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- [00:03]
A
Bloomberg Audio Studios Podcasts, Radio news. Welcome to our Bloomberg audiences worldwide. Romaine Bostick here in Milan, Italy with Elliot Hill, the CEO of Nike Inc. Great to have you here, Elliot.
- [00:17]
B
It's great to be here. Thanks so much for having me and this great city.
- [00:20]
A
Well, thanks for inviting me. You didn't just invite me here to Italy, you invited me to actually oversee what has become a big relaunch here of your ACG brand here in, at the Milano Cortina Winter Games.
- [00:31]
B
Yes. Yeah, it's been, it's part of, clearly we led with some innovation in the apparel and our Air Milano jacket, but we also use this as an opportunity to reintroduce, if you will, the ACG brand to the trail running consumer. And we thought there was no better place to do it than here in Milan when the eyes of the world were watching. But also with the backdrop of the Alps and the Dolomites and I don't know if you saw the train that we brought in, the ACG Express where we, we brought consumers and we took them to the wild, we call it, and went, took them out on a trail run. And it's been, been a really, really fun launch for us and I think it has done a great job of positioning the brand moving forward.
- [01:13]
A
Well, you've, guys, Nike, I should say, has been masters at branding. You've been in the CEO chair now for 16 months or so. You've been at Nike for much longer than that. I want to talk a little bit though about how these types of launches, the innovation that you see, the buzz that it creates, how that actually translates into sales.
- [01:31]
B
Yeah. So I think a couple of things. Number one, these moments, these sport moments are critically important to our brand and frankly to the industry. Their tent pole moments, again, whether it's an Olympics and a Winter Olympics, a World Cup, a Super Bowl, NBA All Star Game, and frankly, they're really, I think, galvanizing moments for our teams internally to make certain we show up at our best. And we use those moments to take the relationships that we have with the world's greatest athletes and translate that into coveted, beautiful, innovative product as only Nike can do. And so these are critical moments for our company and for our brands. And no question, they're the moments that can help create a halo over, over the business side of the, of the, of the sport as well.
- [02:23]
A
When we talk about the evolution of Nike, at your core, you are a road running company. In fact, the most recent quarter with the relaunch of the Romero and the Pegasus line, 20% growth in your running business. There's another aspect of this, though, that's been picking up a report that went viral a couple of years ago about the explosion of off road running, trail running, if you will, and acg, I would assume, fits into that in some capacity. Have you actually sat down and kind of gone over what the market is for trail running?
- [02:51]
B
No question. So when we. And by the way, it's not just trail running, it's the overall outdoor industry, if you will. And there's no, there's no question that consumers are, there is a movement to getting outdoors and whether it's in China or Europe or the United States. And so we looked at the overall outdoor market and the opportunity that exists there. And it is a, there is some crossover, but it is incremental opportunity from a branding and positioning and a revenue perspective. So we decided to go after that through the lens of trail running, which is a, a point of strength from us where we can bring innovation to, to the market and newness and freshness, and decided to do it with the ACG brand because there is some awareness already around that brand and it has an attitude and that we think is new and fresh and it brings something different to the outdoor market. So we're really excited about what ACG is going to do for us long term.
- [03:48]
A
So we're going to see more products.
- [03:49]
B
You will see, no question, you will see us continue to invest in the ACG brand. It's going to be around design, protection, attitude, innovation, and you'll see us extend beyond trail running, moving forward.
- [04:03]
A
I'm curious though. ACG has been around for a long time. It started out as a performance brand to a certain Top of.
- [04:08]
B
Top of the. Top of the mountain.
- [04:09]
A
Top of the mountain. A bunch of K2 climbers for some reason decided to do it in a pair of Nike sneakers and they sent it back to Nike. Said, look, here's some feedback, here's how we can make this better. But ACG has been through some fits and starts and I am curious as to why there hasn't been that continuity in the brand. Was it the marketing of it? Was it the innovation or lack thereof?
- [04:29]
B
No, I think, I think with anything it comes down to positioning. And I'm really excited about where the team's going to take this brand we're calling it. We're going for the wild ones. So you think about the outdoor world with a little bit of an attitude and a swagger, with an element and an approach around design and innovation. And so again, I'm excited for what the team has come up with and the positioning and the opportunity that lies ahead.
- [04:54]
A
You sign a lot of athletes under the Nike ACG brand. Now you're sponsoring events in that space as well. There has been, I guess some concern about this idea that a lot of what you see in the outdoor space, particularly when it comes to ultra marathons and a lot of the off road type of racing, that there's a certain counterculture to that. And how does Nike, which is probably one of the biggest sportswear companies in the world, a mainstream brand? Are you at risk of maybe alienating some of those folks who just kind of want to be on the fringe?
- [05:24]
B
No, I think, I think that's an, that is a risk. If we just showed up as the big bad Nike. But I think this team, and if you were able to meet the team that we've put on this, they live and breathe this space so they understand it deeply. And we're trying to show up and without question in the most authentic way from an athlete perspective. And we've signed some, as you've already pointed out, some of the greatest athletes and how do we bring something new and different to the sport? And I don't know if you saw what happened at Western States with Caleb shows up at the starting line. It's over 100 degrees out and he's wearing, you know, the radical air long sleeve top. People are looking at him like, yeah, are you crazy? Running in long sleeve? But it's that, but it's about performance and innovation that helped him obviously win the race and set the second fastest time. So we're going to come at it through the lens of innovation, design and an attitude that I think is new, fresh and frankly I believe, and we believe the outdoor consumer is ready for it.
- [06:22]
A
So the airflow shirt that Caleb was wearing got a lot of attention when you look at the outdoor space. So I mean there are a lot of names that already dominate Ultra, Solomon, Smart, Wool, Patagonia. Is this strategy of going for that outdoor consumer, is that actually playing offense? Are you catching up to the rest of the folks?
- [06:40]
B
I think we're always on the offense. We have a, we have actually have a maxim that says on the offense always. And so the team's definitely approaching it from an offensive perspective and trying to make certain that, you know, that we're coming with something new, fresh perspective. And so far the consumer is responding extremely well to, to the product. And it's not just an apparel conversation. The same thing. And then I don't know if you saw the alphafly shoe that we also launched with the full length carbon plate and something new and different to the sport.
- [07:12]
A
I've seen a lot of these products. Alphafly, the Hyperice, I'm forgetting a couple others. The Nike mind, all these things come out and I am curious. These are new products and they seem like risky products and forgive me for saying this, but it seemed like for a while Nike wasn't taking as much risk. It was relying on, you know, your classics, your dunks, you know, retro styles and such. Are you giving your team a little bit more of a leash to be able to sort of come up with these crazy ideas and try to make them into something?
- [07:45]
B
I think innovation with the athlete in mind has been at the heart of Nike from day one. And so as I've come in, I am nurturing the design and innovation teams and we have one of the world's largest sports research lab, if not the largest sports research lab in the world. In the Nike sports research, you were able to see that and how we nurture those teams to dream and think and solve problems and then translate that into beautiful, coveted, innovative product that the consumer wants, needs, and maybe sometimes doesn't even know they need. That's, that's what I'm trying to bring to this role and to the team is to make sure they understand the importance of it and we nurture it.
- [08:27]
A
But your return, you were, you were at Nike for three decades. You left for about four years or so. At some point you got a call to come back and to actually be the CEO of this company. Sixteen months roughly. Now that you've been in that chair, you talk about that Nike innovation lab. I remember somebody said something to me, you can tell me if this is true and forgive my French. But there was some mantra going around, some memo saying, create epic. Was that from you or was that from Phil McCartney? Where did that come from?
- [08:54]
B
I don't know if I can take credit for it. I know. So where that came from is Phil and his leadership team. You have Martin here today, were sitting around thinking about the future and more importantly, what we need to do at this moment in time and always here at Nike. And so, yeah, I guess I can confirm that is true. That's one of the mantras coming out of that building. And, and frankly, I love it. I love the irreverence of it. I like the attitude of it. I like the commitment around it. And I keep telling this team, run. Don't ask for forgive or for permission. Ask for forgiveness. And they're bringing Some really interesting things.
- [09:28]
A
To the marketplace and that translates to the consumer, the consumer lifestyle.
- [09:32]
B
You touched on Nike Mind. That came out of the Nike Sports Research Lab. This idea of how do you use neuroscience and reflexology underfoot, Reflexology to get the athlete ready for their performance. That came out of the Sports Research Lab and it has now launched into the consumer and there's been a tremendous demand for it. It was selling, I just only wish we would have made more, but it's selling out. There's the consumers responding to it not only from what it does for them from an innovation perspective, but esthetically how, how the product looks.
- [10:08]
A
You spend a lot of time meeting with your athletes, meeting with your designers as well. You also have to spend as a CEO of a public company a lot of time meetings with investors. Have they bought into it yet?
- [10:18]
B
I think there's no question if you see where the stock we've held up over the 16 months, the focus on, on sport, the focus on growth. Yeah, they're, they understand then the portfolio that we have three strong brands, Nike, Converse and Jordan. The focus on sport and how we're segmenting each of the brands by sport and then ultimately paying it off in 190 countries around the world is only, only Nike can do with the size and scale that we are.
- [10:48]
A
When I talk to analysts on Wall street they're relatively complimentary of what you've done but they are still concerned about sales growth which is still relatively flat. They're concerned about profitability which to a certain extent is not quite there, at least not to their liking. When do you get there? When do you get there to a sustainable growth rate on revenue and more importantly generating more profits and wider margins.
- [11:10]
B
One of the things that we, we've, we've talked a lot about is, is what is the top line growth rate with our investors and, and the bottom line expectations. And we're confident that we'll be able to get there. We're confident that the sport offense is the path forward. Those three brands, a portfolio of brands, portfolio of sports footwear, apparel, accessories and then again paying it off in the marketplace. And so the newness and freshness is working. We had some proof points in the last quarter. North America being back to growth which was a strong result for us. It's our largest reporting segment running back to double digit growth. And then of course our wholesale business which is critically important to the future of our business to serve consumers wherever they choose to shop. Also back to growth.
- [11:58]
A
So running North America was up more than 20% overall, North America was up 9% across the board. I want to talk about the wholesale though. Yeah, in North America that did great. I think was roughly about 20% as well. But there's been some criticism that maybe the sell in that you've done is maybe too heavy into North America and not necessarily broad based across the globe.
- [12:20]
B
The focus was across the entire globe in terms of wholesale side of the business. I think the team in North America led by Tom Petty, who's a seasoned veteran, he has the relationships there. No, that's P E D D I E for correction. But he has tremendous understanding of the marketplace, the consumer. And he and his team have done a really nice job getting back in with the wholesale partners and driving that level of growth. And you'll start to see that across the rest of the world as well. I'm confident in the leaders that we have in place and, and, and the, the desire for our retail partners to serve their consumers. We have a joint consumer and they want access to our brand.
- [13:05]
A
Is that relationship better with them? I mean, Nike gravitated away from those retail partners to a certain extent back in the early 2000s. I know they kind of tried to reset under Donahoe before you then came in. When you talk about being able to sell through Amazon or Macy's or whoever else here, they're comfortable with what you're giving them. Selection wise, price.
- [13:24]
B
Yes, I think there's, there's no question we're having to pull a lot of our products forward and to really drive that innovation and that newness and freshness. I think we have an opportunity around depth that we're still working through to make sure that we have the depth to drive the revenue and profits that they expect from us. And we are committed to doing that because ultimately when we're driving growth and profitability for our retailers, that's how we take market share. And that's certainly a, I think something that I am really challenging our team around is that growth, growth, profitability and then ultimately taking, taking back market share.
- [14:01]
A
What's the balance now between what you're doing with the wholesale partners and what you're doing with your own Nike Digital, which has seen a lot of softness contraction if you will. Is that just the natural transition as you try to sort of right size things or is there something else going on?
- [14:18]
B
No, no, no. So I think I talked a lot about in, in if you. The five actions I talk about in an elevated and integrated marketplace. And really what the team now has lined up on is making certain that wherever a consumer chooses to shop for our brand, we show up in a thoughtful, meaningful way. And what does that mean? It's the consumer that shops that, whether it's digital, physical, owned or partnered, making certain that we have the right assortment for that consumer and the right presentation, the right depth and the right level of service around it to create the overall experience. And, and that's what we're driving right now. And that's where our focus is.
- [14:54]
A
How closely do you work with those retailers? I mean I saw you had last over the holidays in the US something with Urban Outfitters kind of a pop up there. Are you trying to be more integrated into what your displays look like in those?
- [15:09]
B
Yeah. The elevation piece that I talk about is being proud of where our brand shows up, wherever that is again, digital, physical, owned or part partner. And it's not just the assortment, it is the presentation of that assortment. Because at the point of sale when a consumer is interacting with our brand, it doesn't, it can't just be about the product, it has to be about the stories that we tell and the beauty of it. So there's no question that we're putting an emphasis on really elevating the premium nature of our brands in terms of.
- [15:41]
A
Being able to preserve that premium nature. I know you've pulled some inventory, you're trying to right size that. How much further do you have to go to get inventory levels back to a situation that are going to a not cost you any money or any additional money but at the same time put you on a better path with regards to your supply?
- [15:59]
B
You know, we touched on it last quarter. We're feeling good about, you know, we talk about the big three, the Air Force One, the AJ One and the Dunk. Air Force One, frankly is back to growth. So we, we feel good about the work that the team, teams have done and more importantly than cleanup because I'm, I'm like you. I'm tired of talking about, I'm more about the innovation. What I'm most proud of is the, the growth that we're seeing and running.
- [16:21]
A
Yeah.
- [16:22]
B
Training's coming behind that. You'll see it in football, global football or soccer as we roll into.
- [16:27]
A
I heard you say on the conference call that that soccer, global football, if you will, was probably further along than some of the other sports that are involved.
- [16:35]
B
Yeah. And again we talked about it earlier. Yeah, those tent pole moments. The World cup is a tent pole pole moment. And so our cross functional team on that, that comes there, comes to work every single day and Focuses on the game of football. That team hustled to make certain when we launch for the World cup from football, our boots, we have three really silos, three different types of players with innovation. Each of those silos.
- [17:03]
A
It gets to this idea too, of also curation. I mean, it's one thing to offer a wide variety of things, but in terms of in your retail channels, how much more curation are we going to see so that, you know, people kind of can be able to zero in on exactly what they.
- [17:14]
B
Yeah, when you think about that marketplace that we talked about earlier. Yeah, I think we. There's no question that we have to be thoughtful about the specific consumers that shop in each of the stores or retail partners and being thoughtful about the assortments. And we have to be much more curated so that we create the differentiation in the marketplace, which allows each of our retail partners and ourselves to drive the revenue and profits that we need. And so there's no question we're going to be much more thoughtful and curated in the way we think about the marketplace.
- [17:49]
A
Speaking of curation, I know North America is doing great. There's still a lot of concerns about the contraction we're seeing in China. Some of the criticism has been just the model. The business model in China overall with regards to apparel is a little bit different. There was also this idea that Nike stores weren't as curated as what customers there wanted. When do we start to see a bit more improvement there? I know you've got a new head of Asia right now.
- [18:11]
B
Yeah, we do have a new head of Asia. I'm excited about Kathy Sparks and what she brings to the market. Over 25 years of experience, deep retail consumer. She understands our brands and our. And our culture. So excited about what she and the team because it's going to take the entire team to do. As you think about China, we have to lead with sport and innovation, and that is the focus as we move forward. Whether it's through running. Basketball is obviously big there. Football, tennis is on the rise. And so you'll see us reposition the brand through the lens of. Of sport. And it's not just through product, but it's through the athletes and the stories we tell. Much more local. Another opportunity that we have is around the digital marketplace and making certain that we clean up the digital marketplace and then ultimately pay it off in the market in physical retail. And again, I'm excited about what the team's putting in place and how we can move forward.
- [19:08]
A
You know, you have put a big focus on the athlete and A refocus on sports. And wasn't one of the first things you did when you got back, you kind of worked with the NFL to kind of make sure that that licensing agreement got extended. I am curious, I mean, obviously, American football, if you will, I mean, how important is it to have those types of agreements with the major sporting agencies?
- [19:29]
B
So, yeah, my first, just really quickly story, my first slide that I put up when I walked out on stage October 14th was We're a sport company and we're a growth company. And unbelievable applause in the room. And so it's no question we're focused on sport. And yes, the story is true. One of the first phone calls I made was to Roger Goodell. And we have a long standing relationship and we're excited about the extension that we have in place. Our brand showing up on the athletes, the teams and the leagues around the world, no question helps position us and we use those moments as our runways. And how do we elevate and drive innovation and design and look and feel that we can then leverage across the entire portfolio that we have of brands, different sports and then footwear, apparel, accessories, so critically important to the success of our company moving forward.
- [20:31]
A
You have a big focus on sports and the athlete. You are still to a certain extent a lifestyle brand, fashion brand, if you will, whether you want it to be or not. What's the strategy with that? I mean, you have the partnership with Nike Skims, obviously you have your own internal design that is very fashion forward here with what's the balance between going after that customer who maybe just wants it for lifestyle and fashion and those who are looking for actual performance.
- [20:53]
B
Yeah, I think the key is what separates us from any other fashion brand is sport, is innovation, is design, is the athlete. And I think it's critically important that whatever we do and whenever and we do and we will go after the sportswear business, we do it through the lens of, of sport and the athlete and what the athlete wants, needs, not only on the pitch, field, court, track, but also how they want to show up from a lifestyle perspective off those, you know, off the field pitches, etc. So yeah, it's, it is a big business. It'll continue to be a big business, but we are positioning it through the lens of sport. We even call it Nike Sportswear.
- [21:37]
A
Yeah.
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B
Versus lifestyle or fashion.
- [21:39]
A
Are you happy so far with the partnership with, with Skims?
- [21:42]
B
Yeah, that's gone really well. The launches, I think the combination of our two brands and the understanding that we have around performance and innovation in terms of some of the materials, what they bring from a body shaping perspective and then from a footwear perspective, what we bring to the table. And the consumers responded. We just launched last week here in Europe, so we've now moved into Europe with it and had a great launch both in Paris and London. So really excited.
- [22:11]
A
Do you anticipate doing additional partnerships or is this kind of a one off?
- [22:15]
B
Oh, I think in our world you always have to keep our eyes and ears open and our minds open to potential partnerships because I think the world and this collision of sport and culture is only going to accelerate and it's our responsibility to make certain that we keep the aperture wide.
- [22:35]
A
But you've been at the. Nike has been at the nexus of that for, for years, for decades really. And I am curious, like, what's more stable? I mean, is it the revenue that's generated from the lifestyle fashion folks, the cool kids, if you will, or on the performance side?
- [22:51]
B
There's no question that we will go. We will always run our brands and our businesses through the world of sport.
- [22:57]
A
Yeah.
- [22:58]
B
That is who we are. That's what authenticates us. That's what separates us. That's what differentiates us. So, yeah, sport, without question.
- [23:05]
A
Yeah.
- [23:05]
B
Will be the driver of our business moving forward.
- [23:07]
A
With the Jordan brand, I mean, is that, do you view that as a performance brand or a lifestyle brand?
- [23:13]
B
The Jordan brand was founded in the game of basketball. And I think that the opportunity for the Jordan brand is to continue to dimensionalize through sport. We're lining up those teams that I've talked about, those cross functional teams against Jordan, basketball, golf, which is true to who he is as a person. It's one of his passions.
- [23:32]
A
Yeah.
- [23:32]
B
And so we have Jordan Goff that also, by the way, had a really nice launch. Football and baseball, played baseball and then of course, streetwear. So, yeah, we are pushing to dimensionalize the brand beyond just streetwear, but also position it in sport. And not just about footwear, but also.
- [23:50]
A
About peril, I want to say on basketball for a second. Obviously, Jordan is just a singular figure that not only, you know, helped the NBA, but certainly helped Nike. You look at the last NBA championships with Jay Gilligan Alexander with the Oklahoma Thunder winning, wearing Converse. A brand that has struggled a little bit here. Do you see any potential of using somebody like Shay to maybe help to build up a little bit more buzz for that brand?
- [24:18]
B
No question. I love what the team's doing and repositioning the Converse brand around the idea of creators. And there are creators, of course, in the world of culture. But there are also creators in the games that we play. And in the case of basketball, there's probably no more special creator than Shay Gilgis, not only in the way that he plays on the court, but that he shows up from a. From a style perspective.
- [24:42]
A
Yeah.
- [24:43]
B
And from a Converse, I think we became very focused on the Chuck. And you'll start to see us dimensionalized through basketball, through. Through skate, and then of course, the Jack Purcell, which is setting out there as well. So you'll start to see a more.
- [24:56]
A
So you're still investing in that.
- [24:57]
B
No question. And so you'll start to see more of a broad approach to the Converse brand moving forward.
- [25:04]
A
There's no plans to sell off Converse. I mean, I'm sure you've heard the chatter.
- [25:07]
B
Yeah, I've heard the chatter and I've received even some of the phone calls. But no, we're committed to. To the Converse brand. We see it as an opportunity to address a different consumer than is the core consumer at Nike or the core consumer at Jordan. It's a separate and distinct consumer, and it offers us a separate and distinct opportunity from a revenue and profitability perspective.
- [25:31]
A
There was a memo that was floating around the Bloomberg News obtained earlier this week saying that there were layoffs coming at the Converse brand.
- [25:39]
B
Yeah, Well, I think any time that, you know, we come through with a new strategy and a new approach and a new leadership and dimensionalizing the brand, we're having to look to where we reposition resources. And again, I'm excited about the strategy that we have in place and the structure that we're putting in place. It's unfortunate, and I'm empathetic to some of those teammates. But, yeah, we're having to reposition some where we put our resources as we move forward.
- [26:09]
A
But as you sort of move in this process, 16 months on the job right now, I don't want to ask you how long you want to be here. I mean, you know, you're 62. You're still young. But what is the Runway called me.
- [26:22]
B
Out on my age. Well, I. I mean, you know, well.
- [26:23]
A
If you want to come look it up. But you're. I mean, what are you like. Only you're only the fifth CEO of this company.
- [26:28]
B
I don't even know, by the way. I don't even know that. So you just taught me something.
- [26:31]
A
So you're. You're in rare air here. Pun intended. And I guess the question is, like, what do you want this company to be? So when you finally leave, you know, maybe many years from now and that six CEO takes over. What is the company that you leave behind? What is Nike?
- [26:46]
B
So here's what I'd say. I think Nike is like a relay race. And we have a saying that at Nike, there is no finish line. And in that relay race, I think it's all of our responsibilities. Doesn't matter what job you're in, is to take that baton and to run as hard as and fast as you can and to when you hand the baton off, leave it better than you received it. And that's my responsibility. And that's exactly what I expect to do.
- [27:15]
A
All right, well, Elliot, really appreciate you joining us today.
- [27:17]
B
It's my pleasure. I really appreciate you spending time with us and allowing us to tell our story, so thank you so much.
- [27:23]
A
All right. And hopefully you can get a check on the podium and you can see some of your athletes there.
- [27:27]
B
Look, I'm definitely looking forward to going and enjoying some of the games, so thank you so much. All right.
- [27:32]
A
Thank you.
- [27:32]
B
Appreciate it.
- [27:32]
A
Thank you.