operating. And as we look to the future while we will accelerate investment against the areas that I referenced, we also see equal opportunity for us to shift resources that sit in our P&L in legacy forms which we can redeploy against the future, and so that's going to be our focus as we look toward the future. We will be investing but we're going to accommodate it within the confines of our existing financial model.

Your next question is from Bob Drbul with Guggenheim. Your line is open.

I guess I have a couple of questions on the inventory and I think the plan to sort of have it right-sized by the second quarter. Can you just talk through the major strategy that you have, the flexibility that you have to sort of utilize your outlets versus off-price versus the digital piece of it? Just walk us through some of the major initiatives in terms of getting back there on the supply and demand piece of this, please?

Sure, Bob. As you know, Nike has always tried to carefully manage supply and demand, and as a premium brand, we maintain our premium nature because we try to optimize a full-price marketplace across our channels season after season after season. And so when the pandemic hit it became clear that there was going to be excess inventory for a period of time. And we pulled many of the levers that we have at our disposal in order to be aggressive in addressing this issue. And in particular, we said our first and primary principle was to get inventory clean in the marketplace as fast as we possibly can. And so we now feel confident based upon the actions that we've taken that we will have inventory right-sized and clean by Q2 or in Q2. And in China, as I referenced, given they faced the pandemic a little bit earlier, they're going to clear and come out of the situation from an inventory perspective by the end of June. And so we feel very good about the actions that we've taken. To your point, the marketplace is more promotional. We have shifted more units of liquidation through our factory store fleet because that's a brand-right way for us to liquidate our inventory at a higher profitability level. But, we are also seeing some discounting that's happening across the marketplace but our discounting is less than what we're seeing across the broader marketplace, and our strong brand and our consumer connection is causing us to liquidate and move through inventory faster than what we are seeing across the rest of the marketplace. And so through the first three weeks of June as I referenced, we feel like we're on track against this plan or we are on track against this plan and are confident that we're going to be positioned for the consumer and for the market in the second half of the year.

Great. And I guess just a quick follow up is, with the NBA season sort of looking to return, any early picks in terms of who you guys think will win the title in the back half?

Bob, we are so happy that basketball is going to be back. We just want someone wearing a Nike uniform to win. We feel pretty good about that prediction.

Your next question is from Jay Sole with UBS. Your line is open.

Matt, you talked about the shift of inventories to direct consumer and increase the digital capacity 3x to meet the demand to digital. Could you just talk a little bit more about that like what that means and going forward is there any constraints that will from a capacity perspective that will slow the company's growth to you getting the ecommerce to be 50% of the total business going forward?

Sure, Jay. So I'm incredibly proud of our teams that work in our global operation and logistics because they delivered no small feat in the quarter, increasing the amount of volume that we could ship by 3x in North America and EMEA without much of an increase in cost on a per-unit basis. And the reason why they could do that is because our current distribution capabilities are omni-channel, which means we can ship to wholesale customers, our factory stores and to digital and that enabled us to be agile in the moment to increase our digital demand fulfillment. As we look forward, I mentioned that we're going to be investing in a new facility on the West Coast of the U.S. in order to be able to fulfill demand through holiday. And we expect that we will continue to invest in regional service centers in order to be able to fulfill demand closer to the consumer. But we've also enabled buy online pick up in-store and ship-from-store from our stores which will also be a way that we fulfill demand closer to the consumer. So I guess a long way of saying that we feel confident that we can continue to meet this digital demand and our team continues to be able to expand capacity without it compromising our cost per-unit. In fact, they continue to do what they can to mitigate cost per-unit and we believe it's a long-term opportunity for us as well.

And I may just to add a little bit of color on that. The week before last, I had a chance to go out and visit our teams in Memphis along with Andy Campion. By the way, Andy's not on the earnings call any more, but he's working full-time as our COO on just what Matt was talking about, doing a great job. And Andy, Venky and I went out and saw our teams in Memphis and got to see this adapt facility that Matt talked about. It was initially constructed to serve wholesale, but has now been completely redeployed to serve direct-to-consumer. And I think, Matt, you referenced the power of data, right, the power of that Celect acquisition where advanced analytics and demand sensing capabilities can allow us to get the right product as close to the consumer in the right time which offers enormous efficiency opportunities, right? And by the way, that's a scale gain and that's going to allow us to build scale that others won't be able to match and we want to share that scale with our wholesale partners and others as we embrace this. And so it was really great to see that team and they've done a phenomenal job as their counter parts in Europe and in China.

Our last question is from John Kernan with Cowen. Your line is open.

Hey, Matt, can you give a little more detail on the inventory obsolescence, the bad debt and the big supply chain costs? What's the level that you faced in the fourth quarter, obviously pretty significant, how do we think about those line items in the first quarter and as fiscal 2021 evolves?

Sure, John. Let me break it down for you a little bit. The first thing I would say is that year-to-date through the first three quarters of fiscal year 2020, we delivered strong gross margin expansion, about 70 basis points excluding the impact of active FX and that was on the back of a really strong product portfolio, innovation and then ultimately our digital business. In the fourth quarter our gross margin was impacted by COVID-19 and the decision that we took to prioritize cleaning and right-sizing our inventory into Q2. And so the plans that we aggressively put in place to rebalance supply and demand did have an impact on our margins in Q4. But let me break down to [A24] [ph] maybe a little bit more. About 500 basis points of the impact was related to factory PO cancels, inventory obsolescence, as we were making decisions about the value of our inventory and our plans to liquidate it and then the negative rate impact due to lower wholesale shipments on our supply chain costs. What that last point really means is that as our press release said, our wholesale shipments were down 50%, but because our costs are mostly fixed, you see a negative rate impact as a result of that. And so as wholesale shipments start to pick up, you'll see less of an impact as you look toward the future. And then, we also had 70 basis points of FX headwind in the quarter. As we look ahead to next year, we do expect the market to remain promotional in the first half. And in Q4, we had about 250 basis points impact from like promotional activity, across our own stores and our partners as we were investing to liquidate inventory across the marketplace. As we look to the first half of next year, we expect that the marketplace will continue to be promotional as we and our partners are moving through this inventory to achieve our goal. But as I said in my prepared remarks, we expect to see sequential improvement relative to what we delivered in Q4 as we move quarter-by-quarter through the first half. I think you also asked about bad debt, so bad debt fits in SG&A, it doesn't fit in margin and it was $180 million in the quarter. I think that's really more reflective of the wholesale marketplace. And our risk assessment of some of our wholesale customers and the impact that this pandemic has had on their ability to pay Nike for receivables that were owed. And so if you connect the dots to what John said in terms of our strategic acceleration, we do believe that there is going to be consolidation and dislocation in wholesale distribution in North America and in EMEA and that's why we're taking a measured approach to growth in those geos as we look forward to next year.

And embracing the great wholesale partners that we think will be the real winners along with us and partnering as close as we can with them to build that marketplace of the future.

That's excellent. Thank you. Excited to see the refinement of the Consumer Direct Offense. Best of luck.

So thanks, everyone, for joining us today and we look forward to speaking with you next quarter. Take care and stay safe.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.