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Nike, Inc. (NKE)

Q1 2012 Earnings Call

September 22, 2011 5:00 pm ET


Kelley Hall - Senior Director of Investor Relations

Donald W. Blair - Chief Financial Officer and Vice President

Charlie Denson - President of Nike Brand

Mark G. Parker - Chief Executive Officer, President, Executive Director and Member of Executive Committee


Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Eric B. Tracy - FBR Capital Markets & Co., Research Division

Michelle Tan - Goldman Sachs Group Inc., Research Division

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Kate McShane - Citigroup Inc, Research Division

Robert S. Drbul - Barclays Capital, Research Division



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Good afternoon, everyone. Welcome to Nike's Fiscal 2012 First Quarter Conference Call. For those who need to reference today's press release, you'll find it at Leading today's call is Kelley Hall, Vice President, Treasury and Investor Relations.

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 and discounts, which may vary significantly from quarter to quarter. In addition, it is important to remember a significant portion of NIKE, Inc.'s business including Equipment, NIKE Golf, Cole Haan, Converse, Hurley and Umbro are not included in these futures numbers.

Finally, participants may discuss non-GAAP financial measures including references to total wholesale equivalent sales for NIKE, Inc. businesses that have license sales. Wholesale equivalent sales include those reported revenue and estimations of sales by licensees based on the royalties paid. References to total 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 result.

Participants may also make references to other non-public financial and statistical information and non-GAAP financial measures. Discussion of nonpublic, financial and statistical information and presentation of comparable GAAP measures and quantitative reconciliation can be found at Nike's website, Now, I would like to turn the call over to Kelley Hall, Vice President, Treasury and Investor Relations

Kelley Hall

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss Nike's fiscal 2012 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,

Joining us on today's call will be NIKE, Inc. President and CEO, Mark Parker; followed by Charlie Denson, President of the NIKE Brand; and finally, you'll hear from our Chief Financial Officer, Don Blair, 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 2. 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 turn the call over to NIKE, Inc.'s President and CEO, Mark Parker.

Mark G. Parker

Thanks, Kelly, and welcome everybody you to our first call of the new fiscal year. At our Investor Day in June, we outlined some exciting opportunities and goals for our brands and the company. Reaching those goals starts with our relentless focus on creating innovative and compelling products for our consumers everyday and Q1 shows how we're delivering on our commitments. NIKE, Inc. revenues for the first quarter were up 18% to $6.1 billion. In line with our expectations, gross margins were down 270 basis points to 44.3%. And in spite of that, diluted earnings per share of $1.36 were up 19%. Those numbers do a great job of reinforcing that NIKE, Inc. is a growth company and our growth is accelerated.

We all know that the economic uncertainty that we're seeing in the world today is putting pressure on consumers around the world. Yet in most countries, we continue to see solid growth in Footwear and

Apparel sales, which tells me the growing middle class in developing markets is increasing consumption and that consumers everywhere are ready to buy when they feel good about what they get for their money. At the same time, some countries face slow or no growth, while others work to avoid overheating. Some consumers have returned to higher end goods, while others are trading down or cutting back. These conditions place a premium on companies like NIKE, Inc. with broadly diversified businesses that are not over reliant on any one market, one price point for one consumer demographic.

And as always, our strength starts with the consumer. We connect with them in truly deep and meaningful ways. They want authentic brands, innovative products and powerful experiences in store, online and out in the world. And that's what we deliver and we do it through the category offense. It's a core part of our growth strategy. And as you can see, it's gaining traction across the NIKE Brand. The better we get at running this offense, the stronger results we see.

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