Nike Class B Earnings Call Nuggets: Earnings Outlook and North American Futures

Nike Class B (NYSE:NKE) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Earnings Outlook

Robert Drbul – Barclays Capital: I guess the first question I have you for you Charlie, as this is your last call is, can you give us any, like, Trevor taking over as President of the NIKE Brand, any advice that you’ve given Trevor that you’d share with us and what he should be most concerned about as he takes over at this point in his career?

Charlie Denson – President, NIKE Brand: Well, no. I think, Trevor and the entire team, I think they’re in great shape. Everybody knows Trevor, he has been around here long time and he’s in great shape. He’s well positioned to take the baton and keep going. I think there is no specific areas of advice that I can give him, that, that I don’t think he already knows. He’s pretty well positioned and got a great experience and he’s a well-recognized person certainly around here and I think externally as well. So, I think I look forward to help him and make the transition, and we’ll be in good shape.

Robert Drbul – Barclays Capital: Then, I guess as a bigger picture and I don’t know if this would be for Mark or for Don. I guess can you just talk about the outlook or the macro that has impacted the outlook over the last 90 days or last 60 days in the business, and as you look at the expectations on the earnings side of it going forward. What have been the biggest factors to alter the view a little bit here?

Mark Parker – President and CEO: Yeah. I am glad you asked the question, Bob, because our perspective on the business really hasn’t changed. We are absolutely as confident in the business as we were 90 days ago and in fact when we look at our constant currency operating profits, they’ve actually gone up a little bit in terms of expectations, but couple of things have happened. Number one is the FX environment changed a bit and that’s been a little bit of a drag on the numbers. Secondly, we finished FY ’13 with a few more share than we had expected 90 days ago, and finally if you look at our tax lines, our FY ’14 perspective has not changed, but FY ’13 came in a little better than what we had expected as we talked about in the prepared remarks. So, from an operating standpoint, we’re just as confident as we’ve been and very confident going into FY ’14. There’s just been a few things that have pulled our growth rate down a touch…

Mark Parker – President and CEO: I would jump in and add that our ability to sort of work the operational and financial levers to make the adjustments that we need to in light of some of the – for macroeconomic challenges, I mean that’s never been better. We feel like we have room for improvement in areas, but we’ve never had the ability to kind of surgically manage from an operational and financial standpoint as we do today. Very proud of that and I think it’s served us well particularly over the last couple of years.


North American Futures

Robby Ohmes – Bank of America Merrill Lynch: Charlie, congratulations as well and good luck with what you do next.

Charlie Denson – President, NIKE Brand: I appreciate it.

Robby Ohmes – Bank of America Merrill Lynch: Two questions. The first question is the double-digit North American futures orders you guys put up today, another great number. Can you just give us some color on what channels might be driving that more than others, as well as the average selling price component to that? And then if there is any changes in the categories driving that? And then second question is just Brazil, some of the unrest that’s gone on there, I was just curious, if you guys had any color or thought on that?

Charlie Denson – President, NIKE Brand: Yeah. No, I think from – when we talk about and we look at North America and both the results and the futures order going forward, they are – they are still pretty broad-based. Running continues to still grow at double-digits, Basketball is accelerating and you saw the Q4 Basketball results, they were extremely strong and certainly the NBA Playoff run didn’t slow that down at all, and so we are very excited about that going into next year. We talked about women’s. We are pretty excited about the women’s piece and then we are moving into our second year with the NFL here in North America. So, it’s really broad-based portfolio of progress I guess and when you look at the way that the business is being made up from a channel standpoint, we are doing it across all the channels. It’s not one specific channel that’s really – stands out good or better than the others. And I think that that speaks to North America management team and points of differentiation that we’ve been able to create in the marketplace…

Mark Parker – President and CEO: We talk a lot about complete offense and that means across the product platforms, technologies, categories, geos, and wholesale and direct retail, and the U.S. or North America is a tremendous example of really operating a complete offense. The exciting thing is, as we see that kind of success in the U.S. and kind of turn around all cylinders there, we see the opportunity to really take a lot of that and apply that to other parts of the world. Leveraging that complete offense and those success across the other geographies is really our plan, very exciting. The other point is and it relates to the organizational shift, Elliot Hill coming on board to lead the geographies, is incredibly experienced, he’s done a fantastic job in North America, tremendous experience both wholesale and retail. Great energy, lots of passion, and again, part of what I think is going to be a leadership team and has some tremendous chemistry. So, Elliot and his team to Charlie’s point deserve a lot of credit.

Robby Ohmes – Bank of America Merrill Lynch: Just on the ASPs in Brazil?

Don Blair – VP and CFO: So on the ASPs Robby, we usually don’t get into that level of granularity by geography, but across all the futures as we talked about we were up 5 points on units and 3 points on ASP and that trend line is pretty consistent. So, we don’t usually get into that level of granularity on a geography basis, but all the geos are seeing similar trends.

Mark Parker – President and CEO: Your question on Brazil, obviously there is a lot going on in Brazil with the ramp up to World Cup and the Olympics, we know that the unrest is — and we’re watching that situation very closely today. There has been no material impact on our operations or our business in Brazil. We remain incredibly excited about the World Cup coming up and all the opportunities around that and then following that the Olympics. This is, as we’ve said, our time to shine as a brand and we have some pretty amazing things coming, Charlie alluded to that, in the world of football. So, we’re excited about the opportunity in Brazil. But we’ll stay close to it.

A Closer Look: Nike Earnings Cheat Sheet>>