06 Earnings Call Transcript fitflops udsalg

06 Earnings Call Transcript

Good afternoon, everyone. Welcome to the Nike fiscal 2007 second quarter conference call. Leading today's call will be Pamela Catlett, Vice President of Investor Relations.

Before I turn it over to Ms. Catlett, let me remind you that the presenters of 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 the reports filed with the SEC including Forms 8 K, 10 K, and 10 Q. Some forward looking statements concern futures orders that are not necessarily indicative of changes; and total revenues for subsequent periods due to the mix of futures and at once orders, exchange rate fluctuations, order cancellations, and discounts which may vary significantly from quarter to quarter.

In addition, it's important to remember a significant portion of Nike Incorporated's business including equipment, most of Nike Retail, Nike Golf, Converse, Cole Haan, Nike Bauer Hockey, Hurley, and Exeter Brands group are not included in these futures numbers.

Finally, participants may discuss non GAAP financial measures. A presentation of comparable GAAP measures and quantitative reconciliations can also be found at Nike's website.

Now I'd like to turn the call over to Pam Catlett, Vice President of Investor Relations.

Thank you, and good afternoon, everyone. A Happy Holidays to all of you. Thank you for joining us today to discuss Nike's fiscal 2007 second quarter results. We issued our results about an hour ago. If you need to reference the results, as the operator indicated, you can find the press release on our website which also includes the reconciliations between GAAP and non GAAP reported items.

Joining us on today's call are Nike Inc. CEO, Mark Parker; Nike Brand President, Charlie Denson; and Nike Inc. Chief Financial Officer, Don Blair. We're changing things up so we can maximize our time for your questions, which means both Mark and Don have brief prepared remarks. Charlie will be on hand for the question period to give you his perspective and insight on the Nike Brand.

Now it's my pleasure to introduce Nike Inc.'s CEO, Mark Parker.

Thanks, Pam. Good afternoon, everybody. Thanks for joining us today. We're halfway through our current fiscal year which is really a great time to talk about where we are and more importantly, where we're headed.

On our last call, I reminded you of my priorities for the company, specifically to generate top line revenue, to leverage our costs and resources and to extend our leadership in the industry. So how are we doing? In a word, I would say good. For the first half of fiscal '07 we've added nearly $680 million in incremental revenue.

In Q2, revenue grew 10% with all Nike Brand regions and business units increasing revenue over the prior year, and the other brands in the Nike Inc. portfolio grew by 21%. Global futures are up 7%, our strongest futures number in a year. We continue to return cash to shareholders with a 19% increase in our dividend and share repurchases of over $600 million to year to date. region continues to be a workhorse. Second quarter revenue increased 8%, based on strong footwear increases and even stronger apparel performance. Our EMEA region grew revenue 6% driven by strong performance in apparel, equipment and retail. Our Central European markets grew more than 30%. In Asia Pacific, consumers continue to respond to the brand across the region. Revenue in the region grew 15% over last year and over 30% in China.

I also want to call out a recent survey of brand power conducted by the Wall Street Journal, a study that named Nike as the new consumer icon and put Nike among the ten most admired companies in Asia. It's a strong validation of the authentic and relevant position Nike has with Asian consumers.

We're working hard to elevate our competencies in every region. We continue to make deep connections with consumers, deliver innovative product, and raise the bar in presentation at retail. These competencies continue to pay off around the world.

Revenue drivers are also strong throughout the portfolio. Overall, revenue from our other businesses grew 21% with PTI up triple digits over the year. Converse is a great story. Revenue is up nearly 50%. Dwayne Wade was named Sports Illustrated Sportsman of the Year, and Footwear News named Converse Brand of the Year for 2006. Cole Haan revenues are up 9% over prior year thanks to Dress Air product, strong retail performance, and a visit by Gordon Thompson to the Oprah show. In Nike Golf, revenues increased 6% over prior year continuing a run only Tiger Woods could match.

The Nike Brand had a lot of big wins in key categories this quarter. Nike Plus is turning out to be huge. In less than six months, Nike Plus users have logged more than 3 million miles and there are over 3 million Plus ready shoes in the global marketplace; we expect that number to double by the year end. Clearly our confidence in this concept has proven to be accurate.

In soccer, we launched the first signature collection with the world's most dominant player, Ronaldinho. In college football, Nike will be represented in 28 of the 32 college bowl games and for the eighth straight year, a Nike team will become National Champion.

Finally, Air Force One, one of the most popular shoes in history, is set to launch a new generation of Air Force product at this year's NBA All Star Game.

We're exercising the fiscal and operational discipline it takes to drive healthy margins. We're making progress on reducing the rate of inventory growth. It's still not where we want it to be, but I'm confident we'll bring it in line with revenue by Fitflop Happy Gogh Clog Danmark year end. We've arrested the rate of decline in gross margins. We've secured a big advantage with more favorable long term tax agreements in Europe. In short, we're pulling all the right levers to meet our long term revenue and earnings goals and to drive shareholder value. Don will share some of the specifics with you in just a moment.

Overall, we're pleased with our progress in delivering healthy and consistent growth; we're pleased, but not satisfied. We see long term and immediate opportunities to grow. We're challenging ourselves and the industry to bring innovation and vigor to the marketplace. The industry can really benefit from change and leadership and we're committed to both.

Internally we're taking steps to strengthen every aspect of our business. As you know, one of my priorities is to get after fewer high return opportunities and we're doing that. Specifically, we've identified key categories that billige fitflop represent extensive growth opportunity. These key categories are like the power plays in sports. We're aligning every competitive advantage we have in our offense to connect with consumers and attack and beat the competition. You'll hear more about this when we get together in February.

We believe our category focus and segmentation will create a stronger Nike Fitflop Happy Gogh Clog Danmark and a stronger, more diverse and differentiated marketplace. These are exciting times for Nike and our industry. The brand is strong, the company is growing, and we are accelerating our commitment to become even stronger, more focused, more competitive and more influential.

I'm extremely confident about the future for Nike Inc. We're widely regarded as the innovation leader in the industry, but the Nike I know is also the leader in passion, talent, commitment, and competitive fire. I wouldn't trade places with anybody.

Now I'll turn it over to Don to give you some financial highlights.

Thank you, Mark. We're very pleased with this quarter's strong growth in revenues and earnings per share. On an operating basis, we continued on the upward path we outlined for you earlier in the year; more on that in a moment. This agreement will significantly improve our cash flow and reduce our effective tax rate in fiscal 2007 and in future fiscal years. This benefit and the operating trends in our businesses around the world leave us well positioned to deliver strong EPS growth for the year.

Reported revenues for the quarter grew 10% as once again all three of our product business units and all four of our geographic regions delivered revenue growth for the quarter. Excluding the impact of the weaker dollar, revenues grew 9%. Our worldwide apparel and equipment businesses were particularly strong, each posting 11% growth and together adding $140 million of incremental revenue for the quarter.

In addition, the businesses reported as "other" grew more than 20% and delivered over $90 million of incremental revenue for the quarter, contributing nearly 3 points to our overall revenue growth.

Futures orders scheduled for delivery from December through April 2007 grew 7% versus the prior year. Excluding the impact of currency changes, futures orders were up a little over 5%.

Consolidated gross margins for the quarter were 10 basis points lower than last year's second quarter, continuing the trend of sequential improvement in the year over year comparisons. Currency changes did not have a material impact on consolidated gross margins.