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Nike Q2 2010 Earnings Conference Call:
Tiger Woods, World Cup, & Nike Fresh Air
The Nike Second Quarter 2010 Earnings Conference Call held this past Thursday evening shed light, as in previous sessions, on the future product andmarketing plans of the world's #1 sportswear and equipment provider. Touched on in the call was a statement on Tiger Woods, momentum in Basketball andAthletic Training lines, the best-selling new Nike shoe of the year, a brief talk on the World Cup and the new LeBron VII and Zoom Kobe V, and theunveiling of a brand new, company-wide marketing concept debuting in Spring 2010 called "Fresh Air" which Charlie Denson, Presidentof the Nike Brand, says will be used to "energize the marketplace". Continue reading for an inside look at the Nike Q2 2010 Earnings Conference Call.
Notes on the Nike Q2 2010 Earnings Conference Call:
Mark Parker, Nike Chief Executive Officer:
- I see a lot of momentum in our direct-to-consumer business where we continue to deliver positive results, especially online.
- Opened a new Nike flagship store in Harajuku (Japan). It's a great example of how innovative retail experiences really connect with consumers, even in avery tough economy like Japan.
- Football is a great example where we are leveraging the most powerful dimensions as the world's biggest football company. It's a perfect storm thatallows us to deliver compelling experiences and innovative product from Nike and Umbro like the CTR360 football boot and the tailored England National Teamjersey all the way through retail experiences like the Boot Room in Nike Towns.
- As we have demonstrated with Flywire, for example, we are able to use innovation to drive profitable growth across our business portfolio, from NikeBasketball, Running, and Training footwear to Hurley board shorts and Cole Haan footwear. And we have a lot more product innovation in the pipeline.
- Laguna Beach consumers are responding strongly to our Action Sports store concept where we have Nike, Converse, and Hurley all under one roof. We just openeda second store in Irvine.
- You don't have to be in a store to see the reach of Nike. You can walk down the street and see Air Max 2009's, Hurley board shorts, custom Chucks,Cole Haan bags, an Umbro tee, a pair of Retro Air Jordan 12's - all unique, iconic products, each with sustainable, long-term relevance.
Nike (NYSE: NKE) 1-Year Daily Stock Chart
Charlie Denson, President of the Nike Brand:
- In Basketball we continue to see the game and our brand gain momentum. The big story focuses on a couple of franchise products, the LeBron VII and thebrand-new Kobe V, which we just launched last week. It's pure Nike - use technology and innovation to create a project that defies logic, put it on anincredible athlete that establishes its credibility and shift the traditional paradigm that says you have to wear a high-top basketball shoe to play at thehighest level.
- In Running we used marathons in Chicago, San Francisco and New York, along with the second annual Human Race, our global Nike+event, and a fully immersedNikeTown presence to create an interconnected consumer experience
- Tremendous sell-through of the LunarGlide, our best-selling new shoe of the year and a big step forward in bringing energy to running at retail.
- In Apparel, Pro Combat has taken its rightful spot on the performance side of the US apparel business. Nobody can match our relevance or performance inprotective base-layer technology. Over the last 12 months we have added about 4 points of market share and we feel like we're just getting started.
- As exciting as the last three months have been, its the next nine months that I'm really looking forward to. You're going to see even more ofthat integrated category offense beginning this spring with a concept we call Fresh Air. We are taking Nike Air, our iconic cushioning system, and creating awhole new level of performance, aesthetics and comfort that will play out across multiple categories. This is a tremendous opportunity to leverage the strengthof the Nike brand and a key franchise technology to energize the marketplace.
- Next, in Football, we continue to redefine the game. Everyone knows the big story coming up is World Cup. I'm not prepared to drop the curtain just yet,but here's what I will say. You can expect to see unprecedented intensity in our marketing and messaging, a global network of grassroots and communityexperiences and a new generation of boots that are the lightest and most responsive in the history of the sport, true game-changing innovation.
- Nike is the biggest football company in the world. I would add that we are also the most innovative, and I'm confident that what we have coming will putto rest any claims to the contrary.
- And we're not stopping there. We will follow up our World Cup efforts with a couple of other surprises that I'm going to leave under the tree fornow.
Don Blair, Nike Chief Financial Officer:
- Second quarter revenues were $4.4 billion, down 4% on both a reported and constant currency basis. NIKE Brand revenue was down 4% while other businessrevenue was up 1%. Futures orders for NIKE Brand Footwear and Apparel scheduled for delivery from December through April 2010 declined 1% on a currency-neutralbasis, reflecting sequential improvement from holiday 2009 through the spring and summer 2010 seasons. On a real dollar basis we estimate futures orders willbe 4% higher than the prior year.
- Footwear revenue in North America fell 4% of the second quarter. Revenues for Nike Basketball, Jordan and Athletic Training were higher for the quarter,while all other categories declined. While overall industry sales trends have been challenging, we have continued to gain market share in the US. For the 12months ended October 2009, NPD reported that the Nike and Jordan brands combined to add 1.5 points of market share while Converse added 70 basis points.
- Second-quarter revenue in our Other Businesses increased 1% versus the prior year on both a reported and constant currency basis, driven by strong growth atConverse. Revenues at Hurley and Cole Haan were essentially flat while sales at NIKE Golf and Umbro were below the prior year.
Question & Answer Session:
Bob Drbul, Barclays Capital: I guess the big question that we've been getting from a lot of people, and you didn't really talk aboutit at all, but the Tiger Woods situation. Is there any statement that you can make around impacts that you see on the business orders, inventories? And then Ihave another question that's different, totally different.
Mark Parker: Let me take that; this is Mark. First of all, you have to recognize that Nike has about a $650 million golf business, which, asyou know, like the rest of the broader golf market, has really been among the most impacted or probably hardest-hit segments of our business, particularly inthis economic environment, over the past year. That said, I want to quickly add that we feel very good about how we are managing our golf business through thisperiod and our position in the broader golf market and then, certainly, with our confidence in our growth potential going forward there.
The only thing I'll say right now about Tiger is that we all know that he's chosen to step away from the game, and out of respect for his time andspace he needs, that he's asked for, we'll respect that and we'll continue to support Tiger and his family as we, of course, look forward to hisreturn.
Omar Saad, Credit Suisse: If I could actually follow on to Bob's initial question, his bold question on Tiger, as you guys - and I knowDon has said in the past that you started to see, as a result of the recession, some deflation in the endorsement sports marketing environment as somecompanies who have been involved in sports marketing get out of the business or get out of the activity - do you expect this to change the landscape at all?How are you thinking about sports marketing overall as you think about the brand over the next three to five years?
Mark Parker: First of all, I just want to remind you, everybody, I guess, that our relationships, the relationships we have with athletes,with teams, are really critical in developing the insights that we need to fuel the product innovation that really distinguishes us in the marketplace, andultimately the overall business performance of the Company. That has hopefully been loud and clear in terms of our messages through many, many years. So thisis a strategy that works. It's helping Nike win and continue to win in the marketplace, not just over this last year, but over these last 37, 38 years. AndI think it's one that will continue to help us extend our leadership as a company.
-
That concludes our notes on the Nike Q2 2010 Earnings Conference Call.
Follow Counter Kicks on Twitter @counterkicks for more in-depth footwear industry coverage andbreaking sneaker news.
Nike Q2 2010 Earnings Conference Call:
Tiger Woods, World Cup, & Nike Fresh Air
The Nike Second Quarter 2010 Earnings Conference Call held this past Thursday evening shed light, as in previous sessions, on the future product andmarketing plans of the world's #1 sportswear and equipment provider. Touched on in the call was a statement on Tiger Woods, momentum in Basketball andAthletic Training lines, the best-selling new Nike shoe of the year, a brief talk on the World Cup and the new LeBron VII and Zoom Kobe V, and theunveiling of a brand new, company-wide marketing concept debuting in Spring 2010 called "Fresh Air" which Charlie Denson, Presidentof the Nike Brand, says will be used to "energize the marketplace". Continue reading for an inside look at the Nike Q2 2010 Earnings Conference Call.
Notes on the Nike Q2 2010 Earnings Conference Call:
Mark Parker, Nike Chief Executive Officer:
- I see a lot of momentum in our direct-to-consumer business where we continue to deliver positive results, especially online.
- Opened a new Nike flagship store in Harajuku (Japan). It's a great example of how innovative retail experiences really connect with consumers, even in avery tough economy like Japan.
- Football is a great example where we are leveraging the most powerful dimensions as the world's biggest football company. It's a perfect storm thatallows us to deliver compelling experiences and innovative product from Nike and Umbro like the CTR360 football boot and the tailored England National Teamjersey all the way through retail experiences like the Boot Room in Nike Towns.
- As we have demonstrated with Flywire, for example, we are able to use innovation to drive profitable growth across our business portfolio, from NikeBasketball, Running, and Training footwear to Hurley board shorts and Cole Haan footwear. And we have a lot more product innovation in the pipeline.
- Laguna Beach consumers are responding strongly to our Action Sports store concept where we have Nike, Converse, and Hurley all under one roof. We just openeda second store in Irvine.
- You don't have to be in a store to see the reach of Nike. You can walk down the street and see Air Max 2009's, Hurley board shorts, custom Chucks,Cole Haan bags, an Umbro tee, a pair of Retro Air Jordan 12's - all unique, iconic products, each with sustainable, long-term relevance.
Nike (NYSE: NKE) 1-Year Daily Stock Chart
Charlie Denson, President of the Nike Brand:
- In Basketball we continue to see the game and our brand gain momentum. The big story focuses on a couple of franchise products, the LeBron VII and thebrand-new Kobe V, which we just launched last week. It's pure Nike - use technology and innovation to create a project that defies logic, put it on anincredible athlete that establishes its credibility and shift the traditional paradigm that says you have to wear a high-top basketball shoe to play at thehighest level.
- In Running we used marathons in Chicago, San Francisco and New York, along with the second annual Human Race, our global Nike+event, and a fully immersedNikeTown presence to create an interconnected consumer experience
- Tremendous sell-through of the LunarGlide, our best-selling new shoe of the year and a big step forward in bringing energy to running at retail.
- In Apparel, Pro Combat has taken its rightful spot on the performance side of the US apparel business. Nobody can match our relevance or performance inprotective base-layer technology. Over the last 12 months we have added about 4 points of market share and we feel like we're just getting started.
- As exciting as the last three months have been, its the next nine months that I'm really looking forward to. You're going to see even more ofthat integrated category offense beginning this spring with a concept we call Fresh Air. We are taking Nike Air, our iconic cushioning system, and creating awhole new level of performance, aesthetics and comfort that will play out across multiple categories. This is a tremendous opportunity to leverage the strengthof the Nike brand and a key franchise technology to energize the marketplace.
- Next, in Football, we continue to redefine the game. Everyone knows the big story coming up is World Cup. I'm not prepared to drop the curtain just yet,but here's what I will say. You can expect to see unprecedented intensity in our marketing and messaging, a global network of grassroots and communityexperiences and a new generation of boots that are the lightest and most responsive in the history of the sport, true game-changing innovation.
- Nike is the biggest football company in the world. I would add that we are also the most innovative, and I'm confident that what we have coming will putto rest any claims to the contrary.
- And we're not stopping there. We will follow up our World Cup efforts with a couple of other surprises that I'm going to leave under the tree fornow.
Don Blair, Nike Chief Financial Officer:
- Second quarter revenues were $4.4 billion, down 4% on both a reported and constant currency basis. NIKE Brand revenue was down 4% while other businessrevenue was up 1%. Futures orders for NIKE Brand Footwear and Apparel scheduled for delivery from December through April 2010 declined 1% on a currency-neutralbasis, reflecting sequential improvement from holiday 2009 through the spring and summer 2010 seasons. On a real dollar basis we estimate futures orders willbe 4% higher than the prior year.
- Footwear revenue in North America fell 4% of the second quarter. Revenues for Nike Basketball, Jordan and Athletic Training were higher for the quarter,while all other categories declined. While overall industry sales trends have been challenging, we have continued to gain market share in the US. For the 12months ended October 2009, NPD reported that the Nike and Jordan brands combined to add 1.5 points of market share while Converse added 70 basis points.
- Second-quarter revenue in our Other Businesses increased 1% versus the prior year on both a reported and constant currency basis, driven by strong growth atConverse. Revenues at Hurley and Cole Haan were essentially flat while sales at NIKE Golf and Umbro were below the prior year.
Question & Answer Session:
Bob Drbul, Barclays Capital: I guess the big question that we've been getting from a lot of people, and you didn't really talk aboutit at all, but the Tiger Woods situation. Is there any statement that you can make around impacts that you see on the business orders, inventories? And then Ihave another question that's different, totally different.
Mark Parker: Let me take that; this is Mark. First of all, you have to recognize that Nike has about a $650 million golf business, which, asyou know, like the rest of the broader golf market, has really been among the most impacted or probably hardest-hit segments of our business, particularly inthis economic environment, over the past year. That said, I want to quickly add that we feel very good about how we are managing our golf business through thisperiod and our position in the broader golf market and then, certainly, with our confidence in our growth potential going forward there.
The only thing I'll say right now about Tiger is that we all know that he's chosen to step away from the game, and out of respect for his time andspace he needs, that he's asked for, we'll respect that and we'll continue to support Tiger and his family as we, of course, look forward to hisreturn.
Omar Saad, Credit Suisse: If I could actually follow on to Bob's initial question, his bold question on Tiger, as you guys - and I knowDon has said in the past that you started to see, as a result of the recession, some deflation in the endorsement sports marketing environment as somecompanies who have been involved in sports marketing get out of the business or get out of the activity - do you expect this to change the landscape at all?How are you thinking about sports marketing overall as you think about the brand over the next three to five years?
Mark Parker: First of all, I just want to remind you, everybody, I guess, that our relationships, the relationships we have with athletes,with teams, are really critical in developing the insights that we need to fuel the product innovation that really distinguishes us in the marketplace, andultimately the overall business performance of the Company. That has hopefully been loud and clear in terms of our messages through many, many years. So thisis a strategy that works. It's helping Nike win and continue to win in the marketplace, not just over this last year, but over these last 37, 38 years. AndI think it's one that will continue to help us extend our leadership as a company.
-
That concludes our notes on the Nike Q2 2010 Earnings Conference Call.
Follow Counter Kicks on Twitter @counterkicks for more in-depth footwear industry coverage andbreaking sneaker news.
