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NIKE, Inc. (NKE)

F2Q2011 Earnings Call Transcript

December 21, 2010 5:00 pm ET


Kelley Hall – Senior Director, IR

Mark Parker – President and CEO

Charlie Denson – President, NIKE Brand

Don Blair – VP and CFO


Kate McShane – Citigroup

Robert Drbul – Barclays Capital

Michelle Tan – Goldman Sachs

Christopher Svezia – Susquehanna Financial Group

Michael Binetti – UBS

Jim Duffy – Stifel Nicolaus

Robert Ohmes – Bank of America-Merrill Lynch

Chi Lee – Morgan Stanley

Omar Saad – Credit Suisse



Good afternoon, everyone. Welcome to NIKE's fiscal 2011 second quarter conference call. For those who need to reference today's press release, you will find it at Leading today's call is Kelley Hall, Senior Director, 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 future numbers.

Finally, participants may discuss non-GAAP financial measures, including references to total wholesale equivalent sales of NIKE, Inc. businesses that have license sales. Wholesale equivalent sales include both 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 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 on non-GAAP financial measures. Discussions of non-public financial and statistical information and presentations of comparable GAAP measures and quantitative reconciliations can be found at NIKE's website,

Now, I would now like to turn the call over to Kelley Hall, Senior Director of Investor Relations. Thank you, Ms. Hall. You may begin.

Kelley Hall

Thank you, operator. Hello everyone and thank you for joining us today to discuss NIKE's fiscal 2011 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,

Joining us on today's call will be NIKE, Inc.'s CEO, Mark Parker, followed by Charlie Denson, President of the NIKE Brand, and finally, you will 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 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 that.

I will now turn the call over to NIKE, Inc.'s President and CEO, Mark Parker.

Mark Parker

Thanks, Kelly, and happy holidays, everybody. Today's strong results demonstrate the power of our strategies and the exciting opportunities we have across the entire NIKE, Inc.'s portfolio. We grew almost every area of our business across brands, categories, products and geographies. What fuels this growth is our long-term strategy. It was not short-term in nature.

We leverage the same competitive advantages that have driven NIKE growth consistently throughout our history; putting the consumer first, fixating on innovative product and leveraging the power of our portfolio. By getting great athletes, we have strong fundamentals, we're able to anticipate and react to opportunity and we stay on the OpEx. That's what leaders do; stay flexible and balanced. It also aggresses and aligns to create and leverage opportunity and that's what we did in Q2.

NIKE, Inc. revenue was up 10%. NIKE Brand revenue increased 9%. Revenue for our affiliates' brands grew 13%. As a result, we delivered earnings per share of $0.94 to our investors. That's up 24% over last year.

The flexibility and power of our portfolio continue to build, and that's a crucial advantage for NIKE. We can really fine-tune how we apply our resources for the greatest return and we're doing just that across the entire business. We can attack with a single brand like Converse, which just exceeded $1 billion in reported revenue for the past 12 months, or leverage multiple brands like we do on our action sports business.

We can drive market growth with a single category like basketball or running where revenue and futures are up double-digits. We can expand key developing markets like China or Russia, which continue to increase revenue, EBIT and futures, and in developed markets like North America where innovative products, strong brands and great retail presentation are driving solid momentum.

Flexibility gives us options and that keeps us targeted, aggressive and opportunistic. We're also very focused on balancing our resources against our biggest opportunities. This is especially powerful when we leverage innovation to drive growth. We're creating more opportunity with innovation than ever before. That's true in our products and our categories and it's true on how we run the business.

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