Nike Class B Earnings Call Nuggets: Macro Impacts and DTC Strategy

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

Macro Impacts

Robert Drbul – Barclays Capital: I guess, the questions I have – on the European business and the business in China, can you talk about the macro impacting you? I mean, the numbers have been very impressive and especially both Western Europe and Central Europe, especially on the futures side, so, is the macro a big factor there and how sustainable do you think these impressive results can be?

Trevor Edwards – President, NIKE Brand: Well Bob. First of all, I just want to reiterate one of the things that we’ve seen over the course of years with our business is the strength of our business is much more a function of whether we’ve got the product right, the brand is strong and our distribution is really compelling than the macro. So, I think we – certainly seen in Southern Europe some impact from macros, but I think for our overall results in Western Europe and China, it’s really driven by what we’re putting out there in the marketplace.

Trevor Edwards – President, NIKE Brand: Yeah, Bob, this is Trevor obviously. The part that I would add is that in both of those marketplaces that we’re talking about, what we’ve certainly seen is our ability to stay connected with our consumer and build the brand has been sort of like paramount in driving the growth that we’ve been seeing. Certainly, the thing that we’re working on and did in both markets was to reset them to ensure that we continue to maintain a really strong pull in the marketplace and we’re working through that in China, but obviously we’re seeing some really good results come through in Western Europe…

Robert Drbul – Barclays Capital: Then the other question, is just on the women’s business in the U.S., like the Training business and I think some of the Legend product, can you just talk about, if you feel like you’re getting traction there and a lot of the initiatives, if you could elaborate a little bit more just in that specific product?

Trevor Edwards – President, NIKE Brand: Yes. I’m actually super excited about the work that we’ve been doing in the women’s business. We’re actually seeing some really good positive momentum as we talk about putting those new concepts into the marketplace. The things that we focused on really was first and foremost get the products right, and so as you commented on the Legend Pant, we’re seeing some great success with all the products we’re putting through. We’re really focused at the premium end, and that’s been doing really well for us. We continue to connect with our consumers. Obviously, the Training Club is a great example of how we do that. So the third area that we’re focused on right now is really the distribution and really making sure that now we can give the consumer access to that product. That’s why we’ve created these concepts. As these concepts get better we’ll roll them out into more of our retail stores, we were super excited about what we are seeing in the results that we are getting.

DTC Strategy

Omar Saad – ISI Group: One of the themes I heard throughout the call and seems to have been present the last several quarters is your owned retail business really performing extremely well, not that your wholesale business is struggling, but this (rally) of our performance really sticks out even in places like China, but also in the U.S. Can you talk about this shift how much of it is strategic that you are directing or is that where your consumer is taking you? What does this mean for some of your wholesale partners kind of looking at this bigger picture here any insights you could provide. It is pretty interesting what’s going on?

Mark Parker – President and CEO: Part of this our strategy around our DTC. We clearly used DTC as an opportunity for us to really improve our assortments to make sure that we have the best lines and so what we are able to do is really use it as a spearhead and so what you are seeing in our DTC doors is really great performance because we have the right assortments coming through those doors. The more we learn the more we then take those to our retail partners. So what we’ve been seeing is our ability to drive a really integrated marketplace is really helping to drive these kinds of results. But obviously we use our DTC as a lab as it were and then also as a way to ensure that we can get our premium products to the marketplace.

Trevor Edwards – President, NIKE Brand: I’ll just jump into, I have always said that focus on our DTC business this effort to become a better retailer will make us a better wholesale partner which is what Trevor just talked about and I think that’s really paying off. We’ve learned so much as we committed to being a great retailer that we’re applying to becoming a really good wholesale partner and that’s most obvious in the North America, in the U.S. market where we are more advanced in the market segmentation that we’re doing with some of our top accounts and that’s the model that we’re working diligently on in Europe, Western Europe especially and then certainly in China we’re in different stages of that development but very confident that that model will actually translate well around the world.

Omar Saad – ISI Group: And then really quick on China as you kind of go through the reset there, how do you think about maybe reducing or resetting some of all those lower volume concession shops and maybe doing more of this kind of high volume whether it’s DTC or with partners, is that the kind of shift that’s necessary on the ground or retail there?

Trevor Edwards – President, NIKE Brand: Yes, I would say that our true intent in China is to make sure that we drive a more productive and profitable retail and we believe that you do that by segmenting the market and creating greater differentiation, I mean in the marketplace that gives the consumer more targeted experiences. At the same time, we’ve been working really on driving on merchandising strategies working at the door level so that we can ensure that the consumer is getting exactly that they need. And then, at the same point, we’re also looking at driving a better operating platform that allows us to get the right product to that consumer at the right time. So, that obviously doing that we’ll create more shifts so that we have the opportunity to go for the next wave of growth that we see in China because we truly see tremendous potential.

A Closer Look: Nike Earnings Cheat Sheet>>