Elliott Hill
President & Chief Executive Officer at NIKE
Thank you, Paul. Hello, everyone, and happy holidays. In my first call, I want to start by saying how energized I am to be back at NIKE, working alongside my teammates. I look forward to the journey that lies ahead for all of us. When I retired in 2020 after 32 years, I continue to stay in touch with many of my teammates and cheered them on from the sidelines. Why? Because I have an irrational love for this company. I know NIKE inside and out, take pride in what the brand stands for and want to see the company succeed. And in a moment where our team, brand and business are being challenged, my singular focus is to help get us back on track to get back to winning.
Today, I'm going to share what I've seen and heard in my first two months. I will then outline some of the immediate moves we're making to reposition the business. I'll tell you this. We, the entire NIKE team feels the sense of urgency here. My full leadership team and I went on the road the past few weeks to meet our teammates, partners and consumers to get a first-hand view of our brand and business. We went to L.A., New York, Amsterdam, London, Paris, Shanghai, Beijing, together, we walked the high streets and shopping malls of those cities to see how consumers are experiencing our brand at retail.
I met with key wholesale partners in each geography all of which I already know and have developed deep relationships with over the years. I met with the commissioners of the NFL, NBA and WNBA, MLB and NWSL, the heads of the top NCAA conferences and teams like PSG and pass and present athletes like MJ and Ronaldo to Sabrina, Asia and Erling. I visited our distribution centers in Memphis and Laakdal and had calls with our top five manufacturing partners to understand the evolution of our supply chain as we've grown the business.
It was important to me that I spent my first 60 days personally collecting these deep and direct insights. Across the board, our partners are energized. The people I talked with are rooting for a strong NIKE, because when NIKE is at its best, we bring excitement. We invite consumers into the world of sport and sport culture. And when we do that, we help grow the overall marketplace. That's good for consumers, that's good for our partners, and that's good for NIKE.
The consistent feedback we've heard is pretty simple. Let's see more of NIKE being NIKE, and that starts with leveraging all the advantages that make us great. Three of the world's most iconic brands, a dominant roster of athletes, teams and leagues, unmatched patented innovation, a deep catalog of products at every price point, teams positioned to serve consumers across 190 countries. A full integrated marketplace across multiple channels, strong, long-standing relationships with leading suppliers and manufacturing partners and most importantly, passionate, highly talented and committed teammates.
Lately, we haven't been maximizing these strengths. From everything I heard and observed, there are clear themes about the recent state of our business and where we need to go. I'll start with a high-level observation. We lost our obsession with sport. Moving forward, we will lead with sport and put the athlete at the center of every decision. The sharpness in each sport is what differentiates our brand and our business and fuels our culture. Another observation is that the reliance on a handful of sportswear silhouette is not who we are. We will get back to leveraging deep athlete insights to accelerate innovation, design, product creation and storytelling. Sport is what authenticates our brand.
I also see that we've shifted investments away from creating demand for our brand to capturing demand through performance marketing for our digital business. We will reinvest in our brands to create stories that inspire and emotionally connect with our consumers important sports moments and critical product launches. When visiting our teams around the world, it was clear. centralization has impacted the resources we have in key countries and key cities. We will rebalance resourcing and empowering our teams on the ground to win with the everyday athletes and influencers.
My last observation. Prioritizing NIKE Digital revenue has impacted the health of our marketplaces. We will build back an integrated marketplace across NIKE Direct and wholesale, our marketplace will be consumer-led. Putting our best product and presentation and the path to the consumer wherever they choose to shop. And ultimately, with sport as our north star, we will reenergize our culture and identity. We believe we have one of the strongest mission statements of any one and that is to bring inspiration and innovation to every athlete in the world. To me, inviting 8 billion athletes into sport is a pretty powerful purpose.
One question I know you want to ask me is if we have the talent at NIKE, and are they motivated? The short answer to both is yes. I've grown more and more confident as I've traveled around the world and saw our teams engaging with each other, with our consumers and with our partners. It's also been great to see how much expertise we've added since I've been away in spaces like supply chain, product creation, technology, materials, sports science, you name it, our talent is world-class. Everywhere I've been, the teams are inspired and ready to go. I feel the optimism. We will win, and we will do it as a team. What our teams need right now is clear direction and focus.
We built this company on the guiding principles of world-class management of product, brand and marketplace. We create innovative and coveted products, tell emotional inspiring stories through our brand and execute in a way that grows the entire marketplace, digital and physical, wholesale and NIKE Direct. My leadership team and I have already identified key near-term actions in each area, and we've got to move fast. First, in product. We're getting sharper on specific sports. We're shifting into sport-led teams segmented by men's, women's and kids, and we call each of them Fields of Play. And it is a segment to grow approach. Throughout our history, we've utilized inflection points to further segment our businesses to unlock the next wave of growth. We will do this by empowering more nimble cross-functional teams to assess the needs of sports-specific athletes by gender, the approach enables the team to identify new opportunities, fuel innovation and drive incremental growth by sport and by gender.
Breadth and depth and how we orchestrate our complete product portfolio have always been strengths of NIKE. We will return to the discipline of franchise management that I was a part of for so many years. We've already started managing the inventory in our marketplaces and will move faster to return to a pull market for our largest classic footwear franchises. At the same time, the team has been planting the seeds of the next franchises that will fuel growth. In the quarter, some of our most sought-after products are franchises that are distinctly NIKE, the Pegasus 41, NIKE Shox and the Kobe lineup. And we're building in anticipation for what's ahead, unveiling the Vomero 18 and Pegasus Premium to passionate runners at the running event in my hometown a few weeks ago.
There's still work to do in rounding out the portfolio, but I'm really encouraged by the innovation coming from our field to play in the next several seasons, especially in the high-volume areas like running, training, sportswear, and core product and the Jordan Brand lineup.
Turning to the NIKE Brand. There are moments when we need to create impact that's felt around the world, and day-to-day work that connects emotionally with local communities. We will deliver bold, creative marketing that leverages our athletes in sport moments, and drive the ground name authentically in neighborhoods. To do that, we're going to be much more intentional about investing to move the brand forward. We're already moving in that direction. The marketing team delivered moments this quarter that got us back to owning the conversation in Sport. From the Liberty's first WNBA championship to the Dodgers World Series win to Saquon Barkley's reverse hurdle, to city takeovers at the Berlin, Shanghai, New York City and Chicago marathons.
We're also going to continue to be aggressive in sports marketing. In just the last 60 days, we've announced the re-signing of the NBA and the WNBA, the Brazil Football Confederation, FC Barcelona and last week, the NFL. We drive growth through sports most iconic partners. Their athletes are the creative fuel for our brand. They power our innovation agenda, our brand voice and our revenue. Inspiring the consumer includes being part of the active communities who run, train and compete locally, it's about showing up and building relationships every day with athletes and influencers. My visits to the geos the past few weeks only reinforced my conviction that we need to get back to empowering our teams in key countries and key cities.
I know for my years of working in our geographies, they're the ones creating emotional consumer connections in their neighborhood. They're the ones identifying the insights that inform our offense. We will resource our key country and key city teams to create stronger consumer connections build relationships with athletes, influencers and partners and unlock incremental growth for our brand and business. We're optimistic about the actions that are already underway in product and brand but we're still in the early innings of elevating the marketplace, both in NIKE Direct and with our wholesale partners.
What I've seen is traffic in NIKE Direct, digital and physical, have softened because we lack newness in product and we're not delivering inspiring stories. The result is we become far too promotional. We've moved to a push model. Entering the year, our digital platforms were delivering roughly a 50-50 split of full price to promotional sales. The level of markdowns not only impacts our brand, but it also disrupts the overall marketplace and the profitability of our partners. We will return NIKE Direct digital and physical to premium destinations that lead the sports industry. They'll elevate the consumer experience and be the ultimate representation of the NIKE brand. It's where we'll offer our most complete assortments, tell deep product stories, and share our passion for sports.
Being premium also means full price. We'll focus promotions during traditional retail moments, not at the consistent levels we are today, and we will leverage NIKE value stores to profitably move through any excess inventory. The final action we prioritize is building back and earning the trust of our key wholesale partners. Some partners and channels feel we've turned our back on them, and we stopped engaging consistently. I've connected with many of them directly. Ed and Lauren at DICK'S, Reedus and Mike [Phonetic] at JD Sports, Marriott, Foot Locker, Heinrich [Phonetic] at the Dyckman Group; Michael at Sports Direct; Mr. Yu with Top Sports; Mr. Yue and Mr. Wang from Pou Sheng; and Juan Carlos at Innovasport. They're all encouraged by our commitment to delivering new innovative products, telling emotional and inspiring stories and elevating NIKE Direct. Their confidence is building in our product pipeline, and they welcome the closer collaboration as we invest more in their business.
We know our sales teams will have to earn every open-to-buy dollar, but we're investing to make sure our partners feel supported. We'll give them access to our best products and the breadth and depth they need, educate their teams on the latest NIKE innovation and provide them with the marketing support, both in-store and out of home. We'll do more than just sell in our products will actively support mutually profitable sell-through. Simply put, we will win when our partners win.
Before I hand it off to Matt, I just want to say it's been an incredibly rewarding first two months. It feels great to be back with my NIKE teammates. This isn't going to be easy, but we're ready for the challenge. After spending so much time with my team in the past few weeks, I'm confident we are all aligned and focused on the areas that will make the most immediate impact. I'll list the near-term priority actions again.
Ignite our culture through a focus on obsessing sport and getting back to winning.
Accelerate complete product portfolio driven by athlete insights through sport-led fields of play.
Increased investment in our brand to deliver big, bold marketing statements.
Invest in and empower our teams in key countries, in key cities to win the ground game.
Elevate the marketplace through a more premium NIKE Direct and an unwitting commitment to our wholesale partners.
Some of these actions are already underway and some need to move faster, and I will continue to evaluate and assess what is needed. I recognize that some of these actions will have a negative impact on our near-term results. But we're taking a long-term view here. We're making the decisions that are best for the health of our brand and business decisions that will drive shareholder value. I strongly believe NIKE's path to sustainable, profitable growth will be through sport.
And with that, I'll turn it over to Matt to cover some of the specific quarter results and our financial outlook before we take some questions.
