NIKE, Inc. (NYSE:NKE) Q1 2020 Earnings Conference Call - Final Transcript

Sep 24, 2019 • 05:00 pm ET

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NIKE, Inc. (NYSE:NKE) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from Bob Drbul with Guggenheim. Your line is open.

Analyst
Bob Drbul

Hi, guys. Good afternoon.

Executive
Mark Parker

Hey, Bob.

Executive
Andy Campion

Hey, Bob.

Analyst
Bob Drbul

I guess the question I have is -- I had two questions, really. On the first part of it is in North America, can you talk a little bit more about the Apparel performance in terms of some success in Women's, but just generally, the level of growth and sort of how we should approach that. And then, the second question is just around the inventory levels, any pockets of concerns there, any areas geographically that you're concerned about or anything we should think about from that perspective?

Executive
Andy Campion

Sure. I'll start on North America Apparel. We continue -- you asked about Women's in particular. We continue to grow the Women's Apparel business in North America. It's in fact growing at a very strong rate. At the same time, we see a great opportunity ahead, even greater than we've capitalized on to date. Overall in terms of Apparel growth, we're really pleased with the growth.

The number in Q1 does compare unfavorably to some prior-year comps. As you may recall, last year in Q1, Apparel in North America grew 8%, and that was in part impacted by the jersey business relative to the NBA. As you may recall, LeBron changed teams last year, and that had some impact. We also are seeing this year back-to-school extend a bit out of Q1 and into our Q2. So in short, we see really strong demand for our Apparel in North America. We've had a little bit of pressure on supply, but you're going to see the rates of growth in North America Apparel accelerate over the balance of the year.

And then, you asked about inventory. I guess I'll take that one too. Inventory, as we spoke about, was up 12% versus prior year. That was primarily driven by strong consumer demand. A majority of our inventory is in new seasonal product, some of which is in transit to the marketplace, and we'll sell into the marketplace and sell-through over the quarter, and into Q3.

There was also a little bit of an impact from foreign exchange in that inventory number. So if you look at it on a unit basis, our unit inventory growth is really well-aligned with our forward-looking unit growth. And kind of combining those two themes, one, the fact that it's largely seasonal inventory, and two, that the overall unit numbers are aligned, what you're seeing and you'd expect and hope to see is that our closeout mix is low, and it is. In fact, very low. So our inventory is very healthy in our geographies.

There are a couple of other dynamics that are probably worth calling out. One, again, is this extended back-to-school season, so you see some of that inventory now selling through as back-to-school extended into September, which is in our Q2. And then, we also have been building inventory in anticipation of