Matthew Friend
Chief Financial Officer at NIKE
Thanks John, and hello to everyone on the call. Nike's third quarter showed that in a dynamic environment, strong brands set the pace. Two quarters ago, we took clear and decisive action in response to changing marketplace and supply chain conditions. Our top priority was to strategically manage excess inventory and drive a quicker return to a healthy pull market, and our Q3 results prove that Nike is leading the way. Nike is more agile, responsive, and resilient than before the pandemic, with operational capabilities and an experienced team that enable us to create competitive separation.
While we may continue to face heightened volatility, we are confident in our ability to drive sustainable and more profitable growth. Consumer demand for our portfolio of brands remains uniquely strong, fueling unit growth of approximately 10% despite increased macro uncertainty. Nike, Jordan, and Converse all drove double-digit currency-neutral growth this quarter. Nike Direct outperformed, with member buying frequency increasing and store sales growing across all geographies. Another quarter of industry-leading digital growth -- up 24% in Q3 -- drove our digital share of business up to 27%.
Our Wholesale channel delivered a second straight quarter of outsized growth, with a planned recapture of retail partner open to buy on improved inventory supply versus the prior year, and strong consumer sell-through. Revenue from performance dimensions grew double-digits versus the prior year, with strong momentum from the Phantom GX, Invincible 3, LeBron XX, and other new product innovations. Revenue from Lifestyle dimensions also remain strong, as consumers continue to shift wallet share towards sport-inspired products that provide innovation, comfort and style.
Nike has been fueling this shift for more than fifty years, built on our passion for serving athletes. We have created the lifestyle around sport and have forged a deep connection to youth culture through our most iconic footwear franchises. Time and again, we take the consumer somewhere new. This quarter we introduced new iterations of the Air Force 1 with Tiffany's, Undefeated, and Drake. We drove energy around our top Jordan franchises with our latest Travis Scott AJ1 and a women's-exclusive AJ4. We welcomed the Year of the Rabbit with a Dunk inspired by the iconic White Rabbit candy.
We celebrated the NBA All-Star Game with an Air Force 1, Dunk, and Blazer collection inspired by its host city. And we connected consumers to the Air Max 1 through craftsmanship, heritage storytelling, and new modern renditions. The energy that we are creating for the consumer continues to set Nike apart. Even in a promotional environment, full-price sales remain strong. And for the seventh consecutive quarter, ASP growth was positive for NIKE, Inc., with benefits from strategic pricing, product mix, and our shift to Direct more than offsetting the short-term cost of promotions to liquidate excess inventory.
In addition to driving strong topline results, we are making tremendous progress on inventory. Let me walk through a few key points. First, inventory dollars and units are down meaningfully from last quarter. In the third quarter, total inventory dollar growth was 16% year-over-year. In North America, inventory dollar growth was 14%. In Greater China, inventory dollars declined 4% versus the prior year, positioning us well for the momentum that we are creating in the China marketplace. Next, we are making even greater progress where we are focused most.
In Q3, total apparel units were down year-over-year as we continue our sharp focus on liquidating excess apparel inventory. In North America, apparel units were down high single-digits. Finally, we are confident looking ahead. With strong traffic and retail sales growth, and reduced inventory buys for the spring and summer seasons, we are increasingly confident that we will exit the year with healthy inventories across the marketplace. In fact, given our brand momentum, we now intend to move through even more units by year-end than we had previously considered. Both transit and buying timelines continue to tighten towards pre-pandemic levels, and free cash flow accelerated this quarter through improvements in working capital.
Along with an improving flow of seasonal supply, our decisive actions will enable Nike to compete at its best: driving consumer energy through new product, seasonally relevant assortments and fresh storytelling, and premium retail experiences. Regardless of the near-term uncertainty facing consumers, we will be prepared to lead and operate from a position of strength. Now, let me turn to our NIKE, Inc. third-quarter financial results. In Q3, NIKE, Inc. revenue grew 14% and 19% on a currency-neutral basis, with broad-based growth across brands, channels, and geographies.
Nike Direct grew 22%, led by 24% growth in Nike Digital and 19% growth in Nike Stores. Wholesale grew by 18%, driven by strong partner demand based on accelerating retail sales higher shipments based on earlier supply availability and lower shipments in the prior year given supply constraints. Third quarter reported gross margins declined 330 basis points to 43.3%, due to higher markdowns increased product input costs elevated freight and logistics expenses, including higher supply chain network costs in North America partially offset by strategic pricing actions. This also includes approximately 140 basis points of impact from unfavorable changes in net foreign currency exchange rates. SG&A grew 15% in Q3, primarily due to wage-related expenses, variable Nike Direct costs, and increased demand creation expenses. Our effective tax rate for the quarter was 16%, and substantially consistent to the same period as last year.
Third quarter diluted earnings per share was $0.79. Now, let's review the operating segment results. In North America, we drove strong holiday sales with momentum continuing into the new calendar year. Q3 revenue grew 27% on a currency-neutral basis, with Nike Direct up 23% and Nike Digital up 25%. EBIT grew 23% on a reported basis. Consumer demand drove strong growth across performance and lifestyle. LeBron, Giannis, and Luka grew high double digits, fueling market share gains in basketball.
A strong Invincible 3 launch energized the marketplace, doubling digital sales compared to the Invincible 2. Air Max grew double digits. And the Jordan brand kicked off its 23rd year -- also known as Jordan Year with strong double-digit growth incredible momentum, especially with women consumers and even greater potential with a path toward becoming the #2 footwear brand in North America. Across the marketplace, we continue to capture opportunity with our growing digital advantage.
Member moments throughout the quarter drove double-digit growth in repeat member buying. On the Nike App, we integrated personalized product recommendations for members using available inventory to increase sell-through of key products. In addition, return on ad spend improved for another quarter as we test personalization in consumer experiences with activity and preference data. In EMEA, we saw strong growth across all Western In EMEA, we saw strong growth across all Western European markets, including positive trends in the UK. Q3 revenue grew 26% on a currency-neutral basis, with Nike Direct up 39% and Nike Digital up 43%.
EBIT grew 10% on a reported basis. New product innovation resonated deeply. Invincible 3 drove strong sell-through in Nike Direct and with our retail partners. Our statement Go Leggings delivered positive early results, with strong sales in Nike Live and Nike Rise doors, where we've been able to create a unique retail experience for her. In Football, we are gaining share with a very successful launch of the Phantom GX plus sustained momentum in the Mercurial franchise. We saw strong consumer response as we continue to transform the consumer journey in Digital. Traffic grew double-digits, with average order value growing mid-single digits and nike.com leading new member acquisition.
On the Nike App, member engagement grew double-digits with a new Jordan member home button driving the highest click-through rate ever on the app. We also continue to drive convenience and improve Nike Digital profitability by expanding O2O services, optimizing last-mile delivery, and reducing digital split shipments. In Greater China, we drove topline growth despite another quarter of volatility. Q3 revenue grew 1% on a currency-neutral basis, declining 8% on a reported basis.
Nike Direct grew 3% on a currency-neutral basis, with Nike Digital declining 11% as consumer buying shifted to brick-and-mortar with the country's reopening. EBIT declined 10% on a reported basis. In December, we managed through disruption from the country's shift in COVID policies with widespread door closures. Starting in January, we began to see a rebound in brick-and-mortar traffic, with strong retail momentum around Chinese New Year accelerating into February, especially as our clean inventory position enabled us to serve consumers with fresh seasonal assortments. Throughout the quarter, we gained traction in some of our most important business dimensions.
Performance footwear outpaced lifestyle, with running up double-digits, led by the Invincible 3. Meanwhile, in basketball, LeBron XX and the GT Series resonated deeply, with energy around our local Space Maker Summit and Jordan Brand's China High School Basketball League All-Star Weekend. Growth in Kids surpassed other consumer segments, with positive response to hyperlocal collections such as our Chinese New Year Leap High Express Lane pack.
We are optimistic as our business momentum continues to build. In Beijing, Nike's brand strength is deepening, extending our lead as the #1 cool and favorite brand. We are also seeing the benefits of a more local operating model as we have made investments over the past two years to serve the marketplace's unique needs. Long-term, we are confident that the fundamentals of growth for Nike in China remain strong. Finally, in APLA, Nike's brand momentum continues to fuel strong growth. Q3 revenue grew 15% on a currency-neutral basis, including approximately 8 percentage points of a headwind due to the first full quarter of impact from the transition of our Chile, Argentina, and Uruguay businesses to a distributor model.
Nike Direct was up 22%, with Nike Digital growing 23%. EBIT grew 1% on a reported basis. Football grew double digits, with a successful Phantom GX launch strong sales for the Men's World Cup in December and excitement building for the Women's World Cup this summer. In running, we saw strong momentum across our top footwear franchises, including double-digit growth for Invincible, Infinity, and Pegasus. And in fitness, the Metcon Free continues to win with consumers, growing triple-digits. We also continue to accelerate opportunity in this geography through marketplace innovation.
This quarter, we expanded Express Lane to bring more hyperlocal product to consumers. In March, we introduced the Nike App in Korea, which launched as the #1 free shopping app in one of our most digitally-connected markets. And later this week, we'll open our newest World of Flight door in Tokyo, expanding Jordan Brand's international growth. I will now turn to our financial outlook for fiscal '23. To date, we continue to see uniquely strong consumer demand as our product innovation, brand storytelling, and consumer connections drive distinction and growth in the marketplace.
That being said, we are closely monitoring the building pressure on consumer confidence and the uncertainties of the macro environment. We continue to take a cautious approach in planning our business, leading with intentional financial and operational guardrails. And looking ahead, we will continue to transform our operating model unlocking speed, agility, and efficiency with an improved marginal cost of growth. As a result of our strong Q3 performance, we now expect Fiscal '23 reported revenue to grow high single-digits, an improvement from mid-single-digit guidance in the prior quarter, with approximately 600 basis points of foreign exchange headwinds. For the fourth quarter, this translates into flat to low single-digit revenue growth.
Remember, more than six months ago, we strategically reduced our inventory commitments for the spring and summer seasons to ensure that both Nike and our partners can work through excess and early-arriving inventory. As a result, we expect wholesale revenue growth to moderate for the next few quarters. We expect Fiscal '23 gross margin to decline approximately 250 basis points, at the low end of our previous guidance range. This reflects ongoing and accelerated actions to reduce inventory by year-end, elevated freight and logistics expenses including higher supply chain network costs in North America and 100 basis points of foreign exchange headwinds.
For the full year, we expect SG&A to grow approximately 10%. We continue to expect our tax rate to be in the high teens range and consistent with my approach over the past few years, I will provide specific guidance for fiscal 24 on our next earnings call. In this environment, what sets Nike apart is our portfolio of leading brands, our proven playbook, and a team and culture of innovation that continues to deliver. We have managed through cycles like this before, and we will be well-prepared for the volatility that is in front of us. With that, let's open up the call for questions.
