Q2 2025 Nike Inc Earnings Call
Good afternoon, everyone welcome to Nike, Inc. 's fiscal 2025 second quarter conference call for those who want to reference today's press release, you'll find it at investors that Nike Dotcom, leading today's call is Paul Trussell VP of corporate finance and Treasurer now I would like to Cook.
Turn the call over to Mr. Paul Trussell. Please go ahead Sir.
Thank you operator.
Hello, everyone and thank you for joining us today to discuss Nike, Inc. Fiscal 2025 second quarter results.
Joining us on today's call will be Nike, Inc, President and CEO Elliott Hill, and our CFO, Matt friend.
Before we begin let me remind you that participants on 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 <unk> reports filed with the SEC.
In addition, participants may discuss non-GAAP financial measures and non public financial and statistical information. Please refer to Nike's earnings press release, or Nike's website investors Nike Dot com for comparable GAAP measures and quantitative reconciliation.
All growth comparisons on the call today are presented on a year over year basis, and our currency neutral unless otherwise noted we will start with prepared remarks, and then open up for questions. We would like to allow as many of you to ask questions as possible in our allotted time.
Speaker Change: So we would appreciate you limiting your initial question to one thanks for your cooperation on this I will now turn the call over to Nike, Inc, President and CEO Elliott Hill.
Thank you Paul.
Elliott Hill: Hello, everyone and happy holidays.
Speaker Change: And my first call I want to start by saying, how energized I am to be back at Nike working alongside my teammates I look forward to the journey that lies ahead for all of us.
Speaker Change: When I retired in 2020 after 32 years I continue to stay in touch with many of my teammates and cheered demand from the sidelines why.
Speaker Change: Because I have an irrational love for this company.
Nike inside and out take pride in what the brand stands for and want to see the company succeed.
Speaker Change: And in a moment, where our team brand and business are being challenged my singular focus is to help get us back on track to get back to winning.
Speaker Change: Today, I'm going to share what I've seen and heard in my first two months.
Speaker Change: Will then outline some of the immediate moves we're making to reposition the business.
Speaker Change: I will tell you this.
Speaker Change: The entire Nike team feels the sense of urgency here.
My full leadership team and I went on the road the past few weeks to meet our teammates partners and consumers to get a firsthand view of our brand and business, we went to La and New York, Amsterdam, London, Paris, Shanghai Beijing.
Together, we walked our high streets in shopping malls are those cities to see how consumers are experiencing our brand at retail.
Speaker Change: I met with key wholesale partners in each geography, all of which are already know and have developed deep relationships with over the years.
Speaker Change: I met with the commissioners of the NFL, NBA and WNBA MLB and NWS sell the heads of the top NCWA conferences and teams like PSG and past and present athletes like MJ and Ronaldo to Sabrina Asia and early.
Speaker Change: I visit our distribution centers in Memphis, and locked on had calls with our top five manufacturing partners.
Speaker Change: To understand the evolution of our supply chain as we've grown the business.
Speaker Change: It was important to me that I spent my first 60 days personally collecting these deep indirect insights.
Speaker Change: Across the board our partners are energized.
Speaker Change: The people I talked with are rooting for a strong Nike.
Speaker Change: Because when Nike is at its best we bring excitement we invite consumers into the world of sport and sport culture, and when we do that we helped grow the overall marketplace.
Speaker Change: That's good for consumers.
Speaker Change: That's good for our partners.
And thats good for Nike.
Speaker Change: The consistent feedback we've heard it's pretty simple.
Speaker Change: Let's see more of Nike and Nike.
Speaker Change: And that starts with leveraging all of the advantages that make us great.
Speaker Change: Three of the world's most iconic brands.
Speaker Change: Dominant roster of athletes teams and leagues unmatched patented innovation a deep catalog of products at every price point.
Speaker Change: Teams positioned to serve consumers across 190 countries, a full integrated marketplace across multiple channels strong longstanding relationships with leading suppliers and manufacturing partners.
Speaker Change: And most importantly passionate <unk>.
Speaker Change: Highly talented and committed teammates.
Speaker Change: Lately, we haven't been maximizing the strengths from everything I heard and observed.
Speaker Change: There are clear themes about the recent state of our business and where we need to go.
Speaker Change: I'll start with a high high level observation.
Speaker Change: We lost our obsession with sport.
Speaker Change: Moving forward, we will lead with sport and put the athletes at the center of every decision.
Speaker Change: The sharpness in each sport is what differentiates our brand and our business and fuels our culture.
Speaker Change: Another observation is that the reliance on a handful of sportswear silhouettes.
He is not who we are.
Speaker Change: We will get back to leveraging deep athlete insights to accelerate innovation design product creation and storytelling.
Speaker Change: Sport.
Speaker Change: Here's what I'll send a case of our brand.
I also see that we have shifted investments away from creating demand for our brand to capturing the brand demand through performance marketing for our digital business.
Speaker Change: We will reinvest in our brands to create stories that inspire and emotionally connect with our consumers.
Important sports moments.
Speaker Change: And critical profit our product launches.
Speaker Change: When visiting our teams around the world It was clear.
Speaker Change: Utilization has impacted the resources, we have in key countries and key cities.
Speaker Change: We will rebalance <unk>.
Speaker Change: Resourcing and empowering our teams on the ground.
Speaker Change: When with the everyday athletes and Influencers.
Speaker Change: My last observation prioritizing Nike digital revenue has impacted the health of our marketplaces.
Speaker Change: We will build back and integrated marketplace across Nike direct and wholesale or.
Speaker Change: Our marketplace will be consumer led putting our best product and presentation in the path of the consumer.
Speaker Change: Wherever they choose to shop.
Speaker Change: And ultimately with support from Northstar, we will re energize, our culture and identity.
We believe we have one of the strongest mission statements of anyone.
And that is to bring inspiration and innovation to every athlete in the world.
Speaker Change: To me <unk>.
Speaker Change: <unk> 8 billion athletes into sport.
Speaker Change: It is a pretty powerful purpose.
Speaker Change: One question I know you want to ask me is if we have the talent at Nike and are they motivated.
Speaker Change: The short answer to both is yes.
Speaker Change: Grown more and more confident as I've traveled around the world and saw our teams engaging with each other with our consumers and with our partners.
Speaker Change: It's also been great to see how much expertise we've added since I've been away in spaces like supply chain product creation technology materials Sports Science you name it.
Speaker Change: Our talent is world class.
Speaker Change: Everywhere I've been.
The teams are inspired and ready to go.
Speaker Change: I feel the optimism.
Speaker Change: We will win and we will do it as a team.
Speaker Change: While our teams right now need right now is clear as clear direction and focus we.
We built this company on the guiding principles of World class management of product brand and marketplace.
Speaker Change: We create innovative and coveted products tell emotional inspiring stories through our brand and execute in a way that grows the entire marketplace digital and physical wholesale and Nike direct.
My leadership team and I have already identified key near term actions in each area and we've got to move fast.
Speaker Change: First in product we're.
Speaker Change: We're getting sharper on specific sports, we're shifting into sport led teams segmented by men's women's and kids and we call each of them fields of play.
Speaker Change: And it is a segment to grow approach.
Throughout our history, we've utilized inflection points to further segment our businesses.
To unlock the next wave of growth.
Speaker Change: We will do this by empowering more nimble cross functional teams to assess the needs of sports specific athletes by gender.
Speaker Change: <unk> enables the teams to identify new opportunities fuel innovation and drive incremental growth by sport and by gender.
Speaker Change: Breadth and depth and how we orchestrate our complete product portfolio.
Speaker Change: Have always been strengths of Nike.
Speaker Change: We will return to the discipline of franchise management that I was a part of for so many years.
We've already started managing the inventory in our marketplaces, and we will move faster to returned to a pull market for our largest classic footwear franchises at.
Speaker Change: At the same time the team has been planting the seeds of the next franchises that will fuel growth.
Speaker Change: In the quarter some of our most sought after products or franchises that are distinctly Nike the <unk> 41, Nike shocks and the Kobe Kobe lineup.
Speaker Change: And we're building in anticipation for what's ahead.
And veiling, the marrow 18, and Pegasus premium to passionate runners at the running event in my hometown a few weeks ago.
There is still work to do in rounding out the portfolio, but im really encouraged by the innovation coming from our field to play in the next several seasons, especially in high volume areas like running training and sportswear and core product and the Jordan brand lineup.
Speaker Change: Turning to the Nike brand.
Speaker Change: There are moments when we need to create impact that's felt around the world.
Speaker Change: And day to day and day to day work that connected emotionally with local communities.
Speaker Change: We will deliver bold creative marketing that leverages, our athletes and sports moments and drive the ground game authentically and neighborhoods to do that we're going to be much more intentional about investing to move the brand forward.
We're already moving in that direction.
Speaker Change: The marketing team delivered moments this quarter that got us back to owning the conversation in sport.
Speaker Change: From the Liberty's first Andy WNBA Championship to the Dodgers World series win the sake, one Barclays reverse hurdle.
Speaker Change: City takeovers that debate Berlin.
Speaker Change: <unk>, New York City, and Chicago Marathons.
Speaker Change: We're also going to continue to be aggressive in sports marketing.
Speaker Change: And just the last 60 days, we've announced the re signing of the NBA and WNBA.
Speaker Change: The Brazil football Confederation FC Barcelona, and last week the NFL.
Speaker Change: We drive growth through sports most iconic partners. They're athletes are the creative fuel for our brand they power our innovation agenda, our brand voice and our revenue.
Speaker Change: Yeah.
Speaker Change: Inspiring the consumer includes being part of the active communities, who run train and compete locally.
Speaker Change: It's about showing up in building relationships every day every.
Speaker Change: Every day with athletes and Influencers.
My visits to the Geos the past few weeks only reinforce my conviction that we need to get back to empowering our teams in key countries and key cities.
Speaker Change: So from my years of working in our geographies.
They're the ones, creating emotional consumer connections in their neighborhood.
Speaker Change: They're the ones identify and the insights that inform our offense.
Speaker Change: We will resource our key country and key city teams to create stronger consumer connections build relationships with athletes influencers and partners and unlock incremental growth for our brand and business.
Speaker Change: We're optimistic about the actions that are already underway in product and brand.
Speaker Change: But we're still in the early innings of elevating the marketplace, both in Nike direct and with our wholesale partners.
Speaker Change: What I've seen is traffic and Nike direct digital and physical has softened because we lack newness in product and we're not delivering inspiring stories.
Speaker Change: Result is we become far too promotional we.
Speaker Change: We've moved to a push model.
Speaker Change: Entering the year, our digital platforms, we're delivering roughly a 50 50 split of full priced two promotional sales.
Speaker Change: The level of markdowns not only impacts our brand.
Speaker Change: But it also disrupts the overall marketplace.
Speaker Change: And the profitability of our partners.
Speaker Change: We will return Nike direct digital and physical to premium destinations that lead the sports industry that will elevate the consumer experience and be the ultimate representation of the Nike brand.
Speaker Change: It's where we will offer our most complete assortments <unk>.
Speaker Change: <unk> deep product stories and share our passion for sports.
Speaker Change: Being premium also means full price.
We'll focus promotions during traditional retail moments.
Speaker Change: What is the consistent levels we are today.
Speaker Change: And we will leverage Nike value stores to profitably move through any excess inventory.
Speaker Change: The final action, we prioritize is building back and earning the trust of our key wholesale partners some.
Speaker Change: Some partners and channels feel we've turned our back on them.
Speaker Change: And we stopped engaging consistently.
Speaker Change: I have connected with many of them directly add and Lauren at Dick's Regis and Mike at JD Sports Mary at foot locker Heinrich at the Dykeman group microwave sports direct Mr. Yu with top sports, Mr. <unk> and Mr. Wang from passion and Juan Carlos at in Nova Sport.
Speaker Change: They are all encouraged by our commitment to delivering new innovative product.
Selling emotional and inspiring stories and elevating Nike direct.
Their confidence is building in our product pipeline and they welcome the closer collaboration as we invest more in their business.
We know our sales teams will have to earn every open to buy dollars.
Speaker Change: But we're investing to make sure our partners feel supported will give them access to our best products and the breadth and depth they need educate their teams on the latest Nike innovation and provide them with the marketing support both in store and out of home.
Speaker Change: We will do more than just sell in our products.
Speaker Change: We're actively support mutually profitable sell through.
Speaker Change: Simply put we will win when our partners win.
Speaker Change: Before I hand, it off to Matt I, just wanted to say, it's been an incredibly rewarding first two months.
Speaker Change: It feels great to be back with my Nike teammates.
Speaker Change: This isn't going to be easy.
Speaker Change: But we're ready for the challenge.
Speaker Change: After spending so much time with my team in the past few weeks I am confident we are all aligned and focused on the areas that will make the most immediate impact.
Speaker Change: I'll list the near term priority actions again.
Speaker Change: Ignite our culture through a focus on obsessing sport and getting back to winning.
Accelerated complete product portfolio, driven by athlete insights to sport led fields of play.
Speaker Change: Increased investment in our brand to deliver big bold marketing statements <unk>.
Invest in and empower our teams in key countries and key cities to win the ground game.
Speaker Change: Elevate the marketplace through a more premium Nike direct and an unwavering commitment to our wholesale partners.
Speaker Change: Some of these actions are already underway and some need to move faster.
Speaker Change: And I will continue to evaluate and assess what is needed.
Speaker Change: I recognize that some of these actions will have a negative impact on our near term results.
Speaker Change: But we're taking a long term view here we.
Speaker Change: We're making the decisions that are best for the health of our brand and business.
Speaker Change: Decisions that will drive shareholder value.
I strongly believe nike's path to sustainable profitable growth will be through sport.
Speaker Change: And with that I'll turn it over to Matt to cover some of the specific quarter results and our financial outlook before we take some questions.
Matt: Thank you Elliot and Hello to everyone on the call.
Matt: To start our Q2 financial performance largely met our expectations as.
Matt: As we continue to make progress repositioning our business.
Matt: Today I will focus my remarks on our recent performance and outlook.
Matt: First I will start by reviewing our Q2 financial results.
Matt: Then I will go deeper into our performance in the quarter, including marketplace trends portfolio highlights and operating segments.
Matt: And last I will review, our near term outlook, including the strategic actions introduced by Elliot to accelerate our pace and stabilizing the business and reigniting brand momentum.
Matt: This quarter revenues were down 8% on a reported basis and down 9% on a currency neutral basis, reflecting ongoing headwinds from our franchise management actions.
Matt: We continue to drive the biggest reductions to our classic footwear franchises on Nike direct which was down 14% with Nike digital declining, 21% and Nike stores declining 2%.
Matt: Wholesale was down 4%.
Matt: Gross margins declined 100 basis points to 43, 6% on a reported basis due to higher markdowns on Nike direct wholesale discounts to liquidate inventory and channel mix headwinds, partially offset by lower product costs and strategic pricing actions.
Matt: SG&A was down 3% on a reported basis.
Matt: While we increased investment in areas such as sports marketing.
Matt: This was more than offset by lower wage related expenses and timing shifts and other demand creation expenses.
Matt: Yeah.
Matt: Earnings per share was <unk> 78.
Matt: Now, let me go deeper into the quarters performance.
Matt: Q2 marketplace trends largely reflected the challenges that elliott outlined with traffic and retail sales across the marketplace falling below our expectations, especially in September and October.
Matt: In November we saw momentum build.
Matt: With digital and physical traffic inflicting positive, especially around the quarters biggest consumer moments.
Matt: In North America, Black Friday week was our largest demand week ever on Nike digital with sales up double digits.
Matt: In greater China, Our 11 11 performance exceeded plan.
Matt: However, on Nike digital our off price mix was up high single digits versus the prior year.
With performance marketing increasing over the same period.
Elliott Hill: As Elliot said Nike digital has become a platform, where we have been capturing demand and competing with our wholesale partners.
Elliott Hill: Rather than creating and growing demand for our brands.
Elliott Hill: This is why we must elevate the consumer experience.
Elliott Hill: Grow organic traffic and drive full price demand.
Elliott Hill: Yeah.
Elliott Hill: Next inventory was flat versus the prior year.
Elliott Hill: As elevated supply in North America in greater China was offset by declines in EMEA and APAC.
Elliott Hill: Footwear inventory declined while apparel and accessories inventory increased to support marketplace growth.
Elliott Hill: On a year over year basis. These trends were partly driven by timing related factors.
Elliott Hill: That said inventory levels are higher than we would like especially given recent sales trends on Nike direct.
Elliott Hill: Partner owned inventory declined versus the prior year.
Elliott Hill: We took some steps this quarter and we plan to accelerate inventory actions in our second half.
Elliott Hill: To drive a return to a healthy marketplace.
Elliott Hill: In particular, we are moving aggressively to reduce aged inventory adjust.
Elliott Hill: Adjust supply with demand on Nike digital and.
Elliott Hill: And ensure we have marketplace capacity for our newest product assortments.
Elliott Hill: Turning to our portfolio this quarter showed progress in key areas, especially as our teams get back on the offense and support with consumers.
Elliott Hill: Overall, our sport performance fields of play grew year over year offset by a double digit decline in sportswear.
Elliott Hill: And training men's was up high teens women's up high single digits and kids up high single digits.
Elliott Hill: In global football men's grew low single digits and kids grew high teens.
In basketball women's grew strong double digits and kids grew low teens.
Elliott Hill: And then running mens was flat and women's up low to mid single digits.
Elliott Hill: In addition, we took another step forward shifting our product portfolio by reducing.
The proportion of our business driven by our classics footwear franchises.
For Q2, these franchises again decelerated faster than the overall business.
Elliott Hill: And at a rate greater than the first quarter.
Elliott Hill: As I said last call, we expect the impact of these shifts to continue for the next few quarters.
Elliott Hill: With that let me turn to our operating segments.
Elliott Hill: In North America, Q2 revenue was down 8% now.
Elliott Hill: Nike direct declined 15% with Nike digital down, 22% and Nike stores down 3%.
Wholesale declined 1%.
Elliott Hill: EBIT declined 10% on a reported basis.
Elliott Hill: Highlights in the quarter included growth in kits with strong momentum in apparel and performance footwear.
Speaker Change: Men's and women's training drove strong growth at his basketball job grew double digits Kobe became the market's largest signature franchise with demand far exceeding available supply.
Elliott Hill: And Sabrina to made a statement.
The MBA second most worn sneaker this season behind only the Kobe six.
Elliott Hill: Throughout Q2, we positioned Nike is the brand of athletes around key sports moments are.
Elliott Hill: Our winning isn't comfortable running campaign, one AD age's best out of 2024.
Elliott Hill: As our ground game built momentum with the Chicago and New York Marathons.
Elliott Hill: As the NFL season got underway, our Kobe release drove our largest cleat shock drop in Nike history.
Elliott Hill: And when the New York Liberty clinched yet WNBA championship and La Dodgers won the World series.
Our brand storytelling owns a moment.
Elliott Hill: Okay.
Elliott Hill: In EMEA Q2 revenue declined 10% Nike direct declined 20% with Nike digital is down 32% and Nike stores up 3%.
Elliott Hill: Wholesale declined 4%.
Elliott Hill: EBIT declined 10% on a reported basis.
Elliott Hill: We continue to build momentum in sport performance led by strong growth in men's and kids global football.
Elliott Hill: Men's and women's running returned to growth in all three of our top performance franchises in EMEA Mercurial Pegasus and Samsung grew double digits.
Elliott Hill: In sportswear, we are seeing momentum from newer franchises, including shocks the marrow five <unk> 1006 thousand.
Elliott Hill: In addition, we moved first in EMEA to reposition Nike digital is a premium platform.
Elliott Hill: This quarter full price realization improves with a strong double digit decline in off price sales.
Elliott Hill: While we are seeing near term traffic impact as we reduce promotional activity and paid media we.
Elliott Hill: Believe these shifts will elevate the total marketplace over time.
In greater China, Q2 revenue declined 11%.
Elliott Hill: Nike direct declined 7% with Nike digital down, 4% and Nike stores down 8%.
Wholesale was down 15%.
Elliott Hill: EBIT declined 27% on a reported basis.
Elliott Hill: In Q2, we experienced another quarter of retail traffic declines.
Elliott Hill: In a difficult macro environment.
Elliott Hill: This quarter also required higher markdown activity to drive sell through and inventory velocity, which negatively affected gross margins.
In a competitive environment Nike's focuses on serving consumers with product innovation and brand inspiration and fueling the growth of sport in China.
Elliott Hill: This quarter <unk> launched with strong sell through <unk>.
Elliott Hill: <unk> 41 top sales in women's running and new ACG apparel releases created social buzz.
We also continue to see strong full price demand with lower markdowns and higher margins for our locally designed express lane products.
This fall more than 250000 runners join us for the Shanghai Marathon.
Elliott Hill: In addition, we hosted marathoner Iliad kept yogi for community adverse school visits and a run along the great wall to inspire the next generation of runners in China.
Elliott Hill: While near term conditions are challenging sport continues to grow in China, and we are addressing our current headwinds to reignite brand momentum and a healthy pull marketplace.
In <unk> Q2 revenue was down 2% Nike direct declined 4% with Nike digital down, 8% and Nike stores up 2% wholesale.
Elliott Hill: <unk> declined 1% EBIT declined 12% on a reported basis.
Elliott Hill: Earlier on we read consumer trends in Korea in Japan, and moved quickly to diversify our sportswear footwear portfolio.
Elliott Hill: Our mix of classics footwear franchises in APLP.
Is below our global business.
Elliott Hill: And new styles are resonating with consumers.
Elliott Hill: Our look of running franchises are up triple digits, and new releases like Citi and Air Max News drove positive consumer response.
Elliott Hill: In addition, we drove strong growth in men's and women's training and kids global football.
Elliott Hill: Men's and women's running returned to growth in the geography.
Elliott Hill: Now, let me turn to our financial outlook.
Elliott Hill: As I said last quarter, we intend to continue providing quarterly guidance during this period of transition let.
Elliott Hill: Let me start first by providing some additional color and context.
Elliott Hill: Elliot has now outlined certain strategic actions to reposition our business and Reenergized Nike brand momentum through support.
Elliott Hill: Some of these actions have been in motion.
And we are accelerating the pace.
Elliott Hill: Others are new.
Elliott Hill: More specifically, we are shifting Nike digital through a full price model and reducing the percentage of our business driven by promotional activity.
Elliott Hill: We are also reducing investment in performance marketing, which will reduce paid traffic.
This will require short term liquidation of excess inventory through less profitable channels.
Elliott Hill: We are creating capacity in the marketplace to selling seasonal newness and innovation for fall and holiday 25.
Elliott Hill: This requires additional investment in marketplace returns higher wholesale discounts to liquidate excess inventory and to win back shelf space as well as higher promotions to accelerate volume through our Nike factory stores.
Elliott Hill: We are targeting a significant reduction in weeks of supply of our classic footwear franchises over the next few seasons with.
Elliott Hill: With timelines varying by franchise channel market and geography.
Elliott Hill: As a result summer order books will be down versus the prior year.
Elliott Hill: We are increasing brand marketing activity to support key product launches and upcoming sports moments.
Investment in sports marketing is also increasing with our recent long term partnership extensions.
Elliott Hill: And we are investing to rebuild our key city offense, our sport by consumer fields of play and our commercial teams to serve our retail partners.
Speaker Change: We believe the strategic actions that Elliot has outlined are the right moves for Nike to.
Speaker Change: To create better balance in our business and to reignite growth with our wholesale partners in an integrated marketplace.
But over the near term the net effect of these actions will result in lower revenue.
Speaker Change: Additional gross margin pressure and higher demand creation expenses.
Speaker Change: With a greater headwind to the fourth quarter compared to the third quarter.
Speaker Change: Turning to our third quarter outlook.
Speaker Change: We expect Q3 revenues to be down low double digits.
Speaker Change: This reflects initial steps on the actions outlined above as well as worsening foreign exchange headwinds.
Speaker Change: Partially offset by a timing benefit from cyber week shifting into our third quarter.
Speaker Change: We expect Q3 gross margins to be down approximately 300 to 350 basis points.
Speaker Change: Including restructuring charges during the same period in the prior year.
Speaker Change: This reflects the actions described earlier to clean and to reset the marketplace.
Speaker Change: We expect Q3, SG&A dollars to be slightly down year over year, including restructuring charges in the prior year.
We will continue to tightly manage expenses, while we strategically increased investment as mentioned earlier.
Speaker Change: We expect other income and expense, including net interest income to be $30 million to $40 million for Q3.
Elliott Hill: With that let me turn it back over to Elliot.
Speaker Change: Thanks, Matt before taking questions I wanted to share some additional thoughts.
Matt and I have made it clear that we're repositioning the business to.
Speaker Change: To get back to driving a pull market for Nike.
Speaker Change: Over the coming quarters, we will provide more details of our plans and I commit to be being transparent on our progress.
Speaker Change: We will also share more specifics about the marketplace moves stories and products.
Speaker Change: They give us optimism.
Speaker Change: But I want you to know my.
Speaker Change: My bigger purpose for being here.
Speaker Change: I rejoined Nike to take our consumers are amazing athletes.
Speaker Change: And this great company.
Speaker Change: To someplace new.
Speaker Change: I want to be a part of a team that celebrates the biggest sports moments in unexpected ways.
Supports record breaking athletes creates innovation that people couldn't even imagine builds new markets for sport from the ground up.
Speaker Change: And most of all a team the changes People's lives.
Speaker Change: <unk>.
Speaker Change: That helps athletes at all levels all around the world to reach their full potential.
It's an ambitious vision.
But one.
Speaker Change: I truly believe.
Speaker Change: Only Nike can deliver.
Speaker Change: Thank you and let's open it up for questions.
Speaker Change: Thank you Sir just a reminder, it is star one if you have a question. The first question comes from Bob <unk> Guggenheim.
Bob <unk>: Hi, Elliot welcome back congratulations and best of luck.
Speaker Change: Thank you Bob.
Speaker Change: I appreciate it it's good to be back.
Speaker Change: I guess.
I appreciate all the commentary.
Speaker Change: Question I'd love for you to elaborate a bit more on.
Speaker Change: Is the relationships and the reception by your retail partners, especially around earning back the shelf space that you have given up as a company over the last few years.
Speaker Change: Yes, Thank you Bob.
Speaker Change: Here's what I'd say.
Speaker Change: We are absolutely committed to getting back to leading and growing our consumer led.
Speaker Change: Marketplace, and I think Theres a couple of key words, there obviously key being.
Speaker Change: Sumer led.
Speaker Change: The bottom line is there are consumers that want to shop Nike direct.
Speaker Change: Consumers that want to shop wholesale and there are consumers that want to shop digital and physical and we have to show up with the best representation of the Nike brand wherever that is and we will do exactly that.
Speaker Change: In terms of our key wholesale partners I've got a long history, there as you know Bob.
Speaker Change: I have deep relationships with all of my listed a number of them.
Speaker Change: And so we have work to do and I would say, especially in the specialty channels Bob.
Speaker Change: And football specialty and we're committed to investing in there we've already started to invest in those areas. We started to engage with our wholesale partners, bringing them out here for what we call key account planning meetings or bringing amount to have product engagement meetings for fall 'twenty five and the response.
<unk> has been very positive.
Speaker Change: If I had to sort of.
Speaker Change: Yes.
Speaker Change: Frame it up for you.
Speaker Change: I want us to get back to being Nike and they want us to have.
Speaker Change: The unrelenting flow of innovative products that we bring across all sports and against all price points.
Speaker Change: And they want us to get back to being delivering bold brand statements that helped drive traffic because when it's all said and done.
Speaker Change: They want and need from us is to drive mutually profitable growth for them and for us and that's exactly what we're going to get back to.
Speaker Change: And we will the only way we're going to get back open to buying shelf space is to do the things that we've already laid out paid up the marketplace bring innovative covenant product every single quarter, bringing the brand heat that drives traffic and drive sell through.
Speaker Change: They're open they're receptive and we're excited and looking forward to getting back in business with them.
Speaker Change: Great. Thanks.
Speaker Change: I guess one of the other meetings I think you said you had was with the <unk> just curious.
Speaker Change: Curious if you think this is the year for the docs are they going to win the college football playoff.
Speaker Change: Bob.
Bob: Good question Mike.
Speaker Change: My guess is I might have the founder on this call I don't know, but.
Speaker Change: I think where I sit today and the role Ive said I better say I better go with Nike team and by the way with the number of Nike teams, we have in the playoffs I like my chances.
Speaker Change: Okay.
Speaker Change: Yes.
[laughter].
Speaker Change: Oh I.
I'd like to I'd like to I'd like a few more of those call or questions.
And we'll take the next question from Michael Binetti Evercore.
Michael Binetti: Hey, guys.
Speaker Change: Welcome back it's great to hear your voice.
Thanks for all the detail Matt.
Speaker Change: Think you gave us some commentary around how youre planning and near term investments in the business.
Speaker Change: And Matt you made some allusions to.
Speaker Change: Some of those investments continuing into the fall.
Speaker Change: Looking at your first 60 days and think about the path to getting that brand back to growth longer term that it deserves what do you. What do you think are some of the most important.
Speaker Change: Thinking about how your space cost and bringing investments back into the business along the way and the pace of those investments along the way as you look to.
Speaker Change: Returning to growth as we went past fiscal 'twenty five.
Thank you Michael.
Speaker Change: We touched on in our prepared remarks remarks, what we saw.
And out in the market as we travel around and first and foremost.
Speaker Change: We've got to get back to put support at the center of everything that we do.
Speaker Change: Product vantage that we're starting to clean up what we have out in the marketplace. We're starting to shift dollars from performance marketing brand marketing.
Speaker Change: We will ship, we will invest in our fields of play because that's where we drive our product innovation, our newness our distinction.
Speaker Change: And we will also invest in the brand and then finally, which is demand creation both from sports marketing and then just Big Bowl brands.
Speaker Change: Marketing efforts.
Speaker Change: And then we touched on.
Speaker Change: What we call our ground game in key countries and key cities.
Speaker Change: We will speak later today with our teammates, but I think the easiest way to think about we can't do all of them everywhere. So we're going to focus in on five sports to start with running basketball.
Training football and sportswear and while we have 10 key countries and 12 key cities, we're going to focus our efforts on three key countries in five key cities. So we're really going to narrow down and will patient phase as we go throughout.
Speaker Change: The next 18 to 24 months or so so I'm excited about.
Speaker Change: The actions were taken and the clarity we have about where we need to invest in.
Michael Binetti: And Michael what I would what I would add to that is.
Michael Binetti: You've seen us for a couple of quarters now tightly managing expenses as we have been prioritizing our investments in the brand and demand creation.
Michael Binetti: The long term support partnerships these assets like the NFL the NBA the WNBA.
Michael Binetti: Brazil. These are long term partnerships.
Michael Binetti: Deep into the next decade, and I think that's a great example for you of.
Michael Binetti: Our commitment to support and to invest behind sport.
Not only now but for the long term and so over the next couple of quarters, you will see our demand creation investments continue to go up.
Michael Binetti: That's going to be a combination of sports marketing and our investment behind the brand this quarter, our SG&A was down 3%, but our demand creation was up 1% and we expect demand creation to continue to lead our SG&A growth over the next few quarters. The other thing I would just add.
Michael Binetti: I think of investment I'm thinking up and down the P&L.
And we are making meaningful investments beginning in the third quarter to clean up the marketplace.
Michael Binetti: That means liquidating inventory that means.
Michael Binetti: Our sales return reserves in order to be able to clear aged inventory. So we can create space to sell in our new assortments and the innovation that we're excited about in fall and holiday 25.
Michael Binetti: And it also means planning for markdowns in our factory stores and.
So that's reflected in the guidance that we provided for Q3.
Michael Binetti: And we do expect that to continue.
Michael Binetti: For the near term until we can get ourselves back to a balanced and reposition the business to drive growth looking forward.
From Bank of America Lorraine Hutchinson has the next question.
Lorraine Hutchinson: Hi, good afternoon. Thanks Elliot.
Speaker Change: You are accelerating a lot of the work around lifestyle in fiscal 'twenty.
Speaker Change: But how much incremental pressure do you expect on 2026 sales and based on your analysis of the pipeline when will gain sufficient scale to offset that.
Speaker Change: Sure.
Speaker Change: Okay.
Thank you right.
Speaker Change: Again, as we look at.
Speaker Change: Where we are today.
Speaker Change: We've touched on it.
Speaker Change: Four.
Speaker Change: A number of times already in the concentration that we have in a few key franchise styles.
Speaker Change: One of the core competencies that we have a Nike as franchise management.
Speaker Change: And it's foundational to this company and what.
Speaker Change: We will as we already talked about we're taking actions to reduce the amount of inventory in the marketplace within it opens up shelf space open to buy for new innovative product.
Speaker Change: And I am.
Speaker Change: Excited about the product that is coming we are.
Speaker Change: We have three brands that we can that we can drive from that.
Speaker Change: Nike Jordan and converse.
Speaker Change: From performance to sportswear with over 10 different sports men's women's kid's footwear apparel equipment accessories, and up and down price points.
Speaker Change: I've seen now the product that's coming from.
Speaker Change: From our from our fields of play I was able to sit through a fall of 'twenty five.
Speaker Change: A few of the presentations with our key retailers and they are excited.
Speaker Change: About the product that's coming.
Speaker Change: And it will be led with running training and sportswear.
Speaker Change: And again.
I think the small cross functional teams are doing a really nice job of now starting to flow.
Speaker Change: Innovative product into the marketplace and that's the quickest way to return to health.
Speaker Change: Yes.
Lorraine Hutchinson: Lorraine, we took another step forward this quarter.
Speaker Change: And.
Speaker Change: Those three franchises.
<unk> decelerated at a rate that was faster than the overall business for the second straight quarter and the rate. This quarter was greater than then we drove in the first quarter and so as I mentioned last quarter that has had a disproportionate effect on the Nike digital business results because of the concentration of those franchises on <unk>.
Speaker Change: Digital.
Speaker Change: And so what we had highlighted was that these actions would result in a mid single digit headwind on our financials for the balance of this year.
Speaker Change: And.
Elliott Hill: With Elliott being 60 days in and looking at the current plans and where he wants to take.
Speaker Change: Our product portfolio.
Elliott Hill: We have accelerated those.
Elliott Hill: As actions and so I expect the impact to be bigger for the balance of this year and.
Elliott Hill: Getting various sharpen specific on reducing the weeks of supply over the next few seasons.
Elliott Hill: To ensure that across the entire marketplace. These franchises are back.
At a healthy full price level.
I made a comment in my prepared remarks that summer 'twenty five is down slightly versus the prior year and that reflects this accelerated level of actions that Elliott outlined.
Elliott Hill: I'd note that.
Elliott Hill: Even with these actions, we almost offset by the contribution of newness and innovation and so even that is that as a signal for me. It gives me confidence that the work we started over a year ago to build the pipeline is.
Is taking root with our partners.
Speaker Change: Adrianne Lee from Barclays has the next question.
Adrianne Lee: Great. Thank you very much and Elliott welcome and look forward to meeting you.
Speaker Change: Okay.
Speaker Change: You're welcome I apologize my phone correctly, sorry about that.
Speaker Change: I appreciate the the notion of margin before sales.
Speaker Change: And so when we look at kind of what Youre getting youre accelerating sorry. The recent action when you get to the fall fall of next year do you have the proven innovation at scale to replace what you are liquidating now and then that is there a reset inventory provision it happening right now.
The gross margin.
Speaker Change: And try to wrap that all up it was very much seem that you are going today's margin before sales. So when we think about FY 'twenty six I think it would be rightfully.
Speaker Change: The the right thought to think that sales would be down again.
If you're going for margin.
Speaker Change: Say healthy bedrock margins before you try to top line growth. Thank you.
Speaker Change: Thanks.
Speaker Change: How about if I take the first part of it I'll hit product okay.
<unk>.
Speaker Change: So.
Speaker Change: We outlined the idea of fields of play and taken each of our sports and further segmenting them by men's women's kids.
Speaker Change: And putting tight small teams against each one of those segments of business.
That Fortunately has already started that started over 12 months ago and because of that we're starting to see those teams deliver the innovation theyre, taking the insights from the consumers that.
Speaker Change: They serve in each of those fields of play and we're starting to see the product come through the marketplace. It started in spring and summer.
Speaker Change: As it relates to fall as you referenced.
Speaker Change: Great confidence around running, especially on the footwear side of our business.
Speaker Change: The structure pegged Romero three different price points a lineup that includes a really strong trail lineup and we have a leading business in racing both flat and spikes.
Speaker Change: Our training of course has led with Matt Kahn and continues to be a strength of ours and training along with our apparel, that's coming along with that we have some new concepts around comfort style and performance basketball is another one that excites me and they said maybe the best example of this field of play working let me start with mens and.
Speaker Change: And our portfolio you have Jordan with with Tatum, and Luca comment and then the Nike brand of course, Lebron Kobe jaw Booker and the new GT series. So I'm really excited about the basketball lineup. What is really fun for me to see coming back new to see us running these gender offense.
Speaker Change: We've launched women's basketball program, which I didn't think we'd ever do Sabrina Matt already touched on it number two shoe.
Speaker Change: And the NBA and then we have Asia, and Caitlin coming back from behind <unk> and behind that sportswear, a new lineup around look of course look at basketball look a football including the field general. So net net is the products coming in that we're gaining confidence with each season.
Speaker Change: Yeah and from a.
Speaker Change: Financial implication perspective, Adrian I guess couple of thoughts.
Speaker Change: First.
Speaker Change: As I said a number of these actions we had underway.
Elliott Hill: And Elliot has.
Elliott Hill: Provided a perspective that we accelerate them.
Elliott Hill: And some of these actions our new actions like.
Elliott Hill: Moving more aggressively to reposition Nike direct in Nike digital in particular, as a premium channel and so with him being 60 days in.
Elliott Hill: Continuing to take time to understand the impact of those actions, but we remain committed to be transparent and.
Elliott Hill: And provide guidance on a 90 day basis.
Elliott Hill: As it relates to.
Elliott Hill: Kind of what's in the third quarter outlook and how quickly are we moving.
Elliott Hill: Yeah.
With revenues being down low double digits, and our margins being down 300 to 350 basis points. We're certainly accelerating some of these actions.
Elliott Hill: But some of these actions are going to take time to carry all the way through.
Elliott Hill: And so our focus is on.
Getting back to a healthy marketplace and getting back to a full price business, both in our partners and <unk>.
Elliott Hill: Importantly in Nike direct because we believe that will elevate the entire marketplace and create a foundation for growth.
Elliott Hill: We're very focused on our inventory because we know that a healthy.
Elliott Hill: Inventory is absolutely critical for us in order to be able to.
Elliott Hill: Present, the right assortment for consumers and to give our new innovation in our new seasonal product.
Elliott Hill: The best.
Elliott Hill: Presentation across the entire marketplace.
Elliott Hill: So that's what's been reflected in our third quarter financials.
Elliott Hill: And I'll just reiterate a point I made in my prepared remarks, which is I said that we expect a greater headwind in the fourth quarter as compared to the third and Thats because of the timing of implementing these actions are different across different geographies and different timelines. You've heard me talk about the product portfolio rebalancing being ahead of ahead in APLP.
Elliott Hill: Or are repositioning the digital business being ahead in Europe, and and so as we look ahead from what we can see to date of the fourth quarter, we expect the headwinds to be larger in the fourth quarter than the third quarter guide that we've provided.
Speaker Change: The next question is from Jay So UBS.
Jay So: Terrific. Thank you so much for taking my question.
Speaker Change: You mentioned in your prepared remarks, you are willing to take some actions in the near term that will hurt.
Jay So: In order to do what's best for the brand of the company over the long term.
Speaker Change: Nike usage.
So always trying to balance short term earnings with solid long term investment. The question is how far are you willing to take the actions in the short term to really put the business on a sustainable path you were talking about too.
To drive in other words, how long are you willing to sort of take your actions recently in the marketplace, making investments in key cities rebuilding brand marketing.
Speaker Change: Is there a limit and is there a sort of a balance youre thinking the strike or you wanted to have 100% just to do the right thing whatever cost to put the company back on the path to whack, sorry, Thats, a long question, but hopefully that makes sense.
Speaker Change: Alright, no worries, so here's here's a.
Speaker Change: For all of you to think about it.
Speaker Change: Wanted to know we are acting with a sense of urgency.
Speaker Change: You heard Matt talk about the different moves that we're making around inventory et cetera, and I think the biggest takeaway hopefully as it were putting sport back at the center of everything that we're doing.
Speaker Change: Our products offense, we're going to lead with sport.
Speaker Change: And we'll do that through our sport fields of play get the cross functional teams and you can see now already the investments that we've made there and we'll continue to make there are starting to pay dividends as we roll it through spring and summer 'twenty five into fall and holiday 25.
Speaker Change: From a marketing perspective, we will continue to invest in big bold brand ideas, we touched on some of the activities that have already taken taking place.
Speaker Change: And some of the excuse me marketing campaigns with a winning isn't.
Speaker Change: Comfortable add won an award at AD age.
Speaker Change: For 2024 out of the year, so feeling good about where we're heading we've made investments in sports marketing we've continued to do that.
Speaker Change: And then of course through the marketplace and invested in the marketplace is doing the things that we've already talked about pulling inventory out return to vendor, but it's also investing in new.
Speaker Change: Product marketing.
Speaker Change: In store presentation, both at a strategic account level that covers an entire country and then down to the city level, which includes.
Speaker Change: Especially accounts, which we are making some investments in running specialty started in.
Speaker Change: <unk>.
Speaker Change: In North America so.
Speaker Change: I think it's going to take time.
Speaker Change: But I am confident that we are making the right moves in the right shifts.
Speaker Change: To drive this brand this business forward Jay.
The way I think about the the implications on our financials in the near term.
I break these actions down between two buckets I would say there are near term headwinds.
Speaker Change: That that we will endure as a result of the repositioning of our channel mix and our product portfolio.
Speaker Change: And those will create headwinds and are creating headwinds right now, but we expect that as we recalibrate the portfolio of both our channels, meaning Nike direct and wholesale or our product that those headwinds will end.
Speaker Change: And then we are transitory headwinds, which are the actions that we're taking to clean up the marketplace and inventory.
Speaker Change: As well as some of the supply chain deleverage that were experiencing is our sales decline.
Speaker Change: Which we would expect to recapture as our business returns to growth and so.
Speaker Change: I think that hopefully is a helpful way to think about.
Speaker Change: What we're looking at here and we're definitely focused on both of those dimensions.
Speaker Change: And confident that these actions will reposition Nike and also provide opportunity for us once we have completed what we've what we've set forward to do.
Speaker Change: Okay.
Matthew Boss: Next up is Matthew boss Jpmorgan.
Speaker Change: Yes.
Speaker Change: Great. Thanks, Elliot So maybe could you help rank the fields of play opportunities you see by category and then just on the long term view whats a reasonable timeline to realign inventory to pull market and then after for the product pipeline and the marketing investments to return to sustainable profitable growth.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change:
Let me hit the fields of play and we have.
Speaker Change: Sure.
Speaker Change: A number of fields of play and we have a sharp focus on five and we see those as are our biggest opportunities from running basketball football Thats global football or soccer.
Speaker Change: Training and sportswear.
Speaker Change: And we will break each one of those fields.
Speaker Change: Fields of play down by men's women's and kids and what we're most excited about is.
Not only the product innovation, that's coming out of there, but the merchandising opportunities that we have so for example, there are moments when.
Speaker Change: We need to show up as a running brand.
Speaker Change: Footwear apparel accessories men's women's kid's and there are moments when we need to show up as a as a women's brand and this this offense allows us to do both of those and we will unlock.
Speaker Change: Incremental growth.
Speaker Change: Both our brand and our business moving forward so.
Speaker Change: In terms of the fields of play those are are those are in sharp focus in the near term and we are learning and growing this offense and it could be able to apply it to more sports in the future and we're excited about it.
Speaker Change: The next question is Jon Komp Baird.
Speaker Change: Yes, hi, good afternoon.
Speaker Change: I wanted to follow up on the ultimate sort of margin recapture potential if you will.
Speaker Change: Just curious Elliott a new look at some of the moves the past few years as the brand is focused.
Speaker Change: Where where the products being sold more in the digital channel specifically.
Speaker Change: And today, if you look at the organizational structure for our supply chain and distribution are there.
Speaker Change: There was sort of a unique opportunity to become more efficient or is it purely going to be.
Speaker Change: Getting back to growth to scale from the investments from the past few years.
Speaker Change: Hey.
Speaker Change: Here's what I'd say no no question growth certainly will help in and Billy.
Speaker Change: I believe the moves and they're confident that the moves that we're making will help set us up for long term sustainable and profitable growth.
Speaker Change: The product the marketing the clean marketplace, one of the moves that I did make is.
Speaker Change: One of the first leadership moves on Amaze I had <unk>, who is now our chief supply chain officer reporting directly to me he looks everything from factory transportation, all the way through to two logistics to the consumer and.
Speaker Change: It certainly will be I've only been here 60 days, but it will certainly be a focus as we move forward as an opportunity for margin expansion.
Speaker Change: And John if you look over history, we have consistently been a double digit margin company.
Speaker Change: And.
Speaker Change: When I think of the actions that we're taking in the marketplace today.
No.
Yeah.
Speaker Change: There are a number of opportunities as we look forward specifically, we talked to several years ago about the profitability of selling our product through the digital channel.
Speaker Change: But that that math is relying upon it being full a full price sale.
Speaker Change: And.
Speaker Change: To take the point that Elliott made around the business being 50% full price and 50% off price today.
Speaker Change: The profitability of the channel has significantly.
Speaker Change: Been challenged over the past several quarters and so in addition to cleaning up the inventory there is certainly a.
Speaker Change: Margin rate benefit opportunity within Nike direct to run, albeit a smaller, but a healthier and more profitable business and and that includes.
Speaker Change: Opportunities. Our teams are working on to continue to drive the cost of fulfillment down as well as.
Speaker Change: Being less reliant upon paid media and performance marketing in order to be able to drive the top line, but leveraging the investments that we're making in our brand to drive organic top of funnel traffic to our end to us into our partners.
Speaker Change: Okay.
Speaker Change: Next step is Greg Roche from Goldman Sachs.
Speaker Change: Good afternoon, and thank you for taking our question Elliot I was hoping you could speak to any specific actions that you'll be taking either in the north America or greater China geographies.
Speaker Change: You look to accelerate some of these actions over the course of the next 12 months. Thank you.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: So I'll take North America first.
Speaker Change:
We have a new leader.
Speaker Change: <unk>, a leading North America has.
Speaker Change: A deep long history, with Nike and a lot of experience He's led North America before.
Speaker Change: And I can tell you that he and his team are being aggressive in all of the actions that we've outlined in terms of cleaning up that marketplace.
Building back the relationships with our with our wholesale partners investing in the brand elevating Nike direct and they'll start moving there in.
Speaker Change: In spring so in January and so resetting Nike direct leveraging the relationships investing in RFG, which is running specialty we've invested in <unk> on the ground game.
Investing in the brand we've touched on a bunch of that Liberty's Dodgers.
Speaker Change: And so the shift is going to take time, but I'm really confident in Tom and his team's ability to execute execute across.
Speaker Change: Product brand marketplace into.
Get North America back.
Speaker Change: To growth in terms of China.
Speaker Change: Yes.
Speaker Change: Hey.
We are all we continue to be excited about China long term, there's one 3 billion consumers and our biggest opportunity is to advise us consumers into into the world of sport and the lifestyle and sport and to grow the overall marketplace in and when we do that.
Speaker Change: Like our chances are growing.
We were just in China and there's no question. It's also a promotional marketplace the competitors both international and local increased.
Speaker Change: <unk>.
It's a place that I spent a tremendous amount of time of bid and China market since 2002 and had some deep experiences in China in 2006, and eight getting ready for the <unk> and <unk>.
Speaker Change: Let our reset plan in China, and our growth plan there, but in the end I have confidence in.
Speaker Change: The teammates.
Get this business back to growth it will start as it always does with product innovation and we are investing with China.
Speaker Change: In product innovation, not only the product from the globe, but we have a local.
Speaker Change: And what we call gel Geo Express lane, it's a local product creation team on the ground and creating products for China.
Speaker Change: We also have a sports research lab, we call it the <unk> Sports Research lab.
Speaker Change: That is doing of China research in terms of gate foot form et cetera, So, we're making product of China for China, and then big brand bold statements matched Matt touched on some of the Shanghai Marathon et cetera, and then I think our biggest biggest after product becomes in the marketplace.
Speaker Change: Got to reset.
Speaker Change: Bigger bolder consumer led Nike concepts.
Speaker Change: Debt net.
Speaker Change: That represent the full expression of the Nike brand.
Speaker Change: The service and the experience that we expect that will drive.
Speaker Change: The performance and the productivity of those doors and the good news is I was just I was over there and I met with.
Speaker Change: Tap sport and with passion, our two biggest partners and Theyre ready to go so long winded answer, but I think it all comes back to what we were talking to and both of these geographies that comes out of product management. It comes down to brand management and it comes back to marketplace management.
Speaker Change: Now, we'll hear from Ike <unk> Wells Fargo.
Speaker Change: Hi.
Elliot: Thanks, so much for taking the question Elliot great to hear from you.
Speaker Change: Actually two questions I think for Matt.
Elliot: Just follow ups on the guide.
Elliot: When you talked about the expense guide for the third quarter I just wanted to make sure I understand is that the relative to the $4 2 billion.
Elliot: And expenses of last year. So in other words, the restructuring charge that someone else took out so just trying to understand the growth up slightly or down slightly relative to what dollar number.
Elliot: And then just a follow up to that is when you talked about.
Elliot: Greater headwinds relative to three Q I think that was in the sentence of talking about revenue gross margin and demand. Gen spend was the comment meant to encapsulate all three of those line items or was it really meant for revenue gross margin was something more specific thank you.
Elliot: Yes.
Elliot: On your first question the.
Elliot: The SG&A guide as relates to the full the full amount, including the restructuring charge in the prior year.
Elliot: As it relates to your second question the answer is yes.
Elliot: As I mentioned these actions are happening on different timelines.
Across different regions and based on what we can see today, we think the net impact of these actions across revenue margin and demand creation will.
Elliot: <unk>.
Elliot: We will be larger in the fourth quarter than they are in the third quarter. So the year over year impact is another way to take it as the year over year impact when you compare to the prior year will be more significant in the fourth quarter.
Elliot: And everyone that does conclude the question and answer session as well as today's conference we would like to thank you all for your participation today you may now disconnect.
Elliot: Yeah.
Elliot: Okay.
Elliot: Okay.
Elliot:
Elliot:
Elliot: