Nike, Inc - Just Do or Don’t Do It 2?

Previously, we provided you with an example from a Nike, Inc Earnings Call, asking If you considered it from the perspective of having a significant amount of your own money invested in the company. What action might you wish to take having read the below and what you might conclude from the response?

The question focused on operating margins and expectations for the coming year.

Nike FY24 Q3 - Earnings Release Conference Call Transcript 21st March 2024

Jay Sole (Research Analyst - UBS): Maybe just to start, Matt, I wanted to ask you about the fiscal '25 commentary you made. You're talking about low single-digit growth for the first half of the year. You said operating margin, I think you said grew ex restructuring charges and EPS growth, can you give a little bit more to mention around what you expect for operating margin next year?

Matt Friend (Nike – CFO): "Jay, the way I think about fiscal '25 is that we are taking our product portfolio through a period of transition. We talked about this last quarter. In terms of our focus on scaling newness and innovation and the green shoots that we were seeing in terms of the way the consumer is responding to the newness that we're bringing to market. And this quarter only gave us more confidence that is where we need to focus and how we will continue to create greater impact and distinction from a brand point of view. And so, this quarter, we saw a majority of our top 20 growing footwear products be new products that have been created this year. And those products are on a trajectory to deliver multibillions of annual run rate of incremental revenue. And that's where our focus is. At the same time, we're managing some of our largest lifestyle franchises and some of our performance franchises back to make space for the newness. And that's going to have a corresponding offsetting impact.

And because we've been missing some product newness at scale in our portfolio over the last several seasons, these actions are resulting in a decline of low single digits is how we're thinking about the first half of the year. But we believe we will inflect in the second half and grow next year on the top line. And when we step back and think about the importance of newness and innovation, and not just to drive the top line but to create consumer impact at scale, that's the foundation for us driving long-term growth."

It is notable that the question is not answered. The topic of operating margin was a sensitive one.

The product portfolio is being taken through a period of transition.

Nike are managing some of their largest lifestyle franchises and some of their performance back to make space for the newness. Focus is on the decline of low single digits which the CFO ‘believes’ will inflect in the second half and grow next year.

Overall, the CFO avoids answering the question and has a need to deflect while detailing the transition of products before finishing with a summary of the revenue expectations.

Nike, Inc, went on to see operating margins fall over the next two quarters.

Language in itself is a currency which can reveal much and provides opportunities to negate potential risks in real-time, whilst maximising potential profits.

Nike FY24 Q3 - Earnings Release Conference Call Transcript (if appropriate): https://s1.q4cdn.com/806093406/files/doc_financials/2024/q3/NIKE-Inc-Q3FY24-OFFICIAL-Transcript-FINAL.pdf

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