Q1 sales decline 10%, roughly in line with guidance. EPS of $0.7 better than consensus expectations of $0.52 For the 3 months to end August, NIKE’s reported Q1 Group revenues fell 10% (down 9% CC). NIKE Direct was down 13% (12% CC; Q4 -7% CC) with a 20% fall in NIKE Brand Digital sales (Q4 -10% CC) partially offset by a 1% increase (Q4 2% CC) in NIKE-owned stores. Wholesale revenues fell 8% (-7% at CC) versus Q4 +7% CC. Converse revenue was even weaker with reported sales -15% (-14% at CC). Group gross margin increased 120bps, helped by lower product, warehouse, logistic costs and benefit from last year’s strategic pricing initiatives. Diluted EPS fell 26% to $0.7 vs FactSet consensus $0.52. North America revenues were down 11% (Footwear -14%/Apparel -10%) with Nike Direct -11%, NIKE Digital -15%, NIKE stores -1%, Wholesale down 11%, reflecting unfavourable shipping times. In Europe, Middle East & Africa revenues at CC fell -12% (Footwear -12%/Apparel -11%) with Nike Direct -12%, NIKE Digital -24%, NIKE stores +3%, Wholesale down 11%. NIKE withdraws FY guidance. Near term outlook expectations have moderated since beginning of year NIKE has withdrawn FY25 guidance (previously FY25 revenues down high single-digit) to give time for Elliott Hill, a NIKE veteran who takes over as CEO from John Donahoe in mid-October, to evaluate the business and reset strategy. The outlook for near term performance has moderated since the beginning of the year, according to management. After Q1, Retail sales are behind expectation across all channels, inventory is elevated and so more promotions are needed. Q2 guidance is for revenues down 8-10% with gross margins down 150bps due to higher promotions to clear inventory, channel mix headwinds, supply chain deleverage, and getting less of a benefit from lower product costs and last year’s strategic pricing action. Management does expect to see a slightly better 2H revenue trend versus 1H as newness improves, although the CFO does expect FY gross margin to now be down YoY. CFO is also watching the East Coast port strike in US closely as he is ‘yet to bake anything in forecasts for this.’ NIKE’s Wholesale spring order books for next year closed flat vs last year. This was behind expectations. The comment that ‘the multi-brand environment is very competitive today’ suggests to us that NIKE’s innovation will not be firing by then, it has more formidable competition versus history, and one should not expect any real momentum until end of 2025 at the earliest. Continued overleaf