NKE
#Yes.
Hi, <UNK>.
It's <UNK>.
I'll start on that one.
Overall we feel great about the progress that we're making from an inventory or, maybe more broadly, a supply and demand management perspective.
As I noted, our overall enterprise inventory growth was driven by only 3 percentage point increase in units and, actually, we saw a decline in North America in particular, in inventory, both in the value of that inventory as well as the units actually declining even greater.
So while I noted that in margin off-price sales had a negative mix impact, that was versus the prior year in the first quarter.
We're actually continuing to see those off-price sales tighten up as we make the progress we told you we would in terms of returning to a healthy pull market in North America.
Maybe just to give a broader context around the inventory of the marketplace, I would say really around the world, our in-line channels are very healthy, really across the board.
So we feel that we've made great progress in North America to make sure that we have obviously cleared the excess inventory and we're bringing in new products into the marketplace and we're seeing the result of that.
Going forward, we will continue to manage the supply into the marketplace proactively to make sure that we maintain a pull market.
If you look across to Western Europe, their inventory is actually in line with revenue growth, maybe the only difference would be on the value side you're certainly seeing foreign exchange have some impact.
Then in China, we're certainly seeing inventories are very healthy there and you're seeing some inventory build as we prepare for Singles' Day, which is obviously a big impact.
And so we're excited about that.
So across the board, we feel very of confident about our ---+ the marketplace and the inventory position that we're in today and we're just excited about the pipeline of products that are coming through.
Thanks, <UNK>.
We'll take the next question, please.
Yes, I would say the two biggest drivers of the margin contraction versus prior year were the bucket of discrete or temporary items that we referenced and foreign exchange.
So those items most notably included the shift of operating overhead expenses into cost of goods sold, so that is a movement within our P&L versus a change in trajectory.
And as I mentioned, it's not always that evident to those on the call or otherwise that included in gross margin or in cost of goods sold is not just the product cost but also the investments in the teams and resources that we deploy against innovation and manufacturing revolution and otherwise.
Golf, as you highlighted, was another factor within gross margin, both some charges that we took as well as the impact of exiting the Golf Equipment business.
Frankly, it's a great example of the Edit to Amplify approach that we've talked about in the past and we've talked about on this call increasingly being applied to operating overhead.
That is having an impact on our margin in the short term and will over the balance of the year.
It's not reported as a discontinued operation.
It's in our numbers.
But we are making those decisions because we believe our long-term focus, in other words, what we will amplify as our focus on footwear and apparel and drive greater growth and profitability there, and we think we'll see the benefits in margin and return on invested capital from the decision we made to edit.
Yes.
There's always been a shift back and forth from a consumer standpoint.
I'll just back up and say, though, that Sport in general and innovation have always been, and I think always will be, two of the most powerful drivers of culture and style.
Nike's always ---+ we've always started with the athlete.
It's how we create the insights that drive the innovative product and then we amplify that across the portfolio.
And Sportswear is a really important means of doing that.
We see tremendous growth in all areas.
Specifically in both dimensions of Performance and Sportswear.
We just had our most successful quarter ever for Performance Running and our Sportswear business at the same time continues to be a massive growth driver for the Company.
So it's really, for us it's the balance between the two and the relationship between the two.
That intersection between performance and style I think is stronger than ever.
And by the way, innovation is a huge part of creating a new aesthetic.
And lifestyle product does prioritize, I think, at this stage with the consumer comfort and lightweight and breathability.
So performance is really an element of Sportswear for Nike and that's what helps to separate and distinguish Nike in the marketplace.
I would maybe just add and say, been there, done that.
Certainly around, as you approach the idea around Sportswear, and certainly the Lifestyle, the life cycle that we go through, we continue to believe that our performance business is actually ---+ is at the root of what drives continued innovation in the marketplace.
We then leverage that point of view to create sports style innovation and I think we're in the best position where we can actually do both.
We can serve the consumer who wants a performance product to wear as a lifestyle product, but also something he can wear to compete, he or she can wear to compete in.
And again, this current environment is great for us.
This is when we are at our best and that's why I said been there, done that.
And we'll do it again, just only bigger and certainly it's a great opportunity for us.
Thanks, <UNK>.
We'll take the next question, please.
We'll go to the next question, please.
Well, we're actually starting to take some of this innovation to scale.
I think that's the short answer.
For us, this is about getting product to the consumer faster.
It's about lowering our product costs, as we talked about, really trying to drive greater labor productivity, less waste in the system, new design capabilities.
These are all parts of man rev.
I think though, the difference, the inflection point that you mentioned, is really more about taking it to scale.
With partners like Flex, but then across our whole manufacturing partner base.
So we're really modernizing, not just with any one partner, but using that innovation to drive it across the whole base.
So we talked about Flex and footwear, Apollo is a more recent focus for us on the apparel side.
Our investment in the advanced product creation center here on the Nike campus, some amazing innovations in looking at disruptive methods of make.
Obviously, we're aware of Flyknit.
3D printing I think has got a lot of potential for scale.
So we're starting to see the impact at a greater level as we get quarter-to-quarter and I think that's going to continue to grow.
<UNK>, I'd just add, today we're seeing gains in the tens of millions of dollars per quarter.
We certainly expect to see that expand over the long term.
The tangible results that we're seeing today are primarily driven by automation and being closer to market.
In terms of automation specifically, we're seeing greater yield in terms of our use of materials.
So less waste means lower cost.
And we're also improving the throughput in our manufacturing lines.
In other words, improving labor productivity.
I guess in short, I'd say we're increasingly confident the manufacturing revolution, now across both Footwear and Apparel, will have a significant impact on both revenue and margin long term.
And as you know, as you start to see returns on your investment, that starts to build momentum.
So we remain bullish on that opportunity.
B.
Absolutely.
It's sort of a gateway into a whole new era of what we call personalized performance, and that's not just in terms of fit.
It's in terms of cushioning, support, real-time.
That's what's exciting about it.
There's a lot I'd love to talk about, as I sometimes say, but I really can't.
But I'll suffice to say at least at this stage, that the HyperAdapt or the adaptive performance technology is not just centered on fit.
We've got so many other opportunities from a complete performance standpoint.
And what you'll see coming out very soon in Q2 will be the tip of an iceberg that I think is actually quite compelling.
Thanks, <UNK>.
Operator, we have time for one more question, please.
Sure, <UNK>.
I think the key driver to keep in mind is sell-through to consumers.
We're seeing much tighter supply and demand and stronger sell-through to consumers.
So in the same vein as some of the comments that I made around futures, futures are not really a proxy for revenue.
In fact, you don't need a proxy for revenue guidance because we provide that guidance.
Really futures are one of the drivers.
There are other dimensions of the business, be that what we call at once or prop business.
Obviously, our factory stores.
There are a number of other dimensions but one of the primary drivers of that greater growth on the revenue line, as compared to futures in any given period, is that strong sell-through.
And as <UNK>, I think spoke about in a fair amount of detail, we're seeing a return to a strong, healthy pull market.
And again, that's also evidenced or corroborated by the declining inventory in North America.
Yes, as you know, <UNK>, we don't give geography-by-geography quarterly revenue guidance.
What I would tell you is precisely what we told you on the call, which is we do see revenue outpacing futures.
And I'd reiterate our view on North America as a geography that we shared at our Investor Day in October.
We see North America as a high single-digit growth geography out to 2020.
We don't manage in a strict way to those measures in any given quarter, but we're as confident as ever in that trajectory, driven by our brand and our product.
I'd just say, the brand in North America remains incredibly strong and we're seeing really just great momentum across the business.
As we obviously launched a lot of new products into the marketplace, certainly the Soldier 10, the KD 9, 31, the Epic Low.
I could continue nicknaming a few, but the point there would be that the marketplace just continues to see very great response to those items so we feel very good about North America and its continued growth.
And the brand is as strong as ever.
And we're just seeing momentum in the market place and we're excited about the pipeline of great products that we have coming.
Again, we just look forward to it.
So it's all good.
Thank you, <UNK>.
That's all the time we have for today.
Thank you all for joining us.
We look forward to speaking with you next quarter.
