Nike Earnings Call Nuggets: Price Increases, China Futures

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

Price Increases

Kate McShane – Citi Investments: Don I was wondering with regards to your guidance that you just gave how you should be thinking about price increases going forward. You are going to be lapping some pretty big price increases that you took across your portfolio at the beginning of the calendar year. So I wondered if you could maybe give a little bit more detail on that math?

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Don Blair – VP & CFO: Well, Kate what we expect to be doing as we go forward, and this is not just an FY ’13 approach, but we are doing season in and season out work to make sure that we’ve got the price value equation in the right place across our line. So we think what you’ll see for fall of what you saw for fall of 2012 and in the holiday of 2012 then on in the spring and summer is not as much of an across-the-board type of price movement as you saw in the last couple of seasons, but a lot more style-by-style, product-by-product price increase. So we do expect over time we are going to see more pricing certainly in the next few years and what we saw over the last 10. But you are not going to see the same kind of across the board pricing that we saw in the last couple of seasons

Kate McShane – Citi Investments: So my second question, I know there’s a lot of moving parts when it comes to China with all the different things you’re doing to better position the brand and how the category offence? But near term once you do get through the sportswear inventory. What is your expectation for that sportswear category? What is going to drive that sportswear category to be more of a driver of growth than (indiscernible) of growth?

Charlie Denson – President, NIKE Brand: Kate, this is Charlie. I think certainly our ability to flow and merchandise the product into the retail marketplace is something we’re really focused on. Retail productivity and profitability is a measure focus going forward. I think it’s paramount in the execution of the sportswear strategy. With that said, continuing to balance the offering between performance and sportswear is really where we are ultimately headed. I think something else that we’ve realized is continuing to really tailor a specific fit for the Chinese consumer is important, especially in the apparel side of the business and we’re working on that. so, we’re still very bullish long-term on the opportunity whether it’s up from the sportswear side or the performance side, I think as we’ve said many times on the way this is the amplified sport approach, but we really feel the brand up our performance positioning and leverage that into the sportswear arena is the way that we’ll attack the Chinese market, just like we do to the rest of the world.

China Futures

Robby Ohmes – Bank of America Merrill Lynch: A couple of quick questions. I guess the first question is it was obviously noticeable how strong the total revenue growth was versus the future’s number constant currency put up last quarter. Any thoughts on 15% global comp gain, sort of what drove with this quarter in Y-o-Y wouldn’t that continue going forward? That was one question and just a follow-up on China, can you give us a little more color on what the futures that minus six China futures, is it sportswear futures are down big in China, but technical footwear is up or in technical apparel is up or flat? Just sort of some color on if there’s a pretty dramatic difference between your sportswear business in China in the outlook in whether you’re actually growing the higher price point technical product?

Charlie Denson – President, NIKE Brand: Robby, it’s Charlie. Let me take the comp store number first. I think what you saw was an incredibly strong brand and some incredibly strong product coming out of the DTC numbers. A lot of that number was being driven out of North America marketplace. It’s weighted where we saw huge success in the North American marketplace and something that I think is indicative our ability to continue to drive both our brand and the business forward, as we think about that. With regards to the 6% number in China, it’s really relatively balanced, across both footwear and apparel and sportswear and performance. I would say this sportswear numbers are a little bit – excuse me the performance numbers are a little bit stronger and I would also add that it’s our goal right no to manage the supply into that marketplace. One of the things that we’ve always talked about is the strength of the brand in the marketplace and creating a pull market and making sure that our supply and demand ratios are intact. Right now, we have an overabundance of supply and we need to manage that as we continue to drive demand. Yeah. I want to add. Robby, I just want to add one more thing. The other thing that’s really powering our DTC business is really stronger operations. Those store operations are getting better and better and Charlie referenced this earlier in terms of our learning that we can deploy back into the wholesale business as well, but our DTC operations are becoming more and more productive on a door basis and that’s also helping fuel the comps.

Robby Ohmes – Bank of America Merrill Lynch: Just one last follow-up, Charlie on the China futures number down 6, obviously not a number that we all like seeing, but the local Chinese brands are putting up much worse numbers than that and look to be under much greater pressure in the Chinese market than your brand is. Can you give us a sense on what the kind of market share opportunity is for you, some — a lot of the partners you work with also work with these Chinese brands that are really getting killed over there. Can you just give us a sense on how you think that could play to your advantage?

Charlie Denson – President, NIKE Brand: Yeah. Well, I think I mean you’re right Robby. I mean you bring that up I think the competitive landscape right now for us on the long-term, actually, we’re pretty — we feel good about because to your point a lot of the local brands have really struggled and have continued to show an inability to figure out how to go forward. I think that offers up longer term some great market share opportunity for us. In near-term, though it really with the discounted products from all the brands in the marketplace, it tends to throw some of the market share numbers off a little bit, depending on who’s discounting the heaviest and who’s moving — trying to move the most inventory, but that being said I do see a consolidation in that marketplace we’ve seen it in time-and-time again around the world as markets develop and I think you are going to see some of that in China as well. But we still believe that market has a ton of growth left in it, and then I don’t want to let that get away from any of these conversations, it’s still a very, very big growth opportunity for the NIKE Brand.

Mark Parker – President and CEO: This is Mark I am going to jump in here. The strength of the category offense that you’re seeing more in full bloom here and North America. It really represents the huge opportunity in China over the long-term. We have the strongest offering of products across the categories across product types that we’ve ever had as a company. In large part due to the focus we’ve had by category and as we leverage that position more effectively in China I think you are going see that competitive advantage of Nike actually extend itself.

A Closer Look: Nike Inc Earnings Cheat Sheet>>