NIKE : Q3FY24 EARNINGS CALL UNOFFICIAL TRANSCRIPT

REMARKS AS PREPARED FOR DELIVERY

Q3FY24 NIKE Inc. Conference Call

March 21, 2024

The following material represents prepared remarks for NIKE, Inc.'s earning conference call and is not an official transcript. These remarks are provided only for reference purposes until an official transcript is made available. These prepared remarks do not reflect questions asked by participants in the conference call or responses from NIKE, Inc. management, and information presented by NIKE, Inc. during the conference call may differ materially from these prepared remarks. Information contained in these remarks was current only as of the date of the conference call and may have subsequently changed materially. NIKE, Inc. does not update or delete outdated information contained in these prepared remarks and disclaims any obligation to do so.

[OPERATOR]

Good afternoon, everyone. Welcome to NIKE, Inc.'s fiscal 2024 Third quarter conference call. For those who want to reference today's press release you'll find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer.

Now I would like to turn the call over to Paul Trussell.

[PAUL TRUSSELL]

Thank you, operator.

Hello everyone and thank you for joining us today to discuss NIKE, Inc.'s fiscal 2024 Third quarter results.

Joining us on today's call will be NIKE, Inc. President and CEO John Donahoe, and our CFO, Matt Friend.

Before we begin, 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 NIKE's reports filed with the SEC.

In addition, participants may discuss non-GAAP financial measures and non-public financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over- over basis and are currency-neutral, unless otherwise noted.

We will start with prepared remarks, and then open up for 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 question to one. Thanks for your cooperation on this.

I'll now turn the call over to NIKE, Inc. President and CEO John Donahoe.

[JOHN DONAHOE]

Thank you, Paul, and hello to everyone on today's call.

Before I get into our Q3 performance, I want to take a moment to acknowledge the tragic passing of Kelvin Kiptum last month. Kelvin had just set the marathon world record in Chicago. He was a world-class athlete and champion, and a beloved member of the Nike family. Kelvin was an inspiration to so many of us, and he will long be remembered and honored for the impact he had, both on the running community and beyond.

Looking at our business, Q3 performed in line with our expectations.

That said, we know Nike is not performing at our potential.

While our Consumer Direct Acceleration strategy has driven growth and direct connections with consumers, it's been clear that we need to make some important adjustments.

Simply put, we need to make adjustments in four areas: We must sharpen our focus on sport.

We must drive a continuous flow of new product innovation. Our brand marketing must become bolder and more distinctive.

And, while Nike Direct will continue to play a critical role, we must lean in with our wholesale partners to elevate our brand and grow the total marketplace.

And this is exactly what we're doing.

Starting last June, we aligned our organization to put the consumer and a sharp focus on sport back at the center of everything that we do.

We integrated our leadership structure, appointing Heidi O'Neill and Craig Williams as co-Presidents. We've reinvested in consumer-led,sport-focused teams that are the foundation of our offense. And we're driving our winning formula of creating a relentless flow of innovative product, combined with distinct brand storytelling, delivered through differentiated marketplace experiences.

And while we still have much work to do, we are making significant progress:

We're well on our way to building a multiyear cycle of innovation that's bringing freshness and newness to consumers. We've pulled forward several innovations more than a year and our intent is to delight consumers and disrupt the industry.

Our brand storytelling will leverage our athletes and sport moments to become sharper and bolder, beginning with the Olympics this summer.

And we are increasing our investment in wholesale to help us elevate and grow the entire marketplace. We recognize that our wholesale partners help us scale our

innovation and newness in physical stores and connect our brands in the path of the consumer.

Most importantly, we're back on our front foot with growing confidence in our innovation pipeline. We know it will take time to scale these innovations, but we see some early green shoots.

We are also carefully managing our most important franchises for long-term health. As a result, our product portfolio will go through a period of transition over the coming quarters.

All together, we're relentlessly focused on driving Nike's next chapter of healthy and sustainable growth. And we look forward to sharing our plans in-depth at an Investor Day later this year.

Now, as we've said before, our success always starts with innovative product, and so that's where I'm going to focus on today's call.

Today, our innovation engine is moving with speed. Our innovation, design and product creation teams are working hand-in-hand with urgency and creativity. They're leveraging new technologies to be faster, more collaborative and more expansive in their thinking.

We have many platforms at Nike that drive growth. But today, let's go deep on our greatest innovation platform and a true source of competitive advantage: Air.

Today, as a platform, Air is a double-digitbillion-dollar business on its own, larger than some Fortune 500 companies. There's nothing like Air: it's a proprietary technology that lets us iterate and revolutionize. It drives breakthrough performance benefits for athletes and defines the future of sportswear.

Air offers stability, resilience, and energy return unlike any other cushioning platform. Simply put, Air helps athletes win.

Decade after decade, we have developed new breakthroughs in Air. And as we approach the Olympics in Paris this summer, we continue to innovate with Air with a focus on helping the world's greatest athletes compete and win on sports' largest stage. So, this summer, you are going to see Air drive major advancements in measurable performance benefits on the track, on the court and on the pitch.

In addition to AlphaFly 3, which continues to set the standard for distance racing, you'll see Air in new footwear that brings elite performance to everyday runners. You'll see Air in Football and Basketball footwear in new, more-visible ways. And you'll see Air in the fastest track spikes we've ever created.

You're going to get a chance to see all these products, and our full Olympics innovation lineup, two weeks from now at our Innovation Immersion event that we'll be hosting in Paris.

Beyond creating leading-edge performance innovation, we also continue to bring new sensations of Air across our business, including our lifestyle portfolio.

For instance, Dynamic Air, our newest innovation platform, is a true breakthrough, delivering a uniquely comfortable sensation with each step.

It's a total rethinking of what airbags can be. Historically, airbags have been fixed and static. Picture an inflatable raft. They compress when you step and then immediately return to their original shape, ready for the next impact.

Dynamic Air changes the game. It unchambers the Air to create a new underfoot sensation that's truly responsive. As the consumer takes a step, our new four-tubed Air

unit allows air to flow freely between the tubes, responding to the pressure of each unique stride to deliver maximum comfort.

We will scale Dynamic Air across many of our leading Air franchises.

This starts with Air Max DN, a shoe that offers just the latest example of how we use Air to craft a new lifestyle franchise. I've been wearing the DN all week, and in fact I'm wearing it right now, and it really is a unique and great sensation. What's more, DN's bold style and design identity is deeply rooted in youth culture and the next generation. We're excited for consumers to experience it.

Next week will be Nike's 10th Air Max Day. It will be a day where you'll see us drive an integrated offense of innovation, storytelling, and consumer activations that we're very excited about.

Air Max DN will be debuting in more than 4,000 stores globally on Air Max Day, creating impact like we haven't seen in years.

When we teased DN last month, we saw a rise in other Air Max franchises. This is common - our experience has been when we launch a strong new product, it creates energy for the whole family.

It all speaks to the confidence we feel when we look at our overall innovation engine and pipeline, from Air to the rest of our portfolio.

Now, earlier I mentioned the impact Nike can have as we sharpen our focus on sport. And the world got a great reminder of that today, with the announcement of the awarding of the German football contract.

I was fortunate to be in Germany for our pitch earlier this week, and I can tell you it was simply Nike at its very best. It started with our deep and unapparelled commitment to

sport. We are the world's leading sports brand, the world's biggest sport brand and the leader in football, the world's most popular sport.

Our focus started with product innovation, both on the pitch, with unmatched kits and footwear that popped and had style and performance and extended into distinct and fashionable lifestyle design.

Our ability to tell stories shown through to make their team a global brand and make their athletes global heroes. And our ability to expand the game, expand their women's game and invite youth culture into football, all mattered.

It was a remarkable team effort that a great proof point that when Nike brings out our best, no one can beat us. And so, we feel honored and privileged to partner with the German football federation, starting in 2027.

Before wrapping up, let me touch on something core to our DNA as a company: Nike's purpose, which will always be our foundation and remains deeply embedded in our strategy. We are defined by our commitment to the future of sport in service to athletes around the globe. And Purpose continues to guide us to redefine our own potential for positive impact in the world.

We're pleased with the progress we've made against our 2025 purpose targets across representation, sustainability and community. To learn more, please see our recently released FY23 NIKE, Inc. Impact Report.

In the end, we are acting with urgency as we make the adjustments needed to compete and win.

And I'd like to conclude by saying that I deeply appreciate how much our team has kept our focus on delivering results amid macro volatility and an organizational restructure. This has been a difficult time for our organization, and I feel truly grateful for our

teammates who've demonstrated such dedication and commitment to our work this quarter.

It's thanks to them that I feel so confident in Nike's future.

With that, I'll turn the call over to Matt.

[MATT FRIEND]

Thanks John, and hello to everyone on the call.

Nike's third quarter showcased the operating discipline of our teams, as we delivered revenues up slightly on top of the prior year's double-digit growth, outperforming our expectations in North America and more than offsetting dynamic conditions in some other geographies. We executed well to recapture transitory cost headwinds and expand gross margins, even in a promotional environment. Our inventory position remains healthy, with total marketplace units down double-digits versus prior year, and weeks of supply at their lowest levels since the pandemic.

Most importantly, our teams are focused on what matters most to capture the strong growth opportunity we see in the marketplace. This means creating more value for consumers by scaling new product innovation, with greater brand impact, across the full marketplace, with even more inspiration through sport and our athletes.

Last quarter, we highlighted that particularly in an uneven macro environment, newness and innovation are what drives brand distinction. Consumers are moving quickly to access new products. Trends are igniting in different places and rapidly spreading around the world.

Nike needs to be faster, and so we are accelerating a multi-year innovation cycle. And while our new product cycle is just getting under way, this quarter showed that we are on the right track.

Since the start of this fiscal year, new and updated footwear models have grown into a majority of our top 20 growing franchises in Q3. Added up, footwear products introduced over the past several quarters are on track to generate a multibillion-dollar run rate on an annual basis, and we see even more opportunity ahead.

On the whole, we see momentum where we are focused most.

Performance footwear grew high-single digits, with double-digit growth from $100-plus franchises, including Kobe and Ja in basketball; Metcon and Motiva in fitness; and Structure and Vomero in running.

Women's fitness footwear grew double-digits, and key apparel franchises, such as $100-plus leggings, continued scaling with strong sell-through.

New product journeys - from Book 1 to Vomero 5 and V2K to Lunar Roam and Travis Scott's Jordan Jumpman Jack - drove consumer energy.

And ahead of a new wave of Nike Air innovation, the Air Zoom AlphaFly 3 debuted with a marathon world record and sellout launches across multiple markets around the world.

As you heard from John, we believe the Paris Olympics will serve as a catalyst for our brands, as we launch our newest Nike Air innovations for athletes. Most importantly, this is just the beginning. With a growing portfolio of new concepts, platforms, and capabilities, our innovation teams are well-positioned to continue driving breakthroughs in performance and lifestyle over the coming years.

To maximize the impact of our new product cycle, we are accelerating several important actions lined up against key brand and sports moments.

First, we are elevating and differentiating the consumer experience with our brands at retail, especially as consumers continue to shift back into physical stores. This includes increased investment to support strong seasonal retail marketing execution, breadth and depth of assortment, and elevated service and product presentation. You heard John say that we will initially launch the Air Max DN next week at more than 4,000 doors. We will increasingly leverage our full portfolio of thousands of physical doors to position our newest products in the path of consumers.

Second, we are sharpening our brand storytelling to tell fewer, bigger stories with greater reach. We will focus our demand creation investments to elevate our brand and most distinctive products - leading with the voice of the athlete, amplifying new innovation, and engaging consumers at point of sale. As we look forward, we see our Olympics "Air for Athletes" campaign as the boldest expression of Nike's brand voice in many years.

Third, we are in the midst of shifting our product portfolio toward newness and innovation. Last quarter, we spoke of our intentional actions to reduce marketplace supply of certain key franchises to ensure they remain healthy and strong, while seeding and scaling new products. Given the way consumers are responding to our newest product journeys, even amidst a more promotional environment, we have decided to accelerate our actions. For example, we are pulling back supply of classics such as the Air Force 1; and we are reducing supply of Pegasus ahead of launching new innovation in the Pegasus 41.

We have been here before. Twelve months ago, our basketball portfolio was meaningfully impacted when we exited a key signature franchise. Since then, we have more than offset that impact by scaling innovation with the GT Series; introducing