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Good afternoon, everyone, and welcome to NIKE, Inc.'s First Quarter Fiscal 2027 Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com.

Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I'd now like to turn the call over to Paul Trussell.

Thank you, operator. Hello, everyone, and thank you joining us today to discuss NIKE, Inc.'s First Quarter Fiscal 2027 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill; and CFO, David Denton.

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 NIKE's reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and [ nonpublic financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com for comparable GAAP measures and quantitative reconciliations.

All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time. So we'd appreciate you limiting your initial question to one. Thank you for your cooperation on this.

I will now turn the call over to NIKE, Inc. President and CEO, Elliott Hill.

Before I begin, I want to welcome David Denton to NIKE. Dave brings deep financial expertise, strong operational leadership and a proven track record of helping world-class companies grow. I'm excited to partner with him and the rest of our senior leadership team to serve consumers better, accelerate our profitability and create long-term value for shareholders.

For the first quarter, results were in line with our expectations. NIKE, Inc. revenue was within the range we guided to. Gross margin improved as we said it would, and we manage costs with discipline. Importantly, the quarter showed the sport offense is driving results. Our NIKE Brand performance portfolio continued to grow. Last fiscal year, we grew this business to $16 billion. We built on that foundation this quarter, growing NIKE performance by another high single digits. Today, I'll share more about the momentum we're seeing across our key sports.

Despite that progress, our NIKE performance business is not yet large enough to offset the pressure we're seeing in NIKE Sportswear, [indiscernible] and Greater China. We're taking deliberate actions to strengthen those businesses, but realizing the full benefit of those efforts will take time. On the call, I'll provide more detail on what we're doing and why. And finally, Dave and I will share how we're transforming he's operating model to scale the success of the Sport Offense across the company. This work has been underway for some time, and it's an important part of building NIKE the right way for the long term.

Let me start with NIKE Sportswear, Jordan Brand and Greater China. We've identified the areas that need improvement and are actively repositioning these important businesses. NIKE Sportswear, which accounted for just under half of this quarter's revenue was down low double digits. The decline reflected a combination of deliberate actions, product underperformance and broader marketplace pressure. The first factor was one we expected. As planned, we reduced revenue from the dock by nearly 50% in the quarter. That resulted in roughly $200 million headwind in Sportswear. In addition, some age, higher volume, sportswear, footwear sold through below expectations.

Looking ahead, that has impacted our future order books as we proactively work with our wholesale partners to work through excess inventory to create a healthy marketplace. Overall, there's a lack of energy in the lifestyle space right now, which is impacting traffic. Yes, the consumer is cautious. But as the leader in the industry, it's on us to bring more creativity to sportswear.

The headline decline only tells part of the story. Within Sportswear, several major franchises are healthy and growing. The Air Force 1, one of the most important sneakers in the world is now driving a stable full-price business through new dimensions and seasonal materials and colors. We also had a handful of Sportswear Footwear franchises that have scaled over several seasons that grew by strong double digits in this quarter, led by our Running-inspired silhouettes, the [ P6000 ] and the [ V5 Runner ]. And where we have introduced newness at scale, we've seen early success. We launched studio fleets for women and solar freeze for men during back-to-school season, and the studio fleets was the best-performing apparel collection of the quarter and all of NIKE, Inc.

The common thread across these successful franchises is clarity. They know exactly who they are serving. That's the lesson. The sportswear consumer isn't one audience. It's a collection of consumers with distinct needs, tastes and motivations. So we're organizing sportswear assortments, the same way we've organized our performance business around specific consumer insights and distinct style preferences. We're breaking down the sportswear business into smaller areas of focus to create a more diverse product portfolio and a more differentiated marketplace. We'll see less of a sea of sameness that's hurting the lifestyle marketplace across our brands and our competitors right now. That's how we believe we'll move from managing a few successful Sportswear franchises to building a deep bench of winners across the entire marketplace.

With Jordan Brand Footwear, we're going to get back to leading the scarcity model that we created. Simply put, we've been oversupplying our iconic retro product asking them to do too much. And as we've done with the Air Jordan 1, we will deliberately reduce the volume and frequency of specific Jordan Retro launches. We've discussed it with our wholesale partners. Together, we will restore balance to the marketplace to create a foundation for more profitable and sustainable growth. In the near term, North America will feel the biggest impact.

To give you a better sense of the scale of these actions in Q1, the Jordan Brand represented 13% of our global business with revenue falling by mid-teens. Here's why we're doing this. When consumers see the [ Jump Man ], it should feel special, it should feel earn. And every decision we're making is designed to ensure the Jordan Brand remains as coveted a decade from now as it has been for the past several decades.

Let's turn to Greater China, where for the quarter, revenue declined 26%. With a new leadership team in place for the past 6 months, we have been moving with urgency to alter the landscape and improve our position in the marketplace. As we announced in July, we are activating a plan to clean up the digital side of this market. We are eliminating distribution through channels that are not aligned with our marketplace strategy, which will decrease the deep discounting of our brands. We will anchor NIKE's and Jordan's digital marketplace in China around fewer, higher-quality experiences, through the official NIKE flagship storefronts on [ Tmall, JD and Doyen ] alongside NIKE.com and the NIKE app. We believe a tightened digital ecosystem of NIKE flagships will enable a more premium brand presentation with clearer product stories and a more connected consumer journey.

The focus will allow our top partners to concentrate on creating inspirational brick-and-mortar retail experiences. The majority of our partners' physical doors in Greater China have not been refreshed in the past 7 years. When we elevate retail experience and lead with sport, we see results. In Shanghai, our house of innovation has delivered 10 consecutive months of growth since making that shift. In the near term, revenues and profitability in China will be impacted. We expect our digital cleanup to take multiple seasons as we continue to take targeted actions with our partners to improve inventory levels. Taken together, Sportswear, Jordan Brand and Greater China represent significant work ahead, but we know what healthy looks like and we're taking deliberate actions to get there.

These challenges are significant, but they are not the whole story at NIKE. At the same time, the Sport Offense is delivering measurable progress against our performance portfolio. Here's what that looked like this quarter. Running is up double digits again with consistent share gains. Global Football benefited from World Cup Energy to drive strong double-digit growth in all 4 geos. Training grew globally, led by EMEA. Basketball was up double digits in North America with expectation that the sport will continue its momentum in Q2, and both tennis and golf grew double digits.

In NIKE Running, our innovation in Max Cushioning helped reignite this business, led by the strength of the [ Vomero ] franchise, we've nearly tripled our share of the [ Max Cushioning ] category over the past year. Now we're entering the next phase of NIKE Running. Over the past 2 months, we've introduced 4 new footwear innovations, 3 in our racing silo and 1 in our Pegasus silo, each built around a different runner, a distance and a goal. In August, we launched the [ Pegasus plus 2 ] a fast tempo training shoe with a curved Air Zoom unit for a quick smooth ride. In September, we unveiled the [ Alphafly 4 ], a lighter, more energy given version of our most celebrated Marathon shoe. And yesterday, we introduced 2 new shoes that span the spectrum of Runners. The [ Swoosh Fly ] our entry-level marathon racing shoe designed for the 4-hour-plus runner and NIKE Apex, a super shoe with double-stacked Air Zoom units that deliver an incredible 40% more energy than the [ Alphafly 3 ].

In Global Football, we're pleased with our World Cup results as we doubled our World Cup team kits sales compared to the 2022 tournament. One of our strategies going into the tournament was to use the energy to invest in a much needed refresh of the global football marketplace. This quarter, the newly elevated marketplace helped drive stronger sales in our club football kits this quarter which was up high teens. That's critical because club football fans buy season after season.

Training is one of NIKE's largest untapped performance opportunities because every athlete trains. We're seeing success across the portfolio. NIKE Mine has quickly become one of our top-selling franchises. [ NIKE Pro and MetCon ], our industry icons, and we just introduced the NIKE Hybrid Footwear System for both running and strength movements to serve the fast-growing world of hybrid training and racing. The new hyper slide brings the next recovery innovation from our NIKE Times Hyperised partnership to a more accessible price point.

In Basketball, where we are the global leaders. One of our most powerful growth opportunities is the women's game. NIKE Basketball has grown our women's signature business nearly 500% from FY '22 to FY '26. Today, we activated the largest women's signature shoe launch in NIKE's history, the Caitlin 1. It will launch in 5,000 doors, twice the average for a NIKE Basketball signature shoe, supported by our largest NIKE product campaign for the holiday season.

What we've learned through the Sport Offense is that focus wins. When teams get closer to the athlete, the consumer and the marketplace, they make better decisions. And over the past year, we've taken steps to make certain that the rest of the company can move at the same speed. That's the thinking behind Pace, a program that brings several operational changes together under one effort. The purpose of Pace is clear, accelerate the Sport Offense. It will change how and where we work, move decisions and roles closer to the consumer and build capabilities that will allow us to move faster.

The Sport Offense has proven itself, Pace is how we scale it. The first element is the work that's already underway to evolve our supply chain from a mostly fixed structure to one that is more flexible, responsive and cost-effective. As a next step, we're establishing a new campus in Bengaluru, India. Its mission is to drive new capabilities and ways of working for NIKE. They will work closely with the teams around the world to run the business with greater speed and precision. These full-time NIKE teammates will span across a number of functions across the company. As part of Pace, we also plan to organize into 3 geographies. The Americas, which brings together North America and Latin America, [ AP GC ], which combines Asia Pacific and Greater China, and EMEA, Europe, Middle East and Africa will continue operating as it is today. We'll reduce layers and move more resources to the country's territories and cities, and give our local teams more ownership of winning in their markets. We expect teams to move into this new formation in fiscal year '28.

And the final part of Pace is enhancing the way we work across NIKE, which will change the shape and size of our workforce. In some areas, will add capabilities to increase speed and scale, and others will eliminate duplication. Over time, those changes will reduce the overall number of roles across NIKE Inc. As Dave will outline, we expect Pace to streamline decision-making so we can capture demand faster and improve productivity while also creating greater capacity to invest in what has always set NIKE apart serving athletes, creating industry-leading innovation and building the world's strongest sports brands.

At our Investor Day in November, we will provide a clearer view of our long-term growth algorithm. The actions behind our portfolio priorities and how our operating model will support sustainable growth and value creation.

With that, I'll hand it over to Dave.

Thank you, Elliott, and good afternoon, everyone. Over the past few weeks, I've had the opportunity to connect with many analysts and stakeholders but importantly, I look forward to working with all of you as I begin my tenure here at NIKE. I've long admired NIKE as an iconic brand, not only for its relentless commitment to innovation, but also for the way it inspires athletes through the power of sport. I'm pleased to be joined NIKE at such a pivotal time with so much opportunity ahead of us. It's clear to me that there is an enormous potential to drive significant long-term shareholder value.

NIKE operates in a growing, vibrant but yet competitive sector where it remains a clear leader despite recent results that have fallen short of expectations. A key part of my role is to ensure that our Performance business grow sustainably and profitably over the long term, while also focused on getting Sportswear and our Jordan and Converse brands back to financial health. That means ensuring we are appropriately resourcing our priorities, taking the right actions with discipline and urgency and maintaining accountability across the organization. We will continue our unwavering focus on driving shareholder value which requires us to restore the NIKE portfolio of brands back to premium positions, improve the company's operating margin through enhanced productivity and better ways of working, invest with purpose to drive higher quality top line results and unlock new growth opportunities and appropriately allocating capital to maximize shareholder value creation.

Under Elliott's tenure, it's clear we have made significant strides towards these objectives, but we still have more work to do. Our results are below both our expectations and our potential and we are focused on closing this gap. And today, I'll cover our financial performance for the quarter, then I'll highlight a key program focused on improving operating margins across the enterprise. And then I'll close with our guidance for fiscal '27.

Our first quarter results reflected progress in several areas, while also showing where we still have work to do to return our business to a healthier position. In Q1, revenues were $11.2 billion, a decline of 4% on a reported basis and 5% on a currency-neutral basis. And by geography, Greater China declined 26%, EMEA declined 5%, while APLA was flat, partially offset by a 2% growth in North America.

From a financial standpoint, the core continues to be defined by 2 different realities. Our NIKE Performance portfolio delivered strong growth while NIKE Sportswear, the Jordan Brand and Greater China remains significant headwinds to our consolidated results. In fact, NIKE Sportswear and the Jordan Brand including men's, women's and kids, represented a high single-digit drag on consolidated NIKE. And if you were to isolate our NIKE Performance business, it was up high single digits this quarter, benefiting from the World Cup. Additionally, if you were to exclude the reset in Greater China, NIKE Performance would have been up low double digits in Q1. Performance was driven by double-digit growth in Running, Global Football, Tennis and Golf.

Gross margin was 42.8%, up 60 basis points compared to LY. The results included benefits from our supply chain cost management efforts and FX tailwinds, partially offset by increased discounts as well as channel mix. Importantly, SG&A declined 3% on a reported basis. The team has maintained strong discipline on expenses in the quarter while increasing investments in demand creation associated with the World Cup. Earnings per share for the quarter were $0.48, down 2% versus LY. Overall, our financial results were largely in line with our expectations for the quarter but clearly below the company's long-term potential. The company's balance sheet remains very strong. We ended the quarter in a net cash position with $8.4 billion in cash and short-term investments, with leverage at roughly 2x. We remain disciplined in how we allocate capital with an emphasis on prioritizing investments that can strengthen the business and improving returns on those investments over time.

In the quarter, we returned approximately $610 [ million ] to shareholders through dividends, and the dividend remains a significant priority in our capital allocation strategy. Taken together, the quarter shows a business and transition. We are not where we want to be yet, but we have a strong understanding of the trends throughout the business and importantly, the actions required to improve results over the long term.

As Elliott mentioned, we have -- we are taking strategic actions to build a healthier and more productive operating model that gives us greater flexibility to invest for growth improve operating margins and create long-term shareholder value through a program we're calling Pace. Pace is focused on improving how and where work gets done, improving our speed to market, streamlining decision-making and sharpening our focus in areas that matter most to the consumers and athletes. We expect this program will enhance productivity and drive a lower cost base at NIKE. We expect this will deliver approximately $2.5 billion in savings. As we move forward with this work, we intend to reinvest a portion of the savings from Pace back into the business with discipline, prioritizing the opportunities with a clear strategic impact and the strongest return.

We also expect the cost to implement Pace will be approximately $1 billion over the programs live which is in addition to approximately $300 million of severance-related costs in fiscal '26. We have begun taking actions and expect the majority of the program savings to be realized in fiscal years '29 and '30, with the full realization of the program to continue into fiscal year '31. Now we expect to provide additional details on these actions, our investment priorities and the measures we will use to assess our progress at our upcoming Investor Day.

Now I'd like to just spend a few minutes discussing our outlook for fiscal '27. And before I discuss the outlook, let me share my approach to guidance. I believe guidance should be grounded in the realities of the business, informed by both the risk and the opportunities ahead of us and set at a level that we believe is reasonable and attainable based on the information we have today and importantly, the actions we are taking to drive the business forward. One of my objectives is to build on our financial discipline and provide investors with a clear framework for understanding our performance as well as our outlook. To that end, beginning today, we intend to provide a view of our expectations for the full fiscal year and update that perspective as the year progresses.

Today's outlook should be viewed as our initial assessment of fiscal '27 based on a comprehensive business and financial review conducted over the past several weeks. We expect to provide additional context in November as we further refine our plans as well as our priorities.

Starting with revenue. For fiscal '27, we currently expect revenues to decline in the high single-digit range. As Elliott outlined, we are making deliberate choices across portions of the portfolio, particularly in NIKE Sportswear, the Jordan Brand and Greater China to improve the health of these businesses over time. We will continue to take actions to reduce supply across key parts of the marketplace in support of a healthier marketplace environment and stronger full price realization. We expect those actions will create pressure on reported revenues for the remainder of fiscal '27 and into '28. And as a reminder, in the second quarter, we are also lapping significant promotional activities in EMEA from Cyber Week and a higher comparison of North America sell-in activities versus last year. These 2 items will represent a headwind of approximately 400 basis points to revenues in the second quarter. While these decisions can dampen near-term top line results, our focus is on improving the quality of revenue and creating a more sustainable foundation for long-term growth.

Now turning to profitability. We currently expect EBIT to decline by a greater percentage than revenue. This outlook reflects continued pressure on gross margin and fixed cost deleverage associated with lower revenue levels. Higher input costs but partially offset by disciplined expense management. At the same time, we remain focused on the levers that we can control. These include improving entry management, increasing full price realization strengthening sourcing and supply chain execution while managing our cost structure. We also expect SG&A to remain down year-over-year as we continue to identify opportunities to improve efficiencies and simplify operations and increase productivity across the organization. Our priority is to direct more resources towards the consumer, support, product innovation and the growth opportunities with the greatest long-term potential.

And finally, with respect to adjusted earnings per share, we currently expect fiscal '27 adjusted earnings per share to be in the range of $1.15 to $1.35. This range excludes approximately $0.15 of impact from the Pace program. We look forward to providing additional perspectives on our strategic priorities, investment approach, and our long-term financial objectives in November. Here's what I've taken away from the last 6 weeks. We are not at a standing start. Significant and valuable work has already been done to build a better NIKE we intend to accelerate those efforts over time.

From a financial perspective, I hope you come away with a clear sense of our focus on moving the company forward with discipline, accountability and urgency. Our teams are working with purpose to restore the business to stronger financial health, while prioritizing the long-term strength of the company and positioning NIKE for sustainable success.

And with that, I'll pass it back over to Elliott.

A few weeks ago, the University of Texas hosted the Ohio State and what many call the biggest game of the college football season. Most people will remember how Texas came back from a 20-point deficit against the #1 team in the country. But what stood out to me wasn't the final score. It was how they got there. a series of methodical drives, a few calculated risk, extra effort in critical moments. They stay committed to the plan and eventually the scoreboard caught up. that resonates with me because as Dave and I just shared, we have a lot more work to do. That's just the reality we're in.

Increasingly, I see signals that remind me why our strategy is right. That happened in Austin and it happened off the field. For 6 days leading into Saturday night, we help turn the football game into a broader consumer moment. We activated every dimension of NIKE, bringing down the Running, Training, Football and Sportswear. We leverage [ Blue Ribbon Elite ] NIKE's program for NIL athletes and our retail partners to capture the attention of an entire campus. Students went for a guided run along [ LadyBird Lake ] with our agents. They did yoga with our trainers on the South lane. They got a special invite to work out at the Texas football wait room. They lined up at 5:30 a.m. to shop at our skims pop-up on Speedway, they customize studio fleets and solar fleets designed specifically for Texas, and we sold through the collection. We ceded custom [ vapor deposit ] cleats, with our top athletes. And we announced 13 new NIO athletes across 8 sports, even UT legend Kevin Durant showed up to welcome new athletes to join [ TKD ].

This was NIKE surrounding a moment, deploying our full sport offense, something no one else can do. it was the kind of focus on the ground game that helps us become more locally relevant. And when you have 1,000 partnerships like we do across universities in North America, that reached over 13 million students. It's clear to me that Austin wasn't a destination. It was a reminder of what's possible of a larger opportunity in front of us of what happens when NIKE plays to our strengths. Now 1 week in Austin doesn't change the work in front of us. We have a lot to prove, but it reinforced something special. The closer you get to the athlete, the closer we get to the consumer, the more opportunities we uncover to serve them. This is NIKE used in our partnerships in bigger, more creative ways. We can do it with Texas, the Ohio State and soon Miami and football.

With the upcoming German football association partnership or with FC Barcelona and Paris [ Germane ] and Global Football at our major marathons and at March Madness. That's how we create more value for athletes and fans strengthen our brands and that's how we expand the opportunities ahead for NIKE and our shareholders.

With that, Dave and I will now answer your questions.

[Operator Instructions] Our first question comes from the line of Simeon Siegel with Guggenheim Securities.

Dave, welcome looking forward to working with you. Elliott, any way to frame for us how large performance versus Sportswear and Jordan are in the U.S.? I'm just trying to align the positive and negative comments with the fact that North America still grew revenues. And if I'm looking at it correctly, I think you saw the first regional positive inflection in EBIT margin in dollars. So that would be helpful just in terms of sizing.

And then, Dave, just maybe a higher level, curious if you can speak to your confidence in these numbers and your thoughts on how much you've been able to learn and touch in the short time you've been with the company?

Simeon, thank you. It's good to hear from you. Let me start first with performance. I'm going to start bigger picture. The Sport Offense, in fact, working and you can see it as our performance business continues to grow. It's a proof point. We believe that when you really get sharp on a distinct consumer segment, that's when we win. Performance delivered broad-based growth in Q1 across all key sports. We grew high single digits in Q1. Performance did overall. That was driven by football, running, training, basketball, tennis and golf all contributed to performance growth. So it was across the board growth there.

And so Q1 performance, and we said this in the remarks, growth. That -- the Q1 performance growth was on top of the performance growing mid-single digits in FY '26 to $16 billion. And Simeon what I would say is innovation is really driving that growth. And I won't go through every one of them, but in running, training, golf, you go through innovation is what's driving the performance business. But it's also not just about product. It's about how we line up what we call our Sport Offense, not just the sport, but how we execute at the country level across products, across marketing and across the marketplace. And you can see that what we did in the World Cup. I was really proud of the work that the teams did there here in the United States and around the world.

The Caitlin launch today has been incredibly successful. The NIKE Hybrid launch that we did at the [ Hiro ] World Championships in Stockholm. Those are proof points. When we get performance innovation product and the moment all lined up, we have great success there.

As it relates to North America, North America did grow 2%, as we said, and it was driven by performance led by Running, Global Football and Basketball, those were the drivers there. So overall, excited about the direction that we're headed from a performance perspective. And like I'll say about North America, we are seeing good sell-through across all channels, whether it's sporting in North America specifically, whether it's sporting goods at a [ Dick's ] an academy of Shields, athletic specialty, [ JD, Foot Locker ], performance product is selling and then also at our specialty accounts. So overall, we're pleased with the sell-through and performance product in North America.

Simeon, Dave here. I really look forward to working with you. Maybe just a couple of comments on guidance. First and foremost, you should understand that we've really performed over the past several weeks, a bottoms up comprehensive business plan review and a financial plan review. Taking into consideration all the realities that we're seeing within our business across all the dimensions of our business. And importantly, the risk and opportunities and the actions that we're taking to manage this business and return it to health over the long term.

Obviously, I gave a range from an earnings perspective. And that just shows that we've pressure tested a series of continued trends across the business and feel comfortable that this range reflects our best assessment of where this business stands today and the outlook. So I sit here today feeling very confident the teams are focused against this these financial measures are pushed into the business and everybody is accountable for delivering against these results. So this is our best estimate. I feel good about where we stand, and we're focused against delivering not only this year but the years ahead of us.

Our next question will come from the line of Brooke Roach with Goldman Sachs.

Elliott, Dave, I was hoping you could provide better context on the magnitude of cadence of pressure that you expect in Greater China relative to the 26% decline observed in 1Q. Are there additional strategic actions that you think are still necessary to be taken on top of what's already been taken to improve the health of the China business beyond the reset of NIKE Digital?

Thanks, Brooke. We continue to execute a marketplace reset in China, and you saw that reflected in the numbers this quarter. The teams, and we here working with the teams on the ground are focused on becoming a more premium and culturally relevant brand.

I'll start first, as I always do on this question is China does remain an incredibly important marketplace. This year marks our 45th year of doing business in China, and we remain committed to serving the Chinese consumers through sport. And we know, Brooke, when we lead with sport, that's when we win. I can point to running this quarter, it continues to grow. We've lined up in China, not only the innovative product, local experiences, which are critically important in China After Dark Tour this quarter. We had almost 4,000 runners registers selling out in the first day. We are driving double-digit growth, and it's our sixth quarter growth in running.

So when we lead with sport and line up the experience in marketing, it does work. We are aggressively cleaning up the marketplace, at the same time, elevating the consumer experience. The digital marketplace, as you stated, we haven't taken some actions. It was too broad. It wasn't differentiated and it had become promotional. So we did -- we did eliminate some online distribution that was unprofitable and brand dilutive we're anchoring, as we said in our prepared remarks around some fewer flagships at the same -- it's not just about digital. We have to be elevating our physical retail, and we're investing with our partners in their must-win doors to create more, I would say, consistent and elevated experiences because we know when we do that, we've had some great successes in our House of Innovation flagship. We're driving growth there.

The last component of this is about being more local. So we will continue to invest in product creation teams on the ground in China and working on future seasons. Our first collection coming out of China, made for China will launch in October. It will be a brick-and-mortar only launch purposely. And then we will continue to deliver products over time, products and assortments that are locally designed, developed and even manufactured in China. So we're excited about what the team is doing in China. I'm confident in [ Kathy ] and her team. It's just going to take us time resetting the marketplace and we will see -- we will continue to see pressure on revenue and profitability in the near term, but again, confident in [ Kathy ] and the team.

Brooke, this is Dave. Just real quickly, as Elliott said, we have multiple efforts underway in China to improve the performance of the marketplace and improve our performance within the marketplace. But from a specific guidance perspective, we -- the guidance range that I just provided to you assumes that China actually gets worse from a revenue perspective for the balance of this year, and that's because of some of the actions we're taking today to make sure that we've returned this business to health in the long term. So I think that's what you should expect from that business for the balance of fiscal '27.

Our next question will come from the line of Jay Sole with UBS Securities.

Great. Question is on 2Q. I didn't think I heard full second quarter guidance within the comment about the 400 basis point headwind. Can you give us a little bit of help on how you're thinking about revenues for Q2? I mean -- and then maybe on gross margin as well. And then even if -- for the fiscal '27 outlook, I know you said SG&A down year-over-year, but you have sort of an unusual compare in fourth quarter. Can you just a little bit of help on where you think the gross margin lands for fiscal '27?

Yes. Thank you. This is Dave. Actually, we're probably not going to provide guidance specifically for gross margin. But for the year. But at this point in time, there are puts and takes. I think one thing that's really constructive from a gross margin perspective is we're making fairly significant moves in our supply chain and sourcing programs today. That is actually bolstering gross margin. At the same time, we are taking discounts and resetting the marketplace, which is dampening gross margins over time. So there's a little push and pull for this year as we go through the balance of fiscal '27.

I will say as it relates to Q2, I just wanted to highlight, because of the actions that occurred last year, against a tough comparison with what happened in Cyber Week in Europe as well as what happened in the North America sell-in last year Q2. So if you look sequentially quarter-over-quarter, you will see because of that comparison, growth rates being pressured in Q2. So I hope that helps.

Our next question will come from the line of Bob Drbul with BTIG.

Dave, welcome. Elliott, I was wondering if you could spend some time a little bit more on I'd love to hear the decision to let [ Embape ] go from your roster. But the other piece of this, I'd love to hear more clarity on the game plan in basketball, signature basketball, you've had some moving pieces there with [ Shay ] coming into NIKE. So can you put some meat on the bone around some of that for us, please?

Yes. Thank you, Bob. Just in terms of [ Embape ], we've had a relationship with him for over 2 decades. And we've had some great moments together, working together with him and he was an important part of NIKE Football. And what I would say is that we're proud of what we achieved together on and off the pitch. And we wish you much success as he makes the move. And so again, we're happy for him. And we are excited about what our portfolio has in NIKE football. Great stable of athletes, great stable of federations and also countries. So -- and I'm very proud of the work that our team has done around the football boots. So I'm excited about our opportunities in football.

In terms of basketball, you'll see us continue to dimensionalize basketball, both men's and women's. We had a tremendous launch today with Caitlin and Caitlin is just part of the women's business. Obviously, we have -- our women's business was up over 600% over the last few years. So it's a new opportunity. We see the women's being helping us dimensionalize the overall basketball business between Asia and Sabrina and now Caitlin. And so Caitlin was our largest, by the way, signature lots for women ever at 5,000 doors and great sell-through.

In terms of NIKE Basketball, we also launched [ Shishu ] today. I don't know if you saw that [indiscernible] and good sell-through there and we'll continue to lead basketball with some signature athletes, but we also are excited about what we're seeing in our GT series as well.

So overall, excited about where the team is headed in basketball, and we're starting to see growth there. We even called it out. North America had growth in basketball again. So we see it as another growth opportunity from a performance perspective.

Our next question will come from the line of Sam Poser with Williams Trading.

I've got 3. I'm just going to read it real quick. The -- can you give us what you expect -- you talked about China, the regional expectation by geography for the year sort of relative to Q1, where you anticipate sales will trend. Two you've talked about space and the Pace project and increasing speed. You're now -- I think, about 18 months to market, what are you trying to get that speed up to like when you optimize it? And then in the family channel and your sub core products, sub-$100 price point, is most of that product live in Sportswear?

Yes. Let me I'll take -- by the way, you broke all the rules, Sam. We've got 3 questions in. I'll hit Family and Pace. And in terms of Family Footwear that channel of business, which is what we call core footwear here internally Sam. That -- it cuts across all performance sports. So we have an entry-level core product across running across basketball, the cost training. And then of course, we do have it in sportswear. So it is a cross sportswear opportunity in that Family Footwear channel. And that's at $65 to $85 segment. And again, the teams continue to focus on that and are driving, I think, some really nice progress there.

As it relates to Pace, we'll do deeper in terms of the 18 months question at our Investor Day. But I'm going to -- since you asked the question, I want to make sure I hit Pace for everybody on this call. So I might spend a bit more time. I'll go at a little higher level, and that is that we are setting Pace up to help scale the success of the sport offense. And I want to remind everybody the Sport Offense is creating product through the lens of sport, but it's paying it off at a country level. And so we're building an operating model that we need closer to the athlete, the consumer in the marketplace, and we'll do that through some work that we're doing around our supply chain, which we went through in some detail around our new capability center in India and moving from 4 to 3 geos, Americas, EMEA and then Asia Pacific, Greater China, getting resources closer to the countries and then changing the size and shape of our workforce.

And so at a high level, that's the progress or the work that we're doing around Pace, and it will help us build a stronger NIKE for the future and helps support a more profitable and sustainable growth into the future. And we'll share more details at Investor Day.

Yes. And maybe I'll just touch on a couple of things real quickly. One, on the Pace program, as Elliott said, this is a program that, at the end of the day, is working in tandem with the objective of increasing operating profit leverage over time. And so this will be an important program and leverage an initiative to be able to do that. Secondly is -- we're not going to give guidance, obviously, by region. But as I said earlier, the actions that we're taking in China will further dampen China compared to Q1 from a growth perspective for the balance of this year.

Our next question will come from the line of Alex Straton with Morgan Stanley.

Perfect. Maybe just a big picture one for you, Elliott. If we just go back a couple of years when you first started, I feel like we knew what the mean we having a better understanding of what the main pressure points were with Jordan and China, the Sportswear. Things haven't entirely moved that much. They've gotten a little bit worse in some of those areas. So can you just walk through maybe what you underappreciated about some of the challenges there at that time? And then what gives you confidence that some of the revised strategies you outlined today are the right ones?

Yes. Thanks, Alex. What I would say is since I've returned, I believe strongly that we have strengthen the foundation of our business and our direction is super clear that we're building NIKE the right way, and we're building NIKE for the long term. And I would characterize that our comeback is ongoing at our size and scale, meaningful change takes time. Our turnaround is happening 1 sport community, 1 city, 1 country at a time, and we are reallocating resources against our biggest opportunities. So we're building for the long term.

I would say that we started with the areas that matter most, focusing on our culture, getting this company focused back on sport. Innovation. We started with running and you see now that momentum through our Performance business. We thought it was critically important to re-anchor this company in sport. We reignited our marketing efforts. We started serving consumers across an entire marketplace, rebuilding our wholesale partnerships and organizing against the Sport Offense. And so we understand that we still have work to do. It's Sportswear, Jordan and Greater China. And again, from a sportswear perspective, what we are going to do is break this big business called Sportswear. And I think this is one that I probably did underappreciate breaking it down into segments focused on a distinct consumer, which will allow us to have greater clarity around the products, the stories and the retail experiences for those consumers.

In terms of Jordan, we're repositioning the Jordan Brand, restoring the scarcity model for retro styles and you will see us dimensionalize the brand through sport, and we're already seeing some success in growth in our football -- or excuse me, our cleated business, our golf business, our training business.

And then in terms of China, we're leading with support and innovation. I talked a lot about that and we're taking some really decisive actions in the marketplace and that we build a healthier business over time. So we look forward to sharing what comes next for each of those businesses at Investor Day.

Our next question will come from the line of Matthew Boss with JPMorgan.

So Elliott, could you elaborate on the level of potential pain before gain? It seems like that's a key theme here that you're laying out today. What segments of the business may further moderate type of the strategic actions that you noted would impact the business for the balance of this year and into early fiscal '28? And just on Pace, would it be fiscal '29 where we could expect this transformation work to bear fruit at a P&L level?

So maybe -- this is Dave. Maybe I'll start. First, I think as we indicated, those 3 areas, whether they be Sportswear, Jordan and China, we're taking deliberate actions in those areas to improve performance for the long term, and that's going to dampen performance now. So yes, we're going to experience some -- as you described it, some additional pain. But I think that -- and that's going to be through the balance of this year and probably bleed in a little bit into fiscal '28 as well. But that's all in the goal of returning these businesses to health and driving really outsized shareholder value creation over time, number one.

Secondly, as it relates to Pace, we are beginning to see savings now even through Q1, some of the actions that we took as it related to supply chain are bearing fruit and gross margin. So you're beginning to see some improvement in our P&L today from Pace. But clearly, the savings are going to ramp over time starting now with the maximum savings to be appreciated and accrued in '29 and '30.

Our final question will come from the line of Michael Binetti with Evercore ISI.

Let me add my welcome, Dave. It's nice to work with you. I just want to ask -- another way on China, you mentioned that it's going to take multiple seasons to reset it to health. And you mentioned revenue pressure a couple of times will bleed into fiscal '28. I'm assuming maybe there's a connection there. If you just talk to us about what you mean when you frame China in multiple seasons. And if you see a path to total company revenue positivity at some point in fiscal '28.

And then, Dave, you did mention the dividend and as we take kind of an initial pass at the cash model, it sounds like you're alluding to some ongoing top line challenges here for a little bit on the guidance midpoint today, I think the dividend ratio is over 100%. So just given the investment needs in the business, talk to us about the priority there for the dividend.

Yes. First and foremost, let me hit that right off the gate. Dividend is a very significant priority for us here at NIKE. It is a significant priority from the capital allocation program. And under all scenarios, we have support for maintaining and ultimately growing the dividend over time. So just -- we can put back to bed with that statement.

Secondly, I look forward to spending some time with you in November because in November, we're going to give you a financial algorithm, so you can begin to assess what not just '27 looks like, but what does the next 5 years begin to look like, both from a top line and a bottom line perspective. So why don't we hold that question, we'll come back to it at Investor Day, and we'll hit that head on.

And that will conclude the question-and-answer session and our call today. Thank you all for joining. You may now disconnect.

Good afternoon, everyone, and welcome to NIKE, Inc.'s Fourth Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I'd now like to turn the call over to Paul Trussell.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s fourth quarter fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill; and EVP and 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 NIKE's reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and nonpublic financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com. for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted.

We will start with prepared remarks and then open the call for questions. We would like to allow as many -- as many of you to ask questions as possible in our allotted time, so we'd appreciate you limiting your initial question to one. Thank you for your cooperation on this.

I'll now turn the call over to NIKE Inc., President and CEO, Elliott Hill.

Thank you, Paul. I'm proud of the progress our team made in fiscal year '26. When I look back at where we started the year and where we are today, it's clear that we're building a much stronger foundation for our company. Through our win now priorities, we're elevating the fundamentals of our business across our team culture, innovative product, brand strength, and how we serve consumers in our countries and cities. We're making meaningful structural improvements in each of them. Win Now is making the comeback possible. And importantly, it's what's enabled us to move about 8,000 teammates into verticals sport teams under our new operating model, the Sport Offense, while also taking meaningful steps to simplify and accelerate our supply chain and technology. As our foundation approves, the Sport Offense is starting to create impact. Our renewed obsession with sport and the success of our athletes is fueling energy for our brands and building momentum in our performance business, which grew mid-single digits this fiscal year.

Overall, the results aren't there yet. We know we're not living up to our full potential, particularly in Nike Sportswear and Jordan Streetwear, where sell-through remains challenged, impacting both current discounting and future order books. We're operating in a more complex macro environment, where we're seeing an added pressure on traffic and discretionary spending across our geographies. But we're focused on what we can control, bringing each sport together across product, brand, marketplace and operations and deepening our connections with athletes, consumers and partners. When those dimensions connect, they create the Nike multiplier. It's repeatable and sustainable. That's why I'm confident we're building NIKE the right way, not for the next quarter, but for the next decade. Now the opportunity is consistency, execution across every part of the portfolio. From here, we have to prove it every season.

Now let me walk you through the details of the clearest signals of our progress in FY '26. This year, we directed our marketing, social and communications outreach to build influence across a wide network of sport-specific communities. We did that through our deep portfolio of athletes, creators and sport partners. And through those networks, we brought energy and a uniquely NIKE point of view to sports moments, both big and small. When we lead with sport authentically, consumers respond. And we see that in both internal and external brand tracking. Our focus now is translating that brand strength into healthier demand, cleaner marketplaces and sustainable growth. You can see the same energy in our broader product pipeline, too. We're now -- we've now delivered five consecutive quarters of double-digit growth in Nike Running. And over that period, we've added roughly $1 billion to our running business.

In FY '26, across Western Europe and North America, we gained 5 points of running market share in statement footwear, more than any other top 5 brand. The integrated marketplace is one of our most important areas of transformation. We've been rebuilding our wholesale relationships, expanding our outreach and improving how we show up across channels. For the fiscal year, wholesale revenue grew 4%, led by double-digit growth in North America. And we've also made significant investments in physical marketplace, refreshing more than 15,000 spaces in wholesale doors around the world. In Nike Direct, we've taken equally important steps. We're elevating the user experience by leading with performance, celebrating sport moments, and we're discounting less on Nike Digital.

In FY '26, we've elevated more than 150 stores with sport-led experiences. Over time, we will continue to rezone and elevate our fleet and close doors that are no longer aligned to our strategy. At our scale, this takes time. We're not finished yet. I'm confident our investments in the integrated marketplace will pay dividends for years to come. We're also investing in experiences in our key countries and cities to accelerate demand. In global football, our grassroots tournament, Toma, has reached more than 10,000 kids across 25 cities to date.

In basketball, we continue to invest globally from our partnerships with the Chinese High School Basketball League and its 600 teams to Jordan's, the one tournament in 20 cities around the world.

In Running, we launched the After Dark Tour in Shanghai. It will reach 7 cities this fall. Last year, 50,000 runners joined and 1/3 were first-time runners. And with our more expanded reach, we expect even more impact. Being more local matters, it deepens connection, it builds loyalty, and it creates a full market for our brands and products.

As we strengthened NIKE Inc.'s foundation, we're taking decisive action across our supply chain to lower cost, streamline operations and rightsize our distribution network to match the demand ahead. We've redeployed resources from our Nike Direct technology teams to better support the company end-to-end across the entire value chain. And we're investing in advanced tools and capabilities to improve speed, precision and reliability in everything we create from air manufacturing and materials innovation, to how we plan, make and move product to the marketplace. At its core, this work is about serving athletes better and creating a more profitable business. That's especially important in Greater China, a critical long-term growth market for NIKE, where we are fully committed to winning.

Our teams in China are executing a comprehensive reset returning to sport and innovation, taking a more local approach to product creation and building a territory-level offense. At the same time, we're reimagining how we operate in the marketplace. We are working with partners in evaluating new ways to accelerate our return to growth, so we can be more premium, more culturally connected and move at the speed of the Chinese consumer with seamless journeys across digital and physical retail.

In the near term, we're executing cleaning up inventory, investing in must-win doors and when we invest, we're seeing sales increase increase high single digits. I'm confident in our leaders and our plans to restore long-term marketplace health in Greater China. Converse sharpened its strategy this quarter. It's getting clearer on the role it plays within NIKE, Inc., and where it will grow, especially with the Chuck Taylor and Jack Purcell franchises. As part of that focus, we announced that Shai Gilgeous-Alexander has joined the Nike Basketball family. Shai and Nike Basketball are a perfect match. This move allows Converse to fully focus on serving creators through its lifestyle business. That clarity matters. When we're focused, we win. And right now, Global Football is the best example of that playing out through the Sport Offense. It's been an incredible few weeks of the World Cup. What feels different this time around is we're not treating the tournament as a single moment. We're using it to reshape our business, telling a connected story over time, engaging different communities in relevant ways and building momentum that carries well beyond the tournament. We built a full Nike Football universe. It started with a simple image of 31 Polaroid, a map of what was to come. An epic film called Rip the Script followed, branching off into individual athlete stories, collaborator collections, innovation unveils, retail experience and local tournaments. We built it this way because the next generation wants to engage with sport on their terms, discovering and sharing and participating in the story as it unfolds every beat every story is a doorway given different micro communities their own way in. This is the way to reach scale in today's culture.

By the first week of the World Cup, we had 1.5 billion views of our various stories. This is about deeply understanding today's consumers and building modern, meaningful and innovative connections with them. This is nothing new for NIKE. Once again, we're out front, rewriting our own marketing playbook. At the center of the Nike Football universe is amazing product. We launched Aero-FIT in our National Team kits to help athletes compete in extreme conditions. By the start of the tournament, we had already sold 2.5x the number of kits compared to the same period in World Cup '22.

Earlier in the year, we redesigned our Tiempo and Phantom franchises and before the tournament, we launched our new Mercurial into expressions of speed. At launch, the Mercurial became the fastest-selling 24-hour launch for cleated footwear in the history of Nike Direct. We also connected Nike Mind to the tournament and team colors to fuel our new innovation. With our X2 collections, we created amazing energy with leading creators, and we reached scale to Nike Sportswear, Skate, Casa and N7 to connect deeper with broader football culture. And as we talked about last quarter, we're activating the marketplace, elevating over 5,000 football doors around the world. The World Cup is always a moment to prove ourselves. It's one of the toughest battlegrounds in sport, and we're coming with our best. We're leading the conversation in shaping football culture, a strong early proof point for the Sport Offense.

As we move into fiscal year 2017, we're focused on building on that momentum. Here's what you can expect from our teams. As we scale the Sport Offense across more sports, we expect growth to expand beyond running into training, basketball and ACG, but that progress will continue to be uneven. We expect Sportswear and Jordan Streetwear to continue to be negative this fiscal year, with improvement expected in the back half. We know changing their trajectory is critical to restoring sustainable top line growth because, together, they represent approximately half of our revenue.

We are moving quickly to reposition both businesses. In the second half, Nike Sportswear will introduce more than a dozen new footwear styles each with distinct consumer journeys. This work will take time to scale and translate into consistent results. Our teams are also focused on inspiring the consumer in modern ways while driving commercial impact at local sports moments. And we will continue to invest in how we show up as a premium brand in both digital and physical retail, including a plan to elevate 50% of our Nike Direct owned fleet by the end of the fiscal year. Across the enterprise, we'll operate with even greater discipline to improve planning accuracy, strengthen inventory management and expand our margins over time.

Most importantly, we look forward to sharing the next phase of our growth strategy at our Investor Day on November 16 and 17. Before I pass it to Matt, I want to take a moment and recognize him for his many contributions to Nike over his nearly 18 years at this company. Matt helped guide the company through a demanding stretch, and he has been a trusted partner to me and to this team. I appreciate his continued support and its commitment to ensuring a seamless transition in the coming weeks and months. I'd like to thank him for all he has done for Nike and wish him the very best in his next chapter.

Thanks, Elliott. I've truly valued the partnership with you and this team, and I'm proud of the progress that we've made together.

As we close fiscal '26, we made meaningful progress across the business through rebalancing the product portfolio, driving momentum and growth in performance while reducing classic footwear franchises by more than $2 billion, keeping revenue flat on a reported basis versus the prior year, stabilizing gross margins, excluding the impact of incremental tariffs. Taking initial steps to reset our cost base and improve operating efficiency and effectiveness and our balance sheet is strong with substantial liquidity and flexibility to operate as we go forward. Our fourth quarter financial performance was in line with our expectations. However, the operating environment became more challenging as we progress through the quarter. After a stronger start in March, especially in North America. By mid-April, we began to see a deceleration in retail sales trends. Our consumer is under pressure around the world, and we can particularly see it having a larger impact on sportswear, which declined double digits in the quarter with a similar decline in retail sales.

At the same time, momentum in Performance Sports continued to build, growing mid-single digits and delivering positive year-over-year retail sales comps across running, training and global football as well as other sports. We are monitoring marketplace inventory and promotions closely and adjusting by plans to manage future supply and sell-in with demand and improvement in full price sales.

Before I turn to our results, I want to address an unplanned benefit related to tariffs, which was recognized in the quarter and was not included in our previous financial guidance. In the fourth quarter, we determined that the financial recovery of claims related to incremental tariffs paid under IEEPA had become probable. This resulted in the recognition of a onetime benefit of $986 million, offsetting the IEEPA tariffs embedded within cost of sales that had been expensed through the income statement throughout fiscal '26. As of quarter end on May 31, we collected over $300 million of cash related to these claims. The remainder of the benefit was recorded to accounts receivable as we await recovery. Tariffs remain a dynamic cost headwind that we expect to continue looking forward. And so I will share more on our rate assumptions later in my remarks.

Now I will turn to our fourth quarter results. For the quarter, revenues were down 1% on a reported basis and down 4% on a currency-neutral basis, reflecting modest growth in North America more than offset by expected declines in Greater China, EMEA and Converse. Nike Direct was down 9%, with Nike Digital declining 12% and Nike Stores down 7%. Wholesale grew 1%. Gross margin was 49.2%, up 890 basis points versus the prior year, driven by a 900 basis point benefit related to recovery of IEEPA tariffs. Excluding this benefit, gross margin would have been 40.2%, down 10 basis points versus the prior year, which included additional severance costs related to supply chain actions in North America and EMEA, we highlighted last quarter. We expect these actions will deliver positive operating leverage and gross margin in fiscal '27.

SG&A was down 2% on a reported basis versus the prior year, reflecting continued discipline managing expenses while accelerating investment for the World Cup. Our effective tax rate was 19.6%. Earnings per share for the quarter was $0.72 and excluding the benefit on tariff recovery was $0.20. Inventory was flat versus the prior year, with continued progress made to address aged inventory in Greater China. For the full year, revenue was flat on a reported basis and down 2% on a currency-neutral basis. Gross margin was 42.9%, up 20 basis points versus the prior year, including a 210 basis point benefit related to recovery of IEEPA tariffs. Excluding the benefit, gross margin would have been 40.8%. Diluted earnings per share was $2.10, down 3% versus the prior year. Excluding the benefit on tariff recovery, earnings per share would have been $1.58.

Looking at our reported full year results for fiscal '26, you can clearly see that our gross margin slightly expanded, while earnings per share modestly declined. Despite significant investment and nearly $400 million of severance charges made to reposition and create a healthier foundation for our business.

Now I will turn to performance in the geographies. In North America, Q4 revenue grew 3%. The Nike Direct was down 6%, while Nike Digital was down 5%. Nike Stores were down 7%. Wholesale grew 10%. EBIT increased 91% on a reported basis. And excluding the tariff refund benefit, EBIT would have declined 1%. North America continues to drive momentum and performance, including strong double-digit growth in Global Football and Running as well as growth in Kids and Golf. Sportswear was down high single digits.

Retail sales grew over the first 6 weeks of the quarter. However, we did see a deceleration in late April which we continue to monitor closely, particularly in Sportswear and Jordan Streetwear. Wholesale revenue growth was driven by new and existing distribution. One highlight I'd like to note is that our revenue growth and retail sales comp with Foot Locker was positive for the first time in 4 years, and we continue to be encouraged about the path ahead. Inventory grew mid-single digits, in line with our plans with a healthy closeout mix. And importantly, excluding the tariff refund benefit underlying gross margin profitability continued to improve year-over-year.

In EMEA, Q4 revenue was down 6%. Nike Direct declined 16% with Nike Digital down 24% and and Nike Stores down 9%. Wholesale was down 1%. EBIT was down 8% on a reported basis. EMEA continues to work through heightened inventory and promotional levels disruption in the Middle East and a higher portfolio mix of sportswear than our other geographies. We had continued momentum in performance through Running, Global Football and Golf, all of which grew double digits versus the prior year. Although digital revenue declined, off price was down over 50%, following aggressive actions to reduce promotions. This resulted in a 15-point improvement in full price realization. Sportswear declined double digits and sell-through continues to be challenging. And so we have tightened buys and moderated sell-in plans for the near term. Total inventory dollars were up low double digits, with actions in place to reduce supply and accelerate liquidation to improve marketplace health.

In Greater China, Q4 revenue declined 17%. Nike Direct declined 14%, with Nike Digital down 25% and Nike Stores down 9%. Wholesale declined 19%. EBIT was down 20% on a reported basis. As you heard Elliott say, there are several changes underway in Greater China, and the team continues to execute on their plan. In-season sell-through has improved sequentially and average retail discounts are down. We are seeing recovery in full price realization on digital after more aggressive actions to reduce promotions over the last two quarters. Running grew mid-single digits, and global football and tennis were up double digits. Our Pinnacle retail expression, the House of Innovation in Shanghai, posted double-digit growth for the quarter. We also saw sales growth in the doors that we have reset, and encouraging initial results at our newest ACG door in Nanjing. Inventory was down double digits with units also down double digits. We continue to take actions with partners to clean up the marketplace and expect revenue trends in Greater China over the near term to be in line with recent performance.

In APLA, Q4 revenue was down 1%. Nike Direct declined 3%, with Nike Digital down 8% and Nike Stores up 2%. Wholesale was up 1%. EBIT declined 1% on a reported basis. The business across this geography continues to be mixed, with strength in select territories and Performance Sports offset by ongoing pressure in Sportswear, Running and Global Football grew double digits with high single-digit growth in Tennis and ACG. Across the marketplace, the team is focused on elevation and expansion. Where we have invested in elevated retail, we are seeing a strong increase in comp sales growth. We also added new digital partners across 5 Southeast Asian countries. Inventory grew high single digits versus the prior year with a sequential improvement in closeout mix, as inventory actions continue across the geography.

Now I will turn to our outlook. The environment around us continues to be volatile, including evolving tariff qualities ongoing disruption in the Middle East, oil prices and other factors that could impact operating costs, consumer behavior and weakness in store traffic and retail sales. These assumptions reflect the macro environment as it stands today, and we are not expecting the environment to improve meaningfully over the next 6 months. Last quarter, we provided guidance which cumulatively included the fourth quarter of fiscal '26 through the first two quarters of fiscal '27 with revenues to be down low single digits, gross margins to inflect positive in Q2 and earnings to be flattish over this period.

We reiterate our expectation for earnings to be flattish over that time period, excluding the benefit from tariff recovery. However, the composition has shifted. Considering the current macro environment as well as recent sell-through trends, we are taking actions to tighten buys, reduce future sell-in and manage inventory. This will result in revenue moderating, but also higher gross margins. We now expect revenue to be down low- to mid-single digits, with Q2 having a sequential deceleration from Q1 due to some unique factors equating to a multi-point headwind, including higher digital promotions in the prior year in EMEA and timing of North America wholesale shipments. We now expect gross margin expansion earlier, beginning in Q1. We will continue to be disciplined with SG&A management, driving productivity benefits and operating overhead beginning in Q1.

Specifically for the first quarter, we expect reported revenues to be down low- to mid-single digits with no expected benefit from foreign exchange and currency neutral revenue growth consistent with recent performance. We expect gross margin in Q1 to be slightly positive. The tariff environment continues to be uncertain. Our forecast is based on incremental tariff rates of 10% continuing through the end of July and then increasing to 15% thereafter as we communicated last quarter. We expect Q1 SG&A dollars to be flat with operating overhead declining, while demand creation grows high single digits as we invest into the World Cup. We expect our full year tax rate to be in the low 20% range. While the environment remains volatile, and it is taking more time for the top line to inflect positively, we remain confident in the actions we control to improve EBIT margins and increased cash flow from operations. We are tightly managing expenses, reallocating resources to elevate retail and drive deeper consumer connections and taking actions to structurally improve the efficiency and profitability of our supply chain as well as NIKE's overall business.

With that, I will pass it back to Elliot.

Before we go to questions, I want to leave you with one thought. We spent a lot of time this quarter talking about the sport, the highs, the setbacks, the pressures that define teams. Yet there's one I keep coming back to. Earlier this month, we watched something special happened in New York. The Knicks became NBA Champions, a team that had carried the weight of expectations for more than 50 years, finally broke through. And when you look at what happened at the final buzzer, the trophy, the celebration, the joy across the city, it's easy to think, that's where it was won, but it wasn't. The championship wasn't built on a single series or even in one season. It was built over time through setbacks and step forwards through relationships and buying into a system where everyone knows their role.

You saw it when it mattered most because every one of those wins in the finals was a fight, double-digit deficits. They didn't flinch. They didn't panic. They went to work, chipping away, one stop, one bucket, another stop, again and again, that's not luck. That's a team that's ready. Most importantly, that's belief. Belief in their system, belief in each other. [ Runs then ] kept coming. Towns was disruptive at both ends. Heart made hustle plays. Different players, one goal, all focused on closing the gap, possession by possession. And that's what I see in our team. We believe in our system and each other in the way we're building this, not because the work is finished and not because every result is where we want it to be today, but because we know what it's built on. I see the progress. I see the structural change. I see the foundation getting stronger. I see the Sport Offense taken hold. I see a team that's been tested and is ready for what's in front of us.

The Knicks reminded all of us if something important. The real story is never just the celebration. The real story is everything it took to get there. And that's exactly how we're building Nike, the right way. Because the goal isn't one championship. It's build the team that can do it again and again.

Operator, we're ready for questions.

[Operator Instructions] Our first question will come from the line of Adrienne Yih with Barclays.

Elliott, one of the things we talked about was kind of the difficulty in [indiscernible] price sell-through of primarily sportswear. I'm just trying to figure out how much R&D and innovation investments in the sports works category to drive kind of future growth? If you're pulling back on inventory, and focusing on full price selling, having struggled in full price selling. Just wondering how you can get the performance success to halo out to sportswear.

Great question. Thank you, Adrienne. Let me start first with the Sport Offense because I think it's really important for everyone on the call to understand. We understand the importance of getting both Nike Sportswear and Jordan Streetwear back to growth. With that said, our point of this differentiation or point of distinction, what creates authenticity for Nike is our sport business. And that creates the halo over both of those brands. It's also which differentiates us from fashion brands. And so the reason why we've put so much time on the Sport offense is because we believe that's how we create that authenticity around that business. We've created a portfolio of sport verticals, small functional teams focused on consumer, NIKE running, which I'm sure we'll dive into here in a minute. It led the way. And as you heard in the prepared remarks, we've had great response with the sharp, sharp focus on the consumer whether it's the product, whether it's the investments we've made on the ground in retail, with [ Ekins ] or tech reps, and the results are clear. Running grew $5 billion -- $1 billion over the last 5 quarters, and we gained 5 market share points.

Shifting over to other sports. We see it in the Sport Offense. It's working in real time, Nike Basketball. That team, yes, we have A'ja 1 -- A'ja 2, the Ja 3, but the way they respond around the Knicks, championship has been phenomenal. The ad we ran, the championship product, the preorders in footwear, Nike Football, I'm inspired. You heard me talk about that in my prepared remarks around the way the Nike Football Team is leveraging the World Cup to create a halo over the Nike brand, not just sport, but also culture, and we would not be doing that if we weren't in the Sport Offense, and we see momentum gaining training, tennis, golf, outdoor. I'll use one example before I jump to sportswear. I'm not sure if you guys watched Serena today, but she had the Radical Air on. That's a performance product, and that will start to show up, that innovation will start to show up in some of our sportswear as well. So when we lead with sport, we win. As it relates to Sportswear and Jordan, we have taken $2 billion out of the market in FY '26 of our classic franchises.

We do have now dedicated teams against each of those consumers. And so that team now is looking to the future. And in the second half of FY '27, Sportswear is going to introduce more than a dozen new footwear styles. And it's not just going back to the Vault and doing old retro shoes, it is leveraging innovation, and you'll see some newness and freshness coming in new silhouettes. And so the sports team moving to quickly reposition the business being more community-driven, on the ground, working with local creators, authentic storytelling and product. We're investing in accelerating our local product creation as well. You'll see us leverage that more around the world. And in the end, it's going to take time to scale, but I'm confident in the work that the teams are doing.

Our next question will come from the line of Bob Drbul with BTIG.

Matt, I just want to say thanks for the last 17 years. It's been a pleasure, and wish you all the best.

Thanks, Bob.

I guess if I could shift, Elliot, when you look at the innovation pipeline, I think 1 of the bright spots really has been the Mind. I guess, two parts to this is that when you think about your ability to scale the mindset and sort of broaden that out, can you talk about what you're doing throughout the business how quickly that can occur. And I guess the second piece of it is just when you think about the innovation over the next 6 to 18 months, where are you most optimistic, most excited about what is coming in the pipeline?

Yes. Thank you, Bob. Here -- I'll go back to -- we're leading with the Sport Offense. We had now had those small cross-functional teams against each of the sports, obsessing the consumer, taking the insights for the consumer, translating that into a relentless flow of innovative, beautiful coveted product across footwear, apparel and accessories. And we needed to get that going, Bob. That's where a Nike Mind comes from, as an example. And so the first time you're going to see the product across all of the sports that the team's worked on from brief to the market will be spring '27. So that will be the first time you're going to see the fruits of those teams efforts. But nevertheless, I am excited what the team continues to do in running where they set it up. This quarter alone, we launched the PEG 42, and it was a full length encapsulated Zoom Airbag and sold through well. As I look forward to running the Aero-FIT product that we launched in football is going to show up and running. Apparel in fall '26. We've got a Vomero Plus 2 coming in, new and running. ACG continues to bring really interesting product, the radical airflow is amazing looking products, and that sold well. The long sleep sold out immediately. And you'll see us then also leverage that innovation across multiple sport categories. Football, we've talked a lot about Aero-FIT, the Mercurial pack coming back next year with the Women's World Cup, I'm excited. We're hosting a bunch of retailers today -- yesterday and today in New York. We've had tremendous feedback to the product coming there, both in sport and in culture, basketball, excited about the dimension that the team is bringing there. Of course, [indiscernible] coming, that will be launched in the -- in holiday '26, training Nike Mind. I -- we see a big opportunity there, and you'll see us scale that beyond the slide coming in spring of '27. Free MetCon, another performance fabric innovation with free. That's doing well. Nike Pro, men's and women's. And so the point there is -- and it's not just performance, I think the team is doing a nice job of launching new products in sportswear. Probably the best example this quarter would be the moon shoe. So short answer to your question is it's taken time to get the flow of innovation and product going, but I'm excited by what the team is doing. I'm confident in the teams and you'll start to see a season in, season out, that relentless flow product that we expect and you expect out of Nike.

Our next question will come from the line of Matthew Boss with JPMorgan.

So Elliott, could you elaborate on the sequential cadence of sell-through trends across performance relative to sportswear. And what you see as the optimal mix between performance and sportswear roughly -- versus the roughly 50-50 split today? And then, Matt, just on the numbers, could you help us just bridge the drivers first quarter revenue is down low to mid-single digits, further moderation in the second quarter just relative to the negative 1% decline here in the fourth quarter as the base.

Thank you, Matthew. Again, we don't break out sell-through by sport and sportswear. What I can tell you is, we had a strong start in March, especially in North America on itself where we watch it. The teams watch and track it every single week. We're on it, watch and sell-through. And then by mid-April, we began to see a deceleration in retail sales trends. And that softness did coincide with our -- we believe our consumer being more under pressure, impacting traffic and discretionary spend. But Matt did touch on it, I think, in his prepared remarks, we are seeing a strong bounce back with the World Cup momentum right now. So as we moved into June, we are seeing a halo that is being created by the World Cup. So it's something that we will continue to monitor every single quarter -- or excuse me, every single week and make the necessary adjustments that we need to make on forward orders.

In terms of optimal mix, I think, ultimately, the consumer is going to decide what the optimal mix is. It's not something that's predetermined. I think if we predetermine we want x business to be bigger than the other, I think it forces our teams to do unnatural things to get to that number. So it is not a number that we're driving the teams towards. We're going to let the consumer ultimately decide the mix of sport to sportswear.

And Matt, on the revenue guide, I think the way to think about it is we provided specificity on the first quarter that we expect revenue to be down low- to mid-single digits. And I think the biggest driver in Q1 versus Q4 is the fact that FX will no longer be a tailwind to revenue. Outside of that, we don't expect a meaningful change in the mix of the portfolio or anything else. As it relates to Q2, we just wanted to highlight that we expect the sequential deceleration relative to Q1. As you'll recall, in Q2 of last year, there were some anomalies that drove our revenue in that particular quarter. And the two largest ones that equate to a multi-point headwind were much higher level of digital promotions in EMEA last year in the second quarter. And you can see from our results this quarter, we've taken a massive turn on the amount of promotional activity that's on nike.com and on our digital platforms in Europe. And our off-price business was off -- was down 50% versus the prior year. It's the right decision. It's strategically what Elliott highlighted as he came in, that we need to reposition digital to be a premium business. But that's going to create a comp issue in Q2 of next year. And then we also had extraordinarily high wholesale growth in North America in Q2 last year, also related to some timing anomalies. So we just wanted to call that out in advance as we think about this performance over the next two quarters.

Our next question will come from the line of Lorraine Hutchinson with Bank of America.

I was hoping you could go into a little more detail on your China strategy. It sounds like there are some renovations underway for the physical fleet, but how are you thinking about the direct-to-consumer, particularly the digital business from here?

Yes. Lorraine, and I've said this every quarter that I've been on this call, and I'll continue to say it. China, it's the second largest market today. It will be the second largest market in near term or 3, 5 years from now. And so we remain committed to serving the Chinese consumer. We're going to do it through sport. I think the key in China is we have to get back to growth in China, we have to be more premium and culturally relevant, and we have to lead with sport. It's those three things. In sport, some of the proof points running did grow mid-single digits this quarter. We had a great launch of the Peg 42 there. The team just didn't sell it online. We sold it in physical doors. 2,000 doors, and we really elevated the presentation, which is what we need to do more of. Global Football was up double digits. We launched the material. We had a really good storytelling, both digitally and physical on that. The team is moving resources out to our territories in our cities, connecting with consumers, which I think is also critical to our success there. We've got the after-dark tour from a running perspective up and going there. We celebrated the Chinese basketball league, I talked about that. But we know that's not enough, right? And so we are going to take additional actions to reimagine the marketplace. Number one, it's got to be easier for a consumer to find, and we do have to be more culturally connected. We're repositioning the brands as premium to do that. We've got to continue to clean up the marketplace and elevate the marketplace. We have to invest in elevating online and offline storefronts, so that we have a consistent consumer experience between that online experience that you referenced and then the offline experience. And we know that success in China is going to require deep local partnerships, and we continue to execute the reset with both online and brick-and-mortar in mind and those partners in mind. And so we're working closely with them. Two last points local for local. We have hired our resourcing our Greater China local product creation team. They will be delivering locally designed, developed and manufactured product in China in holiday '27. And then the last thing I'll say is it's been great to have Cathy Sparks leading that team. I have a tremendous amount of confidence in her and her team. We have a clear diagnosis. We have a plan in place, and we're moving with urgency. So overall, pleased with the progress we're making in China.

Our next question comes from the line of...

I was just going to add that we also highlighted this quarter the progress that the team continues to make in China. And I just wanted to reiterate a couple of things that I said on the call. We're seeing recovery in full price realization on digital. So in addition to what everything Elliott said, the team has taken aggressive actions to reduce promotions over the last two quarters, and we are seeing that bear fruit on our -- across our digital -- across the digital properties in Greater China, including partners. Our pinnacle retail store, the most premium Nike Store that we have in China is in Shanghai, the House of Innovation, and it grew double digits in the quarter, a reflection of elevating retail and focusing on sport in the market. And then as Elliott referenced in his remarks, where we've elevated our other retail doors with our partners, as we talked about our top door offense, we're seeing strong comp performance in those doors for another sequential quarter. And so we continue to be encouraged by the actions that we're taking and the decision that we've taken to sell in less inventory into the marketplace in order to create a more full-price business. And the progress that we're making with our partners on aged inventory in the marketplace is meaningful. And so as we look forward, we do expect that the revenue trends in Greater China over the near term will be in line with our recent performance. and we continue to believe that profitability will bottom before sales in this market.

Our next question will come from the line of Michael Binetti with Evercore ISI.

Matthew, my thank you for the last 17 years, wishing you all the best.

Thanks, Michael.

Maybe just a couple of brief comments on where the order books on the wholesale side saw the most impact what geos got better was but then maybe just a qualitative thought on the back half of fiscal '27. I know you commented Sportswear, it will be down for the year but improves in the second half. Is that -- so that's negative for the full year, is that negative as you start to look out to the spring summer '27 books? And how are retailers in general approaching spring/summer '27 overall, given the pretty aggressive actions you guys are taking as you work through the channels here.

Well, so here's what I'd just say on the outlook as we look out, and we reiterate that we expect earnings to be flattish. I want to start there over the quarter period that we guided. But we do know the composition has changed. Matt hit on that in his prepared remarks. Part of that is the softer sell-through and weaker macro environment. And we are tracking the sell-through weekly and making adjustments. But we expect revenues over that period that we guided to be down low single digits to mid-single digits. At the same time, we expect gross margins to expand in Q1, and we are actively managing costs in our business, and we will see the benefits beginning in Q2. And so we look forward to sharing more about our overall view of the future at Investor Day from an outlook perspective. So again, overall, that's how we're seeing the the balance of this calendar year. And then we -- like I said, we continue to track sell-through the order books, and we're making the adjustments that we need to make.

Our next question will come from the line of Aneesha Sherman with Bernstein.

Best wishes to you, Matt. Elliott, about 6 months ago, you talked about being in the middle innings on the turnover we now go into fiscal '27. Can you give us an update on where you're at? And do you expect FY '28 to be the first "normal" year of operations? And then, Matt, a follow-up on margins. You've said there's a clear path to double-digit margins today. You guided for a faster inflection in margins than before. Can you walk through some of the main drivers of this margin inflection that are aside from operating leverage, so excluding sales growth, what gives you the confidence that margins will inflect first?

Yes. Well, first of all, I don't think there's been anything normal since I've sat in this chair. There's been nothing normal about this, but we -- in December of '24, we launched the Win Now actions, and it helped us, without question, rebuild the foundation of Nike. And we do remain on track to sunset the win now actions by the end of this calendar year. So I'm going to reiterate that. The idea is we wanted to move through the actions in a really thoughtful sequence. We began first around culture, getting the team refocused on sport and growth and really inspiring our teammates around that. And I think we've made tremendous progress there. It was also about reigniting our brand, being more emotional and inspiring with consumer connections. Hopefully, you're seeing and feeling some of that of us through this quarter. Then we started to focus on our product portfolio driving a steady flow of innovative coveted beautiful products. And so next, it's about how we then start to execute out into the countries and the cities that around the world that make a difference for us. So we continue to elevate. And so I think we're making tremendous progress, and we are prepared as we move through this calendar year to sunset. What that then does sets us up to run the sport offense, and we are going to share more of what's to come next at our Investor Day this fall. And I'll just sort of end here is that we're not building this business for the next quarter or the next year. We're building it for the decade to come, and we're sunsetting win now is just sort of the next step on our journey. And so again, we look forward to outlining more in November.

On margins, Aneesha, I would say that our performance this quarter has given us increasing confidence that our margins are stabilizing, and that we're starting to see a pathway back towards gross margin expansion. In the fourth quarter, our margins, if you exclude the tariff benefit were down 10 basis points versus the prior year. And that was better than how we guided. We guided to be down 25 to 75 basis points. And I would say that the biggest driver was discount improvement that we're seeing in North America. We're seeing lower sales-related reserves in North America, lower cancellations and lower discounts. And so that's been giving us confidence that margins are coming back. We also have had -- we had 4 quarters of sequential improvement in our margins overall throughout fiscal '26. And then I do think it's really important to note that we highlighted in the third quarter, and we've talked about this a couple of times now that we see meaningful opportunity to structurally improve our gross margins, really focused on taking out cost of our supply chain and the make of our product. And the actions that we took in Q3 and Q4 were the initial steps to us, reducing the number of facilities we operate to changing the size of our workforce to changing the way we flow product from factory to retail. And we expect that while those were costs largely in fiscal year we expect those to drive margin expansion in fiscal year '27 and contribute to this trajectory to get back to double-digit margins as you referenced. And then obviously, as we continue to take actions on our business, reducing tightening buys, reducing the order book in holiday and thinking about the -- and reducing the order book as we look beyond. We do expect that we're going to have a more full price business and a higher and healthier business, and that should help us pull margins up in the geographies outside the U.S., that are still depressed relative to where they were.

Our final question will come from the line of Ike Boruchow with Wells Fargo.

Matt, congrats on the 17 years. I just want to focus on North America wholesale. I know you guys don't guide by geography or channel. But just in terms of the shaping I guess my highest level question is, are there any quarters next fiscal year, you're expecting North America wholesale to decline just based on the sell-in and some of the comments that you made on POS. So just kind of curious if you could kind of help shape that, at least for the first half that you kind of had walked us through.

So let me just -- North America, here's what I'd say about North America. The continue to lead to come back that team does. Tom Petty and his crew have done. And I think part of it is because the biggest part is they've centered on sport and they're elevating the marketplace, not only our own digital footprint and physical footprint, Nike but also the relationships with the wholesale team as well. And so again, I think what they've been able to do is the model for the rest of the geos to follow. And the only other thing that I would say really quickly is that when we do elevate, we seek best sell-through, stronger sell-through, both in our own doors and our partner doors. The team is doing a great job of managing sell-through every single week, making certain that we're adjusting order books, making certain shipping in the appropriate level of inventory so that we drive not only revenue for our sales, but revenue and profitability for our wholesale partners as well. So I think the team's got -- they found a really good rhythm there. And I'm really -- I remain very bullish on North America and their ability to continue to have sustainable growth moving forward.

Yes. And I would just add, I think when you look at Q4 and you look at the North America wholesale growth reported up 10% I just want to make the point that we didn't sell in up 10%. There was a meaningful amount of that revenue growth that was associated with lower returns or sales-related reserves and returns lower discount and lower insulation. And so it's a healthier business in North America that contributed to that growth in Q4. It isn't just -- that wasn't just a wholesale comp. But when you look forward into '27 specifically to your question, Q2 has a tough compare in North America. And what I would say is that without getting into the specificities of every quarter, Q2 does that tough compare in North America. And we continue to believe North America is leading our progress. We've talked for several quarters about the fact that the geos are operating on different time lines. And while we've seen a little bit of a blip associated with retail sales in North America. It's highly correlated as we can see with gas prices and how those fluctuated in North America. We continue to believe that North America is out front leading us in our turnaround and our comeback. And we're looking forward to the momentum that we continue to build in that geography. I referenced Foot Locker and the fact that this quarter was the first quarter that we grew both Nike revenue plus Nike retail sales in Foot Locker in over 4 years. And so we're encouraged by that relationship. You know they're an important partner to us in North America and outside, but especially in North America. And then we continue to be furthest ahead in the progress we're making in Nike Direct in North America and in Digital. And so we're continuing to take the steps forward there to a more full-price business. and believe that we're on the right path as it relates to that marketplace.

And that will conclude the question-and-answer session and our call today. Thank you all for joining. You may now disconnect.

Good afternoon, everyone, and welcome to NIKE, Inc.'s Third Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com.

Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I'd now like to turn the call over to Paul Trussell.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s Third Quarter Fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill; and EVP and 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 NIKE's reports filed with the SEC.

In addition, participants may discuss non-GAAP financial measures and nonpublic financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted.

We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time. So we'd appreciate you limiting your initial question to one. Thank you for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, Elliott Hill.

Thank you, Paul. Last quarter, we said we were in the middle innings of our comeback. Since then, we have continued to take meaningful actions to improve the health, quality and foundation of our business. While we are not satisfied I am confident that our progress in the areas we prioritize: first, through our Win Now actions, point to where we are ultimately heading across our portfolio. Because of the scale and breadth of the NIKE portfolio, that progress will not happen all at once.

We have approached this comeback deliberately across brands, sports, geographies and channels, with some parts of the portfolio moving faster than others. One of the most important actions we took this quarter was further removing unhealthy inventory of our classic footwear franchises from the marketplace. That created roughly a 5-point headwind to our reported results. It was intentional. It was necessary. And while it weighed on the quarter, it is improving the health of the marketplace, the quality of our revenue and the foundation for more sustainable growth ahead.

As we were removing unhealthy inventory, we focus first on the areas that create the greatest impact. We focused on our Sport Offense in running our largest performance sport and in football the beautiful global game. We focused on athlete center innovation, building platforms that can scale across multiple sports and price points over time. We focus on our wholesale business, the environment where the majority of our consumers shop and where we needed to prove we could compete and win back market share. And we focused on paying it all off in North America, our largest geography that drives nearly half of our business.

These are the dimensions that are furthest along and each is absolutely essential to turning around this company. At the same time, other parts of the portfolio, including Greater China, Converse and Sportswear, are still earlier in their comebacks. We have new leadership in place, clearer strategies taking shape and structural changes underway designed to strengthen these businesses over the long term.

We are moving with urgency. We're not simply fixing what needs to be fixed. We're building brand by brand, sport by sport, country by country, partner by partner. We're reshaping our marketplace, rewire and how we operate and investing in the technology platforms that we expect will help us serve more consumers better and run our business more effectively. These actions will continue to create near-term pressure, but we believe they are the right actions to strengthen NIKE for the long term and create more durable value for shareholders.

This is complex work, and parts of it are taking longer than I'd like, but the direction is clear. The urgency is real, and the foundation is getting stronger. By the end of the calendar year, we expect to have finished our Win Now actions. Aged inventory across the marketplace will be healthy allowing our sports teams to consistently flow athlete-led, innovative and coveted products in all sports across our 3 brands, including NIKE Sportswear and Jordan Streetwear.

Our marketing teams will be creating even more locally relevant inspiring stories in key countries and cities around the world. Our account teams will be elevating those stories in our brands at point of sale, with consumer-right assortments and presentations, which will all result in more balanced, profitable and sustainable growth across the integrated marketplace, owned and partnered, digital or physical. And because we are now far enough into the work and clear enough on the path ahead, this fall, we will share a more detailed long-term view of the business at an Investor Day at the Philip H. Knight Campus in Beaverton. We look forward to sharing more about the future of NIKE later in the calendar year.

Turning to the quarter. I'll start with the dimensions that I consider to be progressing fastest in the comeback. NIKE Running was the first team to move into the Sport Offense. They created a clear product construct based on athlete insights, segmented and differentiated assortments across an integrated marketplace and elevated our presence in story talent at retail. The consumer is feeling the impact of the full offense with NIKE Running up over 20% for the quarter. NIKE Running has created the road map for other sports to follow.

Global football is the next sport to fully transform into the Sport Offense. For the World Cup '26, it starts with our footwear construct that successfully launched the Tiempo in Q3, and we will unveil the new Mercurial in June. In apparel, we'll deliver Aero-FIT kits for our competing NIKE federations, including a Jordan Away kit for Brazil. We're also utilizing the World Cup as an opportunity to catalyze the football marketplace for quarters to come. By the end of the tournament, we will have elevated our presentation in more than 5,000 football doors around the world with wholesale partners and NIKE Direct because winning in football goes beyond winning the World Cup. We went through the Clásicos, the derbies, in Copa with colleges and youth clubs in every neighborhood, season after season.

In innovative products, we're back to leading big ideas for our industry. In just 1 quarter, we delivered both footwear and apparel platforms with deep insights that leverage years of scientific research from our labs, owned IP and advanced manufacturing. Our new Nike Mind platform with over 150 patents filed globally was the highlight of the quarter, designed to help athletes clear away distractions pre and post competition. The Mind 001 sold out in all geographies. We responded by doubling production of NIKE Mind over the next 2 seasons to meet demand from more than 2 million consumers who signed up for notify me on NIKE.com.

Following NIKE Mind, we introduced several early-stage innovation platforms this quarter. We used Nike Air for the first time ever as a self inflated thermal layer in apparel. Unveiled a new Liquid Air Max platform that is low to the ground and moves naturally with the foot. And we delivered Aero-FIT for football, our new elite apparel cooling platform that increases airflow by 200% over regular Dri-FIT. It will expand into multiple sports, including NIKE Running in the fall. These platforms are scalable foundations for growth that we can extend into multiple sports and price points over time.

Recently, our leadership team reviewed our full innovation agenda for 2027 and 2028 by brand and by sport. That focus is showing up in sharper athlete insights and more complete head-to-toe solutions, and we're excited to share our vision for the future of sport with you this fall. And yes, innovation sparks demand but products alone don't deliver long-term growth. For years, we were running a NIKE Direct first offense. Now, we are rebalancing our offense through an integrated and elevated marketplace and running a key city offense. These moves require us to rewire our supply chain and upgrade our technology platforms.

You saw the early signs of those actions this quarter, and it is a critical step in our return to double-digit EBIT margins. Many of our Win Now actions are being paid off first in North America. One of our strongest execution this quarter was the NBA All-Star Weekend, which connected us to consumers and drove full-price sell-throughs while deepening our wholesale partnerships in Los Angeles with Shoe Palace, DICK'S and Foot Locker. The experience set the tone for how we will show up in LA for the World Cup, Super Bowl and the '28 Olympics.

Across all dimensions in North America, our wholesale momentum is accelerating. It's Sporty Goods, DICK'S and Academy are leaning in with us to tell more sport performance stories. We're building long-term plans with Foot Locker and JD in athletic specialty, and we're fully committed to our partners in running specialty, football specialty and city specialty through our investments in product innovation and presentation. Ultimately, this is about creating a more profitable business model for both sides of the partnership.

In NIKE Direct, we've elevated our own experiences setting a standard for how our brands show up in the marketplace. We've intentionally cleaned the market in all channels. The teams are hyper focused on consumer right assortments and presenting them in environments that tell our best innovation stories, all with the goal of accelerating sell-through. If Running shows what our Sport Offense can do, North America showed the power of our complete portfolio in an elevated integrated marketplace. From here, we expect that to translate into consistent growth in North America.

I'll finish with the areas of our business that are earlier in the journey, starting with our growing portfolio of emerging brands. This quarter, we tapped into the energy of the Winter Olympics in Milan and Cortina to build excitement around ACG. It was a world-class execution that showcase the ACG logo on all Team USA athletes. We executed creative brand marketing including an experiential chain from Milan to the Alps called the All Conditions Express, and we elevated our presentation in more than 600 retail doors around the world, including a stand-alone ACG door in Beijing.

The Nike ACG team is committed to serving the outdoor athlete by creating the world's most innovative footwear, apparel and accessories building our presence authentically over time by supporting world-class racers and events and building long-term partnerships with the retailers who authentically serve outdoor athletes. The outdoors is a tremendous opportunity for NIKE as we bring excitement and a fresh perspective to the consumers and the industry.

In NIKE Sportswear and Jordan Streetwear, our teams are moving from playing defense to playing offense. Matt shared last quarter that by the end of this fiscal year, we will have intentionally reduced over $4 billion of revenue from the peak levels of classic footwear franchises. A cleanup of that scale is significant and has taken several quarters to execute. From here, we're investing in a more sophisticated city offense, one that incubates new styles through different consumers and channels account by account. And as you know, there is both an art and a science to seeding, igniting and scaling new sportswear styles.

A great example this quarter is the strong sell-through we drove around the globe with a more thoughtful approach to the reintroduction of the Air Max 95. That city led approach is especially important in EMEA, where we lack a fully integrated marketplace and it has been one of our biggest hurdles. The team is responding with a more complete street up model working more closely with wholesale partners to improve point-of-sale storytelling and seeding in the community. In EMEA, you'll see us show more -- up more as a local NIKE. Greater China, too, will benefit from a more local approach and closer connection with the consumer on the ground. We have become clearer on the structural challenges in China and the channel dynamics in the marketplace. We are taking action to clean the marketplace, tighten execution across digital and physical retail and rebuild the brand locally through sport. It will take time, but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport.

In Converse, the team took some decisive steps this quarter to bring the brand back to a healthy business. Converse is a beloved brand that serves a distinct consumer through their connection to creative culture, music and youth. Converse will remain an important part of the NIKE, Inc. family, and we are excited about its long-term prospects. Overall, the work is not finished, but the direction is clear. Our teams are moving with focus and urgency and our foundation is getting even stronger.

I'm going to pass it over to Matt, and I'll come back on to close out the call.

Thanks, Elliott, and hello to everyone on the call. As Elliott outlined, we are seeing real progress across the business. Our initial focus on sport was important because it sets a strategic repositioning of our brands. Momentum in Running continues to be strong, and we expect football, training and basketball to return to growth over the next few quarters. Yet, sports dimensions currently represent less than half of our total portfolio. And sportswear continues to be a headwind to revenue growth as it declined low double digits in the quarter. In the marketplace, relationships with our wholesale partners are strong, and our ways of working look very different than they did 12 months ago.

Order books are growing, and we are taking back shelf space. However, sell-through trends are not yet where we want them to be. Despite making progress versus a year ago, digital is still too promotional. Markdowns across the marketplace remain elevated. Our teams are pulling levers to manage inventory and protect brand health, but this continues to be a headwind to gross margin profitability. While our comeback is taking longer than we would like, we are confident we are on the right path, and we have a clear set of plans in place to complete our Win Now actions by the end of the calendar year.

Now let me turn to our third quarter results. For this quarter, revenues were flat on a reported basis and down 3% on a currency-neutral basis. NIKE Direct was down 7% with NIKE Digital declining 9% and NIKE stores down 5%. Wholesale grew 1%. Gross margins declined 130 basis points to 40.2% on a reported basis, primarily due to 300 basis points associated with higher tariffs in North America. SG&A was up 2% on a reported basis versus the prior year due to employee severance charges we incurred in the quarter. We also had other income from legal settlements. Our effective tax rate was 20%. Earnings per share was $0.35 and inventory decreased 1% versus the prior year with units down mid-single digits.

Let me provide some additional context on the $230 million charge we incurred this quarter due to employee-related severance costs primarily in supply chain and technology. During the pandemic, we accelerated investments across supply chain and technology to support a larger digital and direct business. Those investments also resulted in a higher fixed cost base that weighed significantly on our EBIT margins as revenue came down. Given the strategic shifts we have made to serve a more balanced and integrated marketplace, we have begun to take meaningful steps to reset our cost base to improve NIKE's long-term profitability. Our specific actions in the supply chain will lower costs, streamline operations and reduce capacity in our distribution network. Over time, we will shift our supply chain network to become more of a variable cost versus the higher fixed cost structure we have today.

In technology, we continue to optimize our workforce, rationalize programs and leverage new advanced capabilities. We also rightsized operating costs at Converse this quarter, which was included in this charge as well. We continue to evaluate opportunities related to supply chain which could result in additional financial impacts in future quarters though we believe the actions taken this quarter will represent the largest financial impact. We expect benefits from these actions to begin in fiscal '27 and continue to build through fiscal '28.

Now I will turn to performance of the geographies, including key highlights and actions we are taking to drive progress against our Win Now actions. In North America, Q3 revenue grew 3%. NIKE Direct declined 5%, while NIKE Digital was down 7%. NIKE stores were down 1%. Wholesale grew 11%. EBIT declined 11% on a reported basis. North America is leading our comeback and is well positioned to sustain the momentum as we move forward.

Running in global football grew double digits, with basketball up high single digits, while sportswear declined double digits. Our Digital business improved sequentially throughout the quarter, driven by strong launch and growth in key sports as well as continued improvement in average retail discounts. Wholesale revenue growth was driven by new distribution and lapping marketplace management actions with existing partners in the prior year. While sell-through has been below plan, sell-through improved in February, and we drove positive growth in all channels in the geography for the first time in 2 years.

Inventory dollars grew low-single digits, while units were down high-single digits, with the spread primarily due to tariffs. Closeout units remain low and the mix is healthy. From a margin recovery perspective, North America gross margins declined 360 basis points versus the prior year, despite nearly 650 basis points of gross impact from new U.S. tariffs. Underlying profitability has now improved over 3 consecutive quarters, giving us confidence that we can recover the transitory headwinds to margin associated with our Win Now actions.

And last, we are increasingly confident we are on track to return to balanced growth in North America across both NIKE Direct and wholesale channels in the near term. In EMEA, Q3 revenue was down 7%. NIKE Direct declined 13%, with NIKE Digital down 6% and NIKE stores down 20%. Wholesale was down 4%. EBIT increased 7% on a reported basis.

EMEA presented both progress and challenges in the quarter, and the team continued to take action in a highly promotional marketplace. Our performance business continued to build momentum, led by double-digit growth in Running. Sportswear was down double digits, and sell-through has not tracked with sell-in expectations. Promotions across the marketplace were up versus the prior year as partners manage inventory. We were also more aggressive with promotions on NIKE Digital at the end of the season, which resulted in higher markdowns and a higher off-price mix. Inventory grew double digits versus the prior year with units up mid-single digits.

Given the softness in Sportswear, traffic patterns and promotions across Europe as well as recent disruption in the Middle East, we anticipate adding the fourth quarter with elevated inventory. In Greater China, Q3 revenue declined 10%. NIKE Direct declined 5% with NIKE Digital down 21% and NIKE stores up 1%. Wholesale declined 13%, EBIT increased 11% on a reported basis. This quarter, we made forward progress in Greater China. Running grew double digits in the quarter, and we also saw growth in tennis, golf and ACG and kids was flat. Sportswear declined double digits as expected. Wholesale sell-in was managed down while seasonal sell-through rates sequentially improved.

We expanded our NIKE store pilot to 100 doors, including our House of Innovation door in Shanghai, obsessing store assortments, storytelling and replenishment. And this resulted in traffic and comp sales improving versus the prior year. We implemented shifts to manage our brand presence differently across all digital platforms, pulling key styles off discount, resulting in higher full price realization for these styles.

Inventory was down mid-teens versus the prior year, with units down more than 20% and partner inventory also declined double digits. With new leadership now in place, we expect to take additional actions to improve our position in the coming quarters. We will continue to reduce near-term sell-in to align with full price demand, clean up the digital channel and reduce the amount of aged inventory in the marketplace. We expect these actions will continue throughout fiscal '27 and remain a headwind to revenue growth, while profitability should bottom sooner as marketplace management makes progress.

In APLA, Q3 revenue was down 2%. NIKE Direct declined 8%, with NIKE Digital down 12% and NIKE stores down 3%. Wholesale was up 3%, EBIT declined 4% on a reported basis. In the quarter, we saw bright spots with Running up double digits and growth in training and football while Sportswear declined double digits. We had a strong launch of NikeSKIMS in Australia and Korea and launched new cricket footwear innovation at the T20 Cricket World Cup. NIKE flagship stores in Tokyo and Seoul drove positive growth for the quarter. While inventory grew high-single digits versus the prior year, units declined low-single digits, as the team made progress in certain countries. Closeout mix remains elevated, and the team is focused on the actions to address excess inventory over the coming quarter. We expect performance across territories in APLA to remain mixed in the near term.

Now I will turn to our outlook. You heard Elliott say that while our comeback is taking longer than we would like, we have a clear set of plans in place, and we expect to complete our Win Now actions by the end of the calendar year. Over these next 9 months, there will continue to be puts and takes across the revenue and gross margin lines of our business. At the same time, we are even more confident in where we are headed. Therefore, we want to provide greater visibility to how we see the business trend from here through the end of this calendar year.

We expect revenues to be down low single digits versus the prior year with gains in North America, offset by declines in Greater China, driven by intentional reduced sell-in and marketplace management actions over that period. While the tariff environment has been uncertain, assuming no significant changes, we expect the first quarter of fiscal '27 to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin. We expect gross margin expansion to begin in the second quarter due to actions to mitigate tariffs and recovery of transitory impacts from Win Now.

We expect earnings to be flattish with gross margins beginning to inflect and disciplined SG&A management, setting the foundation for earnings recovery from there. We also recognize that the environment around us has become increasingly dynamic, and could experience unplanned volatility due to the disruption in the Middle East, rising oil prices and other factors that could impact either input costs or consumer behavior. We are focused on what we can control and these assumptions reflect the macro environment as it stands today.

Now I'll share a specific outlook for the fourth quarter of fiscal '26. We expect revenues in Q4 to be down 2% to 4%, with modest growth in North America despite lapping a value liquidation in the prior year largely offset by declines in Greater China and Converse. We expect Greater China to be down approximately 20% in the fourth quarter, reflecting reduced sell-in that we highlighted last quarter, as well as accelerated actions to clean up the marketplace.

We anticipate a 2-point benefit from foreign exchange. We expect sequential improvement in gross margin with Q4 down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America. We expect Q4 SG&A dollars to be flat to down slightly. We expect other expense net of interest income to be an expense of $15 million to $25 million in the fourth quarter. And we expect our full year tax rate to be in the low 20% range. And last, we will return to providing full year and long-term guidance at our Investor Day in the fall.

With that, I'll pass it back to Elliott.

Thanks, Matt. Before we move to your questions, I want to leave you with an image that stayed with me from this quarter. I was in Barcelona meeting with athletes and leaders from FC Barcelona, a partner of ours since 1998, and I stood on the pitch at Camp Nou. If you've ever been there, you know it is more than a stadium. It is one of the most imposing stages in sport, a place built for pressure, belief, and unforgettable moments. And right now, Camp Nou tells another story, too.

Above the pitch, there is scaffolding, in the corners there are cranes, entire sections are unfinished. The stadium is being rebuilt tier-by-tier, piece by piece to accommodate over 100,000 supporters. The work is still underway. Capacity right now is limited and it requires patience and perseverance. And still, the supporters are in full voice. The players are still stepping on to the pitch focused on competing and winning. And all around them, the work is transforming what their home, their club will become.

What stayed with me was the reality of both things being true at once, competing today while building for tomorrow. FC Barcelona did not choose between performing in the present and preparing for the future. They are doing both at the same time. Standing there, looking up at the half-built stadium, it occurred to me, this is NIKE right now. We are taking deliberate actions that we believe will restore the health and quality of our business even when these actions create pressure in the near term.

We are removing what is not working. We are rebuilding parts of the foundation that needed to be rebuilt. And at the same time, we are continuing to innovate, to compete and to create for the future. That takes conviction. It takes patience, it takes belief and it takes focus. Camp Nou is being rebuilt for the next -- not being rebuilt for the next match, it is being rebuilt for the next era.

That is exactly how I think about the work we are doing at NIKE. I came back to help return this company to greatness and to build it the right way for the long term, to protect what has always made NIKE special and to modernize it for a new generation of athletes and consumers. So while the work is not finished, the direction is clear. Our focus is clear. and our comeback is within reach. And this fall, we look forward to sharing a fuller view of that path ahead at our Investor Day.

With that, let's open it up for questions.

[Operator Instructions]. Our first question will come from the line of Lorraine Hutchinson, Bank of America.

The performance in the EMEA seems to have decoupled from some of the early successes you've seen in North America. How do you diagnose the problems? And what's the strategy to fix it?

Well, Lorraine, as I highlighted, I may have presented both progress and challenges in the quarter. And I think that as we've implemented the Win Now actions across that geography, we are seeing growth in performance. We're seeing running up double digits, and we're really excited about the plans that we've got in place for the World Cup, as well as the way that we're setting up the marketplace for both upcoming product launches in both Running and in Training.

This quarter, we highlighted that we didn't see sell-in where we were hoping sell-in to be specifically on our Sportswear business. And it's really connected to a theme that we've been talking about for several quarters. We've highlighted some of the macro pressures that we've been seeing in EMEA over the last few quarters and specifically that, that marketplace has seen challenges in traffic and also a higher level of promotional activity.

And so this quarter, as we saw sell-through trending below our expectations, we saw our partners start to be more promotional, and we also were more promotional to manage inventory across this large marketplace. And this quarter, we also experienced traffic disruption from the Middle East. And we also are taking that into consideration as we're thinking about where this business stands and also as we look forward. So we've been aggressive, as I mentioned, with our teams pulling levers in order to keep this marketplace clean and healthy. Our closeout mix is at a really good level. And while we expect to exit the fourth quarter with elevated inventory in EMEA, we're confident given the size of the issue and the way that our teams are responding that we will be able to continue to work through the Win Now actions in this geography as well by the end of the calendar year.

And Lorraine, the only thing just to add to that, we do have a new leader in place. I have tremendous confidence in César Garcia. He's a 25-year NIKE veteran, has deep and broad product and marketplace experience and he's a tremendous leader. The team is really focused from a product perspective, and Matt touched on some of this, moving from being so Sportswear reliant to also be really focusing in on performance where we have growth in Running, Training and Football. So I like what they're doing there. They are now getting back to driving a more elevated and integrated marketplace. And then they are focused on making sure we have the right assortments in those doors, elevating the presentation and driving sell-through with our strategic partners. And so overall, I'm really pleased with the actions that the team are taking.

Our next question will come from the line of Adrienne Yih with Barclays.

Thanks for the forward guidance, actually. That's my question, it's going to be -- so you're talking about the end of the calendar year, but your quarters kind of split the calendar year kind of in the middle. So I'm wondering if we should be thinking about revenue, you said down low-single digit for that horizon with North America up and improving, which would suggest that Greater China is meaningfully negative, probably climbing from that negative 20%. So just a little bit of help there with the shaping and what is that, is it February quarter? The earnings being flattish would suggest 15% maybe haircut to where -- I mean significantly more than where the Street is. So again, is that flat for the fourth quarter on EPS through the February quarter? And then should we think about the May quarter of that year sort of having a big inflection? Sorry for all the kind of convoluted questioning, but thank you.

Yes. Adrienne, I'm going to jump in first. I see Matt wrote down all the questions. So I think he's ready. But let me -- here's what I want to make certain that everyone hears on the call. We are even more convinced now that the Win Now actions were and remain the right strategic moves. We've made meaningful progress improving the health, quality and the foundation of our business. We talked about that. And really, the areas that we said we were going to make the most progress, the ones that we knew made the most impact are some proof points that the actions are working. Just at a high level to go through the actions, we first said culture was #1. We have the teams galvanized around sport and growth. Product was the second one. We're driving the Sport Offense. We just moved into the Sport Offense in September. Spring '27, will be the first quarter where we will have product flowing into the marketplace from the Sport Offense. And Running is a proof point this quarter. It's up double digits.

NIKE Football is also getting back to growth. We have innovation coming. We talked about Mind and Aero-FIT. The wholesale business is back to growth, and we're paying it off in North America. So I'm really pleased with those proof points that the Win Now actions are indeed making an impact and know that we are moving quickly against Greater China Converse and Sportswear. We have new leaders in place. We're creating thoughtful long-term strategies, and we're making structural changes. And what I want to leave you with before I hand it over to Matt is that we are -- these are deliberate actions, and we are not just fixing. We're building brand by brand, sport by sport, country by country and partner by partner. And I will acknowledge that parts of it are taking longer than I would like, but we believe the direction -- in the direction and moving with urgency and the foundation is getting stronger. So I'm really good -- feel great about that.

And Adrienne, on the specific guidance question, I guess what I would say is that we've been providing 90 days of guidance for the last 5 quarters since Elliott returned. And we've been consistently asked for greater visibility as we had confidence in the trajectory of the business. And given -- while this comeback has taken longer than we'd like with North America's continued momentum, and a clear plan in place through the remainder of the calendar year. Our approach to providing guidance for the calendar year is really about pulling up at this moment and providing transparency to the financial trajectory of the business over the next 9 months. So I think of it as -- it includes this quarter and then it carries through over the next 9 months. And we're lining that up with the time line that we've set to complete the Win Now actions by the end of the calendar year.

Specifically, your question about some of the elements of shaping, without getting into the specifics of November versus December, what I'd say is that we expect revenue to be down low-single digits over this period. We do expect the momentum to continue in North America. And so we're planning for modest growth in North America even as we continue to lap the value liquidation that we've been doing this year. That's going to be offset by headwinds in Greater China. And that -- it's partly related to what we've been talking about, which is continuing to reduce the sell-in so that we would meet full price demand and also some of the actions that we're continuing to take in the marketplace in order to be able to clean it up. But I think the important point is that we expect margins to inflect in Q2. And that is a big moment, I think, for us, as we've been navigating through the costs associated with the Win Now actions and dealing with the newly implemented tariffs. And I think our confidence in margins inflecting positively in Q2, while we're managing SG&A tightly, really sort of sets the table for inflection in earnings as we go from there.

Our next question will come from the line of Simeon Siegel with Guggenheim Securities.

In the spirit of all this information, which, again, thank you, I know you guys don't normally give this detail, but any color you can share on D2C gross margins or just any way to think about the health of that channel? I know I've gotten a lot of questions around wholesale growth versus D2C declines. It just might be helpful to hear a little bit more about the quality of those D2C sales versus the reported declines, Elliott.

And then, Matt, just could you quantify the severance booked into the operating overhead this quarter, is that the full $230 million? I'm just trying to think through the change in operating overhead on a recurring basis and how you're thinking about operating overhead expense into next year as you further variabilize the P&L.

Yes. Thanks, Simeon. Let me jump in, and then Matt, I'll let you take the specifics around the DTC questions. But here's what I want to make sure that everybody on the call understands. We had been servicing our consumers with a direct-to-consumer model. And now we are moving to serve the consumers wherever, however they choose to shop with us. We want to make certain that we're managing our business across a balanced and integrated marketplace. That is the strength of NIKE is when we're able to have a portfolio of places that we serve consumers. And we're making certain that we segment and differentiate the assortments across multiple channels. NIKE Direct is certainly a part of that, but we are also making certain that we serve consumers in specialty, sporting goods, athletic specialty, department stores, family footwear and digital and physical. That's the power of NIKE.

And I think we're doing a much better job of working directly with our partners, developing long-term plans and making certain that we gain back shelf space and ultimately share. So again, yes, DTC is critically important to our success moving forward. I want to make sure you hear me say that. But also I want to make certain that you guys hear that an integrated and balanced marketplace is also critically important.

And specifically to your question about the quality of the DTC business, what I'd say, Simeon, is that we -- North America is the geography where we saw the most improvement in the quality of the business in direct and specifically -- I'm really specifically talking about digital. We did with our focus on sports see strong results across our NIKE stores around the world, lining up against sport, getting behind key sport moments. But on the Digital side, in North America, we saw continued improvement in the gap between wholesale and direct. And when we look at the quality of that business in North America, we continue to be encouraged.

I mentioned a couple of things on the call, but we saw sequential growth throughout the quarter driven by strong launch. That's across both Nike and Jordan. We saw growth in key sports on Digital, and we saw continued improvement in average retail discounts in North America. We saw demand on the Nike App grow in Q3 in North America. And as I mentioned, we saw sell-through overall in the marketplace in North America and February inflect up and it was the first time in 2 years that we saw positive growth in all channels. So that includes wholesale and across direct. And so we continue to be encouraged that as we're getting deeper into our Win Now actions that we're getting closer to balanced growth between wholesale and direct in the North America marketplace, and that is the playbook that we intend to take to -- that we're taking to Europe, to APLA and to Greater China and what we're focused on executing through the balance of the calendar year.

Our next question will come from the line of Michael Binetti with Evercore ISI.

I guess just to clean up the negative 2% to 4% in fourth quarter reported currency. And then I guess, bigger picture, with revenues down 2% to 4% and America grow -- I guess, North America growing modestly, China down 20%. You didn't guide EMEA in the fourth quarter, but it seems like you're triangulating somewhere close to down mid-singles, down a bit despite the World Cup. Maybe just some shape of the major puts and takes in EMEA in fourth quarter since the revenue rate changed so much in third quarter? And I guess the follow-up there is the margins in EMEA were surprisingly strong in third quarter despite the revenue decline. Could you just comment there on -- maybe any color on whether those positive offsets continue?

Yes. The comments that I made on EMEA in the fourth -- sorry, in the third quarter, definitely impact the way we're thinking about the fourth quarter. We expect to continue to see growth in the performance dimensions. We're incredibly excited about World Cup. I mentioned that we've got strong double-digit growth in Running, and we're excited about upcoming product launches in both Training and Running. And so Training is the second biggest performance category, and it's super important to continue to build momentum as we continue to drive our Training business across all sports. The real change in the quarter was sell-through on the Sportswear side. And so our outlook reflects a modification to -- it takes us into consideration in terms of our expectation of the Sportswear business in Q4 because we're managing the marketplace carefully.

We've also taken into consideration not only what we've seen in the Middle East as it relates to traffic, but also our expectations of the disruption of that in this marketplace based upon what we can see today. And so that's really the other factor that we've taken into consideration in this fourth quarter guidance. But we continue to be encouraged by the momentum in North America. We've got a strong order book for summer. We're seeing positive signs and sell-through. We're not seeing a consumer reaction to what's going on in the Middle East at this point in time in North America. And so our teams are continuing to work hard to connect with consumers and to continue to rebuild back brand momentum across that geography and the rest of the geographies.

Our next question will come from the line of Brooke Roach with Goldman Sachs.

Elliott, I was hoping to get your latest thoughts on the opportunity to stabilize the Sportswear business. How much additional reset activity is needed in the Classics franchise by geography and are you seeing any green shoots in the North America Sportswear portfolio that gives you confidence that the strength and performance can translate to better momentum in Sportswear over time?

Yes. Thanks, Brooke. Here's what I -- here's how I think about Sportswear. And I said it in the prepared remarks, but we're definitely moving from defense to offense in both NIKE Sportswear and Jordan Streetwear. And we got to think about both of those, especially as you think about North America. Let me first start with where we prioritize, and we did prioritize our performance business. And we felt like we had to get performance products right because sport is what drives our authenticity. It's our point of difference and distinction. It drives our best products and storytelling. And ultimately, sport is what creates a halo over the sportswear and streetwear businesses. And so we really got after the sport business through the -- and running a complete offense, making sure that we had innovative products driven by athlete insights.

And now as you're hearing from Matt and me, we're paying it off across the integrated marketplace. So it's working on Sportswear -- on the sport side. In terms of how we're doing on the Sportswear and the Streetwear side, here's what I would say. And I did use the specific where we intentionally pulled back, which created about a 5-point headwind this quarter of removing unhealthy inventory from those Classics. And what I would say is that the Air Force 1 and the AJ1, they stabilized this quarter. And so we're seeing month-to-month improvement in full price realization in those 2 franchises. And I also want to make sure that you hear me say that we see that as a positive because we believe these icons will always be staples for the consumer. We're still stabilizing the Dunks. We have a little bit of work to do there.

But at the same time, the green shoots, as you call them, we're starting to see the team create some buzz around our business. This quarter, we had some really good and tremendous launches, AJ 11 Gamma, the AJ5 Wolf Grey, the Nike Air Max 95 and all of them had a high full price realization and really strong sell-through. So the Sportswear team is moving to playing offense. And what you'll see from us is that team taking insights from the consumers that they serve and focusing on creation around comfort, innovation. And yes, we will continue to leverage our unmatched vault. And so I'm really pleased with the progress that the Sportswear and the Streetwear teams are making, but we still have work to do. And I called that out that we still have work to do, but -- and confident in the actions that we're taking and pleased with the way the consumer is responding.

Our next question will come from the line of Brian Nagel with Oppenheimer & Company.

So Elliott, the question I want to ask, you've mentioned several times in your comments that you're heading in the right direction, but the process is taking longer than you initially expected. So the question is it -- as you look at the reasons for that, is it more internal? Or is it more external, the environment in the different geographies or whatever has proven more challenging for the turnaround efforts here?

Brian, I think it's the easy answer for me to say it's a little bit of both, right? But here's what I would say, the starting point for each geo or each country was at a different place. And by the way, each marketplace has a different structure as well. And so we had to make certain that we truly understood where each country and each marketplace was in terms of their performance across the entire integrated marketplace, again, from NIKE Direct all the way through the different channels. And so I think the easiest way to think about it is the comeback, it is substantial. And at our size and scale, building for the future, it just -- it takes time, and it's taken longer than I would like.

But what I would tell you is we got our teams reorganized from a product perspective as well in September and spring '27 will be the first time we see the fruits of those teams working together. But in the end, I'm pleased with where we're headed. And I think everybody, when I came into this role, said, "Hey, it's going to take 2 years, and that's where we're tracking right now." So a little bit of both, Brian. We do have some external factors that we're having to deal with while we're in a major comeback, but that's no excuse. We're controlling what we can control. We're getting our teams lined up internally around product and the consumer and storytelling. And then we're getting our country teams lined up around driving a more integrated and elevated marketplace. And ultimately, that's what's going to pay dividends for us and build the foundation for future growth.

Our final question will come from the line of Matthew Boss with JPMorgan.

So Elliott, could you -- if we take a step back, just update us on health of the global sportswear backdrop? Or where does your outlook for the industry stand today relative to when you took the helm? And then, Matt, on low to mid-single digit constant currency revenue declines for the back half of the year. Is there a way to parse out self-inflicted headwinds or maybe where you see underlying demand exiting this fiscal year? And what have you embedded for overall sell-through rates through the balance of the calendar year just relative to the pressure that you cited that you've experienced to date?

Matthew, let me take -- so I think the easiest answer on sportswear is that it will remain a very large part of the overall industry and it will be critical to our success moving forward. So we're taking a streets-up approach to this and making certain that we help this big giant business feel more local. And again, it takes time to seed and ignite and scale product over time. But returning to a healthy sportswear business is essential and vital to our comeback because it will continue to be a critically important part of the overall market and overall part of our growth. So with that said, I'm incredibly positive on the athletic industry overall, not just in sportswear, and we see it as a tremendous opportunity for us to continue to drive growth in an expanding market.

And then, Matt, to your question on sell-through assumptions, maybe let me hit revenue first. For the first half of next year, I think it's safe to look to the range we provided for Q4 as a guide for what we're expecting for revenue for those last 2 quarters. And I think it's really highlighted by the trends that we've talked about. It's North America continuing to sustain momentum. We expect to see more balanced growth across channels. Given where inventory is in the marketplace, we expect to continue to see improvement in underlying profitability in that geography. And the top line will be tampered a little bit like we've been talking about because we are anniversarying quite a bit of off-price liquidation in the prior year, but it's a healthier business. It's a more profitable business, and it's a sustainable growing business across all channels of the marketplace.

As you go outside the U.S. I think that we've been clear that we believe that we can complete the Win Now actions in EMEA and APLA by the end of this calendar year. That's how you should read what we've -- what we're communicating. I think that will continue to be us going deeper on cleaning up the marketplace, especially digital. And quarter-by-quarter, we're planning for improvements in sell-through. As it relates to Greater China, we're managing sell-in. And by managing sell-in, we expect to continue the trend like we saw this quarter of sequential improvement of sell-through rates. And so we're managing supply in order to be able to continue to shift the mix of inventory in that marketplace to be more full price and more healthy. And that's why I gave the commentary around while the actions we're taking will create a headwind to revenue in Greater China, we do expect to see profitability bottom faster because it's going to be a healthier, more profitable business as we set that foundation for much more balanced growth as we go forward in China.

That will conclude the question-and-answer session and our call today. Thank you all for joining. You may now disconnect.

Good afternoon, everyone, and welcome to NIKE, Inc.'s Second Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer.

I'd now like to turn the call over to Paul Trussell.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s second quarter fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill; and EVP and 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 NIKE's reports filed with the SEC.

In addition, participants may discuss non-GAAP financial measures and nonpublic financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted.

We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we'd appreciate you limiting your initial question to one. Thank you for your cooperation on this.

I'll now turn the call over to NIKE, Inc. President and CEO, Elliott Hill.

Thank you, Paul. Let me start by thanking all of you for joining on the eve of a holiday week here in the United States and many parts of the world. And with that, let me also recognize a NIKE team that's leaving nothing on the table right now.

When you work in retail, the holidays don't mean a break. When you work in sport, you often say that sport never sleeps. So when you work at NIKE, you're in the thick of an incredibly busy time. With that in mind, I want to extend a special and heartfelt thanks to my NIKE teammates. Thank you for your continued commitment, passion and determination, and thank you for delivering another quarter of steady progress and building momentum.

Fiscal year '26 continues to be a year of taking action to rightsize our Classics business, return NIKE Digital to a premium experience, diversify our product portfolio, deepen our consumer connections, strengthen our partner relationships and realign our teams and leadership. And I'd say we're in the middle innings of our comeback. We started with the Win Now actions, which was our immediate response to our biggest challenges and opportunities in our culture, product, storytelling, marketplace and winning on the ground.

And now our sport offense is the accelerator of our Win Now actions. It's how athlete-centered innovation travels across and through every country and channel to drive growth. Our focus on sport by brand is the engine of our growth. Our global marketplace is the amplifier, and it is our sport offense that connects the 2. Said another way, our growth will come from sport, athletes, product innovation, sport moments and will be scaled through countries, channels and accounts.

Turning to the quarter. I'd frame up the results as slightly better than we had anticipated 90 days ago. And while we're driving progress through Win Now, we're nowhere near our potential. I see 3 themes that give a better picture of where we stand right now. The first theme is that our sports teams are quickly finding their rhythm in the new sport offense. While rightsizing our Classics, we're building a more diverse product portfolio, gaining the most traction in our performance business, which validates that we've got the right structure to drive a relentless flow of innovative product across our unmatched opportunities.

The second theme is that we're building a healthier base for top line growth. The NIKE brand grew this quarter, and the mix was strong. We delivered 8% wholesale growth, elevated the experience in key NIKE stores and NIKE.com and had fewer days of promotion. These are all positive signs. The third theme is that our comeback continues to move at different speeds. It won't be a straight line, but we're acting decisively to accelerate the lagging areas with China at the top of that list.

A year in, it's clear how important it is to stay closely connected to what's happening on the ground. From intern to CEO and every role I've held in between, I've felt that way, which is why, as you likely saw this quarter, I announced a change in my leadership team, all geographies will now report directly to me. I'm confident this change will result in us accelerating our Win Now actions by allowing our geography GMs to more closely shape our strategy, drive faster decisions and influence investments.

The geography that is leading the way for NIKE right now is North America. As our largest business, that's where much of our focus has been. With North America, we're working with the most diverse wholesale landscape, which gives us several strategic partners to segment and differentiate our multi-brand, multisport and multi-price point portfolio. The team has done an excellent job of reconnecting with partners and getting sharper on the consumers we serve and those that we seek to serve.

This quarter, that approach led to over 20% wholesale growth in North America with meaningful growth coming from existing partners. Our North America marketing team is also finding the right balance of inspiring through big team moments like the Dodgers World Series campaign after their win or at the Chicago Marathon, where we supported everyone from everyday runners chasing personal bests to Conner Mantz shattering an American marathon record that stood for 23 years.

North America is driving a healthy, repeatable offense and showing us what winning looks like. It's a great signal for our future success in other geographies. In Greater China, we highlighted last quarter that we were facing a longer road to a healthier business. We've been implementing the Win Now actions in our key cities of Beijing and Shanghai, leading with more storytelling of our product innovations, editing our assortments and elevating the presentation of those assortments in targeted doors.

What we've done is a start, but it's not happening at the level or the pace we need to drive wider change. The next step is to further adapt our approach to fit China's unique monobrand footprint and digital-first marketplace. The reset requires a fresh way of thinking from our NIKE teammates and our NIKE store partners, and it will take time.

Over the years, we established our premium position and market share there because the Chinese consumer believes in our ability to innovate and inspire them through sport. I'm confident we'll get back to fulfilling that promise. China continues to stand out as one of the most powerful long-term opportunities in sport. That has not changed. Expect to hear, see and feel much more about how we'll manage the China marketplace differently this fiscal year and beyond.

Both EMEA and APLA are geographies that are led through distinct, influential countries and key cities, so we're moving quickly to resourcing our teams on the ground, including sales. They're the ones who deliver locally relevant assortments, elevate the presentation of those assortments, fuel product seeding and build local relationships, create meaningful stories and consumer connections and ultimately drive profitable and sustainable revenue in both wholesale and direct.

EMEA activated their sport offense on December 1, so they've just started rehiring these critically important revenue-generating roles in key countries. I'm locking arms with the leaders of our geographies and with Matt, who now leads Sales and NIKE Direct, to elevate the way consumers experience our brands. I know what it looks like when it's successful. I can see the upside. It's a brand-by-brand, sport-by-sport approach paid off in a partner-by-partner, city by city, high street by high street, mall-by-mall approach and every detail matters.

Next, I'll share some color on how the sport offense is fueling a more diversified product portfolio through footwear, apparel and equipment and up and down price points. Our teams are determined to deliver a consistent product innovation pipeline. In January, NIKE Running will build off of the strong start of our new stability shoe, the Structure 26, with the introduction of the Structure Plus. In Q2, Running grew by over 20% for the second quarter in a row, it's up double digits in every channel, including NIKE Direct.

Also in January, we'll debut Nike Mind, a new footwear platform that will help athletes prepare for performance and competition, which we see as a new dimension to the NIKE Training's offense. We introduced Nike Mind along with 3 other new innovation platforms in October. One of them is the new platform that traps air for warmth in an ACG jacket. The jacket inflates from a shell to a puffer based on the warmth needed. The Therma-FIT Air Milano jacket will debut at the Winter Olympics in February.

Also in February, at the NBA All-Star Game in L.A., you'll see an example of how our 3 basketball brands and their product lineups will come together under the sport offense. The Swoosh, the Jumpman and the Star Chevron have a unified creative feel and merchandising approach with Foot Locker in L.A., and we believe it has great potential to be scaled.

Our NikeSKIMS collection will launch internationally in EMEA and APLA in the same time frame, following a successful rollout in North America. In NIKE Football, the deeper investment in World Cup starts now. This quarter, we brought a fresh perspective to the culture of the game in a T90 collaboration with Palace and with our Hollywood Keepers sportswear collection.

And in March, our athletes will begin wearing our new apparel platform, Aero-FIT in their national team kits. Aero-FIT is like air conditioning for the body, flowing air through the garment unlike any previous performance apparel. The innovation platform will scale across several sport dimensions in coming seasons.

Overall, wholesale partners are very confident in our NIKE Football product. Booking units are nearly 40% higher than World Cup '22. To help sell through the commitment, we'll refresh over 100 NIKE Direct and 1,400 partner doors around the world, and our marketing team is making significant investments to inspire football fans everywhere. All of these new concepts will come to the consumer in the back half of the year. As a result, our order book is improving season on season.

Through to sport offense, we're on our way in product. But as I've said, near-term investments to clean up and elevate the marketplace have put real pressures on margins. Tariffs have also obviously added a significant headwind to overcome. I want to state it very clearly. Margin expansion is a top priority for me and my leadership team. While it will take time, we see the path back to double-digit EBIT margins for NIKE, Inc. That formula includes a multi-branded and diverse product portfolio that is constantly refreshing and bringing in newness and seeking to drive value out of every relationship we have in the marketplace. It also requires us to be bolder and more creative in how we operate.

I made another change within my leadership team this quarter, asking Venkatesh Alagirisamy to be in the role of our Chief Operating Officer. He and his team will look end-to-end to ensure technology is fully integrated across the company in how we create, plan, make, deliver and sell our world-class innovations. We see significant opportunity to get our core operations running more efficiently and more profitably. I look forward to sharing more in the coming quarters.

With that, I'll turn it over to Matt to go deeper into the quarter and then offer some closing thoughts before we take your questions.

Thanks, Elliott, and happy holidays to everyone on the call. Our second quarter results demonstrated the resilience of our portfolio with modest year-over-year reported top line growth, despite managing headwinds from the actions we have taken to reposition our business. As I look back on where we are, 1 year from Elliott joining the company and moving forward with our Win Now actions, our business is in a better position.

Sport dimensions represent a larger mix of the portfolio, led by Running, and we are seeing momentum build in other sports. The Classics footwear franchises are on track to decline from peak levels by more than $4 billion by fiscal year-end. Wholesale has returned to growth, with a growing order book globally in both spring and summer. NIKE Digital has reduced promotional activity and is operating more strategically in sync with our partners. And inventory is in a healthy and clean position in North America and EMEA.

While we are encouraged by all of this, as we have said, our progress will not be linear as each brand, sport and geography is recovering on a different time line, and we continue to read and react every day in service of the long-term health of our brands. We highlighted last quarter that it will take more time to return to healthy growth in Greater China and Converse, and we expect headwinds to continue for the balance of the fiscal year. There are also puts and takes across EMEA and APLA. Meanwhile, North America and Running stand out again this quarter, and we are growing more confident in our ability to sustain the momentum as we look forward.

Being in the middle innings, as Elliott referenced, also means it will take time for the actions we have put into place to change the trajectory on EBIT margins. We have been navigating transitory headwinds to margin due to our Win Now actions and shifts in the business, including product and channel mix and continued inventory liquidation. As we highlighted last quarter, we are also navigating new structural headwinds from the $1.5 billion of annualized incremental product costs due to higher U.S. tariffs.

This represents a gross headwind of approximately 320 basis points to gross margin in fiscal '26. And while we have begun to take actions to reduce this to a net impact of approximately 120 basis points, it is still a significant factor impacting our near-term EBIT margins amidst a turnaround in a very dynamic operating environment. All in all, we have made meaningful progress through our 5 Win Now actions, yet there is more work to do, and our teams are hustling.

For this quarter, revenues were up 1% on a reported basis, and flat on a currency-neutral basis. NIKE Direct was down 9%, with NIKE Digital declining 14% and NIKE stores down 3%. Wholesale grew 8%. This included a top line headwind of approximately $550 million from the reduction of our Classics franchises, down over 20% versus the prior year. This means our currency-neutral revenue grew 6% excluding the impact of this headwind.

Gross margins declined 300 basis points to 40.6% on a reported basis, primarily due to increased product costs due to higher tariffs in North America as well as inventory obsolescence in Greater China that was not contemplated 90 days ago. SG&A was up 1% on a reported basis year-over-year, driven by higher brand marketing expense, partially offset by lower operating overhead. Relative to expectations, SG&A was lower due to operating overhead savings, reflecting the team's continued focus on disciplined cost management.

Our effective tax rate was 20.7% compared to 17.9% for the same period last year, primarily due to changes in earnings mix. Earnings per share was $0.53. Inventory decreased 3% versus the prior year, with units down high single digits. In North America and EMEA, which represent almost 3/4 of our business, we have returned to a healthy marketplace. We still have work to do in Greater China, parts of APLA and Converse.

Now I will turn to the geographies, and once again focus my remarks on specific context and insights of our Win Now progress. In North America, Q2 revenue grew 9%. NIKE Direct declined 10%, with NIKE Digital down 16%. NIKE stores were down 2%, wholesale grew 24% and EBIT declined 8% on a reported basis. As Elliott said, North America is our best example of executing our Win Now actions, and we are taking the learnings from their playbook to execute across all other geos. Momentum is extending beyond Running into additional sports including basketball and training.

As it relates to the North America marketplace, wholesale delivered strong growth in the quarter. While the quarter certainly benefited from liquidation to value channels as we cleaned up the marketplace, we also saw a balanced contribution of growth from both new and existing partners. North America also made additional progress on repositioning NIKE Digital to a more premium representation of the NIKE brand, with fewer days of promotion, lower markdown rates and increased demand at full price.

NIKE.com posted its best Black Friday ever this year, partially driven by strong sell-through of the Jordan Black Cat launch. Growth in the quarter was driven by Running, kids, basketball and training, with running delivering high double-digit growth in NIKE-owned stores, NIKE Digital and wholesale. Sportswear saw sequential improvement, up low single digits in the quarter, with Classic footwear franchises declining approximately 20% year-over-year. Inventory declined mid-single digits versus the prior year, with units down double digits. Closeout units declined double digits, and the mix is very healthy.

Last, I want to point out that North America gross margins only declined 330 basis points versus the prior year, despite 520 basis points of impact from new U.S. tariffs. This gives us confidence that our Win Now actions are working, profitability is recovering, and we are on the path back to sustainable, profitable growth.

In EMEA, Q2 revenue was down 1%. NIKE Direct declined 3%, with NIKE Digital down 2% and NIKE stores down 5%. Wholesale was flat. EBIT declined 12% on a reported basis. EMEA has maintained a healthy marketplace, although promotional activity has been heavier than expected. We saw growth in Central and Eastern Europe and the Middle East, offset by slight declines in Western Europe.

In Q2, our performance business continued to build momentum, driven by double-digit growth in Running. We also saw growth in Training and Sportswear. Sportswear growth was driven by apparel, with footwear flat, as a mid-20s percent decline in Classic footwear franchises was offset by growth in Air Max and the look of Running styles. Inventory grew double digits versus the prior year with units flat and the spread primarily due to foreign exchange rates. Closeout mix in the geography is healthy.

In Greater China, Q2 revenue declined 16%. NIKE Direct declined 18%, with NIKE Digital down 36% and NIKE stores down 5%. Wholesale declined 15%. EBIT declined 49% on a reported basis. Our priority in Greater China is to create greater brand distinction through sport and innovation, leveraging deep local insights in a premium and more consistently managed integrated marketplace across both physical and digital channels.

Over the past several seasons, we have faced consistent challenges with declining store traffic, softer in-season sell-through rates and higher levels of aged inventory across the marketplace. Our brands have consistently been off-price for consumers, especially in digital, affecting our premium positioning across the entire integrated marketplace. These challenges resulted in a higher mix of off-price sales with higher markdowns, higher sales-related returns, higher wholesale discounts and higher obsolescence charges to clean marketplace inventory levels. This cycle has had a significant effect on the profitability of Greater China.

This quarter, we took the following actions in China. We continued to obsess our initial NIKE store pilot, which delivered encouraging results this quarter with better traffic and comp sales growth relative to trends across the broader fleet. We focused on sport, combining new product innovation with elevated retail presentation, and we saw Running continue to grow in the quarter. We were less promotional during 11.11, resulting in an approximate 35% decline versus the prior year, in line with our plans. We accelerated returns of aged inventory owned by partners and wrote-off both partner and NIKE inventory in the quarter.

We reduced NIKE inventory by mid-teens versus the prior year and by 20% in units. And we reduced our sell-in plans for spring, and we cut our buys for summer to improve sell-through and full price realization. We will need to make further shifts in the integrated marketplace to break the cycle that we've been managing through. There is more work ahead to scale the momentum of the initial store pilot to more doors, to elevate our brands across all digital platforms and to clean up excess product in the marketplace. We expect headwinds to continue, but we are working to set the foundation for a return to growth in this important geography.

In APLA, Q2 revenue was down 4%. NIKE Direct declined 5% with NIKE Digital down 10% and NIKE stores up 1%. Wholesale was down 3%. EBIT declined 15% on a reported basis. APLA continues to deliver mixed results across countries, with positive results in Latin America, more than offset by headwinds in Asia Pacific countries. During the quarter, the team leveraged promotions to make progress on pockets of excess inventory in the marketplace. In the quarter, Running grew double digits, and apparel grew mid-single digits overall. Inventory grew double digits versus the prior year, with units up mid-single digits, though we saw pockets of improvement year-over-year.

Now I will turn to our third quarter guidance. We continue to operate in a dynamic environment, both for consumers and our global business, and we remain focused on what we can control to make forward progress for the long-term health of our brands. Our outlook reflects our best assessment of these factors based on the data we have available to us today. We expect Q3 revenues to be down low single digits, with modest growth in North America as we see reduced liquidation activity versus prior quarters, performance in Greater China and Converse similar to Q2 as well as a 3-point benefit from foreign exchange.

We expect Q3 gross margins to be down approximately 175 to 225 basis points. However, excluding the 315 basis point impact of higher gross product costs related to new tariffs, gross margin expansion would be positive in the third quarter. We expect Q3 SG&A dollars to be up low single digits due to higher demand creation and investments in our sport offense. We expect other expense, net of interest income, to be an income of $0 to $10 million in the third quarter.

Now I'll close with a few final thoughts. We are making progress in the areas we focused on first, and we are increasingly confident in our path forward, led by momentum in North America. We are making the investments required to position our full portfolio for a recovery and making decisions in service of the long-term health of our brands. Operationalizing the sport offense, elevating the marketplace and rebuilding our key city teams are critical priorities to return to sustainable, profitable growth across all brands, all sports and all geographies.

Finally, as you heard from Elliott, we are focused on improving the profitability and operating efficiency of our business and realigning costs while also investing to reignite growth. We look forward to sharing more in upcoming quarters.

With that, I'll pass it back to Elliott.

Thank you, Matt. This quarter, the Los Angeles Dodgers reminded us what it takes to win at the highest level, back-to-back World Series titles, something no team had done in 25 years. They gave us a Game 7 for the ages. They didn't take the lead until the 11th inning. Down 3-0 early, every outside voice said, it's over, but they kept chipping away. Every setback became a lesson. They leaned on each other. They believed when belief was hard.

Manager Dave Roberts shared those insights with us at the opening of our new NIKE store in Portland just days after that win. He talked about what guided his decisions, not just analytics, but trust, feel and sacrifice. That included putting in bench player Miggy Rojas who hit an improbable home run in the ninth, followed by a bases-loaded throw to the plate in the bottom of the inning. With one more out to go, Roberts swapped in Pages, who immediately made a leaping, game-saving catch.

Every decision mattered and every player was ready when called upon. But the boldest move he made was managing Yoshinobu Yamamoto's innings, our Nike guy and World Series MVP, who won a historic 3 games in the series. The day after throwing nearly 100 pitches, he surprised everyone to close out Game 7. That wasn't just effort. That was a statement, I'm leaving nothing on the table. It inspired the entire team. That's what greatness looks like. It's not about perfection. It's about perseverance. It's about sticking to the plan and performing when the pressure is highest.

NIKE is in a similar moment. We're the industry leader. Expectations are high. And yes, we face pressure and setbacks. But like the Dodgers, we're leaning on each other, focused on the fundamentals, making the hard calls and building for the long game. Because in the end, greatness isn't promised, it's earned. And we're ready to earn it again and again. Thank you.

And now Matt and I will take your questions.

[Operator Instructions] Our first question will come from the line of Matthew Boss with JPMorgan.

So Elliott, you led both in the release and on the call by citing the turnaround is in middle innings. Could you elaborate maybe where you've scored runs so far versus where you have opportunity remaining and just your overall confidence today that you can win the game? And then, Matt, if you could just elaborate on the components of gross margin that you cited. I think you cited underlying expansion, excluding tariffs for the third quarter and just the progression that we should think about moving forward.

Thank you, Matthew, and appreciate the question. And let me start by saying the path back to sustainable, profitable growth is going to go through our Win Now actions, and that will be -- and they will be accelerated by our sport offense. And I would also say that I'm incredibly inspired by the way our teammates have responded to the actions in the new offense.

The drivers of our growth right now for NIKE, they came through the Win Now actions which were our near-term actions around culture, product, storytelling, the marketplace and winning on the ground with consumers. But it's our sport offense is the accelerator of those actions. It's how we take athlete-centered innovation, and it travels through every country, channel and account to drive growth. And the sport offense is what's bringing the balance to our portfolio. We have a relentless flow of innovative product now coming across our 3 brands through multiple sports, performance and sportswear, men's, women's and kids, and it's -- and we pay it off across 190 countries.

So we've had some meaningful progress, Matthew, over the last 90 days. NIKE brand is growing. Sport is growing with Running leading the effort there at up over 20% and taking market share. We're beginning to diversify the portfolio, rightsizing our classics. As Matt said, we declined roughly $4 billion from its peak. North America grew 9%. Wholesale grew. Our order book for the spring and summer is up. So we have a healthier base from which to grow profitable, sustainable growth.

So in terms of middle innings specifically, I think the best way to think about it is that we have our businesses -- the dimensions of our businesses moving at different speeds and the time lines are going to vary by geo, channel and sport dimension. So by brand, as an example, Nike is off to a strong start. We had growth this quarter. Jordan, I think, still has some room to dimensionalize beyond Streetwear into things like Jordan Basketball, Jordan Training, et cetera, but we've seen some real good progress around Streetwear there. We're resetting the marketplace for Converse under new leadership.

In terms of product, performance is growing, but sportswear is still in the early stages of diversification. We've done a great job of rightsizing the franchises, but we still need to diversify that portfolio, middle innings. And then from a geography, North America is leading, EMEA just transitioned to the sport offense, followed by APLA, which, as Matt pointed out, had some mixed results. And then China has our longest road ahead.

And that's why we're sitting there saying we're in middle innings, great success in North America, work to do in China. And -- but all I would say here, just to sort of close it out, Matthew, is the middle innings, while we keep saying we're in the middle innings, I will say this, the Win Now actions and the sport offense is working, and it will lead us back to profitable, sustainable growth.

And Matt, as it relates to margins, I would just say that our business is still in a transition in the middle innings, and we are navigating through both transitory and structural headwinds across the portfolio. But as Elliott said, we've made meaningful progress through the Win Now actions, and you can really see that in the progress that we made in North America in Q2.

North America's gross margins were down 330 basis points, despite more than 500 basis points of a headwind to product costs due to the gross impact from the new tariffs. And so that's a marketplace where we're furthest along in repositioning digital. We're back to growth in wholesale, and we've made the most progress in cleaning up the marketplace. And so as I look ahead to Q3, we guided our margins to be down 175 to 225 basis points. That includes 315 basis points of higher product costs related to new tariffs. And so we expect -- so expansion, excluding the impact of new tariffs, really reflecting the beginning of recovery of the transitory headwinds at the corporate level.

And we continue to expect to see momentum building in North America given where the state of the marketplace is. We're watching promotional activity in Europe, but inventory in Europe is in a healthy place. And then as I mentioned, there's puts and takes across APLA. And we expect the trends in Greater China and Converse for Q3 to be relatively in line with what we saw in Q2 as we continue to take actions on both of those resets. And so I would say that overall, we're encouraged by the momentum and the progress that we're seeing, but we've still got some work to do.

Our next question will come from the line of Ike Boruchow with Wells Fargo.

I guess maybe for Elliott, it may be a similar type of question as Matt's, but you've mentioned the recovery won't be linear several times over the past year or in transition, and it totally makes sense. I guess I'd like to know if you're able to share when you believe that maybe that caveat won't be needed anymore and you'll be able to better kind of hold momentum, create better visibility for investors on what's clearly becoming a reset base of revenue and earnings.

Yes. Thanks, Ike. Here's the best way that I would think about it is each geo -- let's first start with the brands. Each of the brands are at different stages in terms of diversifying their product portfolio. We just got into the sport offense in September, so we got these small cross-functional teams. We're getting them up and running as fast as we can.

Same thing is happening in the countries and key cities around the world. That's happening at different stages. And so that's -- we believe in the strategy, and we know that the path back to profitable sustainable growth is through the Win Now action. We also believe in the sport offense and our ability to create beautiful products and then pay it off in an integrated marketplace.

We just have 3 brands in multiple sports and 4 geos and 190 countries, and they're all operating at different time lines. And so that's the reason why we keep saying that we have different time lines, and it's just going to take time. So I will just sort of point to the place we focus first, which is North America, and we're having great success there. So we're confident in our path forward.

Yes. And I just would add, Ike, that we said on North America that we're growing increasingly confident that we can sustain that momentum. I would also say that we've said that we believe we're going to drive modest growth in wholesale this year, starting to have more confidence in that dimensionality of the business.

But what you also heard on the call today was that we took some unplanned actions in Greater China as we're navigating real time through some of the challenges that we see in some of the businesses that are under reset. And so we're going to continue to take it 90 days at a time for now to give ourselves the flexibility to make the right decisions for the long-term health of our brands. And much of what we said today is consistent with what we've been talking about for the past couple quarters.

Our next question will come from the line of Bob Drbul with BTIG.

Just if I could ask 2 questions. I think the first one is on the commitment, sort of the focus on the return to double-digit EBIT margin, it's a big priority for you guys. Is there a time line at which you could talk to when you think you'll get there? And I think the second question, just like part of that, I think, is on China. Long road ahead, Q2 revenues similar, Q3 similar to Q2. How deep a reset do you think is necessary in China? And are we near a bottom in revenue or EBIT declines in China?

Okay. So Bob, let me do this. You snuck in 2 questions on me, but here's what I'm going to do. Let's take EBIT first, and then we'll take China because I don't want to confuse the 2. But let me first just say that improving margins continues to be a top priority. And I said it before and I'll continue to say it, we do see a path back to double-digit EBIT margins. Margins are under pressure for 2 reasons. First, the driver of our -- is our Win Now actions and that we've intentionally taken to clean up the marketplaces around the world.

The second is the impact of tariffs where we implement -- which were implemented after we activated the Win Now actions. And we're seeing the benefits of us taking those actions. We've said it North America back to growth, running back to growth, wholesale up, the order book and we have a healthier base for top line growth moving forward. In addition to the top line growth, we also have opportunity to improve the efficiency and productivity in how we operate the business, and we're going to share more in the coming quarters. Matt, I don't know if you want to add anything to that.

I would just say something that will sound familiar. We're clear on what the path back looks like. It starts with growth, and I think that the investments that we've made to drive the Win Now actions are paying fruit. You see it with a second quarter of top line growth and specifically the growth that North America was able to deliver in the quarter, which is where we'd focused our demand creation investments and where we'd focused our investments in our commercial teams in order to be able to get back on the offense in the marketplace.

Part of what's going to drive expansion is recovery of our full-price mix as we continue to manage the off-price, full-price mix in the marketplace. And again, I point to North America where we've now cleaned the inventory in the marketplace, and we're starting to see margin expansion excluding the headwind of tariffs. Another big opportunity for us is to leverage the supply chain costs as we grow. And that's been a meaningful headwind over the last year as our business has reduced in size and growth will help us with that, but there's also a lot of focus and attention on that as well.

And then the last piece of it, I would say, is the work that we're doing to be disciplined in the way we're managing costs across the business. We've been investing in marketing, and we feel good about where we've leveled our brand marketing investment. We've locked in some of our most important team franchises for the long term, which strategically puts us at a great position in the world of sport. But we've been very focused on managing operating overhead, and we will continue to do that, and we look forward to sharing more about that in the upcoming quarters.

Okay. I'll jump back now, and I'll take -- let me take China. China continues to be one of the most powerful opportunities in sport. We're confident that the Win Now actions and the sport offense will allow us to continue to invite 1.4 billion consumers into the world of sport, fitness and the lifestyle sport. So we see China as a big opportunity. With that said, it's clear that we need to reset our approach to the China marketplace and it's going to start with structure. The geos are now reporting to me. Angela, who is our GM in Greater China, is now part of my SLT, Senior Leadership Team, and I look forward to working with her and the rest of our team more closely.

Let me share a little bit of diagnosis of where we are. And we believe and firmly believe and will always believe that our growth will come through sport, but the reality is we've become a lifestyle brand competing on price in China. We also reduced the feet on the ground, people on the ground. As you know, it's a mono-brand marketplace with thousands of -- 5,000 doors with the teams working the presentation of our product at retail and we weren't making the investment in our store fleet, so our stores aren't compelling.

And as Matt mentioned, the cycle that it started to feed itself, soft demand leading to consistent promotions and then impacting profitability. And we did signal last quarter because of these structural differences that China would be on a different time line. So we're taking action. We're cleaning up the marketplace of aged product. We're getting back to the basics of retail, consumer right assortments, better storytelling and elevated visual presentation.

We're increasing investments in Shanghai and Beijing, resetting key doors. Matt referenced those in his prepared remarks. We're seeing early success. But I'll say this, it's not happening at the pace we like. So we have more to do. It's going to take a fresh perspective, a new approach, and we will have to come through this with new capabilities as well. And we're working closely with our partners, Pou Sheng and Topsports, to adapt our approach. But I'll just sort of end here. I've done this before, have a deep history in the market. We've diagnosed the problem, and we will return NIKE to a beloved premium and innovative brand in China.

Our next question comes from the line of Aneesha Sherman with Bernstein.

Elliott, at the start of 2025, you expressed your strong confidence in the pipeline for Running and you laid out this 3x3 framework that you discussed with partners and we're now seeing strong acceptance in the market and the business is growing over 20%. As you look across the other verticals, I know you talked about new innovation across all of them, but how do you see the phasing of the growth? And are there particular areas where you have that same level of conviction that you had in Running a year ago and where you expect the business to ramp very quickly versus some that are a little slower?

And then a follow-up on North America. Matt and Elliott, you both talked about the contribution of new distribution and same-store sales on the wholesale growth. Are you happy with the mix of partners you have now? Or is the goal to continue to ramp up new distribution points into next fiscal year as well?

Aneesha, thanks for the questions. I'll start, let me take the product portfolio piece first. Here's what I'd say. The teams are doing a really nice job of building a more diverse portfolio. You can start to see it in our numbers. We do have an unmatched portfolio with depth and dimension across performance and sportswear, men's, women's kids, footwear, apparel, accessories and up and down price points.

And we believe that moving into this sport-obsessed teams through our sport offense, we're already starting to see the pipeline and the flow of innovation coming through across the 3 brands: Nike, Jordan and Converse. So we know when we focus on sport, we win. You called out Running already. I will hit very quickly that we launched Vomero Premium as part of that 9-box construct that you referenced this quarter and had very good sell-through. And we also launched Structure 26 in our stability silo, and we're launching Structure Plus next month. So we're continuing to fill that out. But it's not just about footwear, it's also about apparel. We have some really strong apparel coming through in Running as well. So we will continue to grow and dimensionalize Running as -- Nike Running as an opportunity.

In terms of other business opportunities, global football, it's probably the furthest along in terms of their construct. We have 3 silos there: footwear silos, the Mercurial, Tiempo which will launch in Q3 and then our Phantom which had a really strong launch in Q1. So 3 silos also connecting deeply with each of the consumers that play a different style of football.

Apparel and footwear also dimensionalizes that opportunity, national team kits, World Cup, really strong read there, 40% up on the order book versus World Cup '22. Training, 24/7 apparel, continuing to diversify the footwear. I see that coming. That's not yet hit, but we feel good about what's coming from training and footwear.

SKIMS had a successful launch. We launched in EMEA and APLA next quarter in basketball. We're dimensionalizing through women's, Sabrina, Asia and now we have Caitlin coming and our men's business continues to do well. Ja sold through extremely well. And then we just launched the G.T. Future, and we had kids lining up for that shoe. So starting to dimensionalize beyond or dimensionalize the portfolio.

And then I could dive into innovation a bit more further out. I think it's getting stronger every season. We're investing significantly in our Nike Sports Research lab, and we're being intentional about connecting that R&D to our sport offense. And we announced a few big. which I talked about product innovations, Nike Mind and then Aero-FIT. So I feel good about the pipeline, and we see the response in our order book which is up for the back half of the year.

Maybe I'll jump in on marketplace, Elliott, and then you can add to it. Aneesha, we feel good about the North America marketplace and our partners. We've got great partnerships. We've been working incredibly close with our partners as we're working to elevate the marketplace and reposition the NIKE brand in a segmented and differentiated way across accounts and across the marketplace.

Tom Petty and the team have just been crushing it in terms of leading us through our Win Now actions. And when I look at the order book for the back half of the year, the order book is very balanced in terms of growth between new partners and existing partners. And so we feel great about the quality of the growth that we see in the back half across a balanced integrated marketplace.

Our teams are always looking for opportunities because our marketplace strategy is a consumer-based strategy. We want to be in the path of the consumer, leveraging our partners across digital and physical owned and partnered. And so I wouldn't rule out the possibility of it, but I wouldn't say that that's what's needed in order for us to be able to sustain the momentum that we see in North America.

I was going to add to it, but you've already embraced your new job, right? I think the only thing that I would add to it, Aneesha, because I think Matt did such a nice job is that, again, that Tom and the leadership team have done a really great job of just rightsizing the product, getting the marketing going. And then I would say the thing that's the big difference is setting 3-year visions with each of -- and this is into the details but it matters, setting 3-year visions by account on the consumers that we want to serve by sport and then bringing that back to 1-year plans and then to seasonal plans. And that's how you get back to driving profitable, sustainable growth between -- with the partners. And again, the team's done a really nice job. So leading the way and therein lies the opportunity in the other geos for us. We've got to get the other geos keeping pace, and we're working hard to do just that.

Our next question will come from the line of Jonathan Komp with Baird.

Maybe one more on China. Do you think the North America experience where, Elliott, we saw maybe 2 or 3 quarters of severe pressures after you came in and accelerated the Win Now actions followed by now a return to growth and healthier conditions. Is that a reasonable time line or playbook to think about China? And then just maybe bigger picture, if you are viewing some of these headwinds currently and resets more as temporary, maybe just expand on why not providing maybe 2- or 3-year out targets or a little bit more specificity around the time line to get back to double-digit margins.

Yes. In terms of China, what I said earlier is we've taken actions. We're cleaning up. We feel good about having a handle on what has happened in China and more importantly, what we must go do. And it's going to take a fresh perspective and a new approach and ultimately some new capabilities. And so -- and we're working with and through partners which, again, that's where it gets tough to put an exact date on it, but we're confident in the path forward and the team that we have in place, and we're ready to get that business moved and turned as quickly as we possibly can.

Jon, I'd just say on your timing question, we're operating in a dynamic environment for both consumers and for a global business. And we're trying to turn around our business across 3 brands, multiple sports in 4 geographies. And as a result of that, it's complicated what we're trying to do. We're encouraged by what we've been able to do in North America.

And I think we've got a clear path of what we need to do across the other dimensions of our business. But we're reading and reacting every day. And it's important right now that we've got the flexibility to be able to make the right decisions every week as we're trading the business in order to be able to establish the long-term health of our brands. And so for the near term, we're going to continue with this consistent practice that we've been doing. And as our confidence grows, we will certainly share greater insight into how we're thinking about the longer term.

Our final question will come from the line of Simeon Siegel with Guggenheim Securities.

So Elliott, just to follow-up a little bit, the North America revenue growth, it was just such a big number even before accounting for just the large Classics reset. So can you just speak to what product is growing domestically so much that is enough to accelerate that revenue growth this much and just way more than offset the ongoing reset?

And then, Matt, it feels like the growing wholesale penetration should help that operating overhead maybe structurally. So just curious if you can give us any thoughts where operating overhead goes. And then as you think about that opportunity, is the idea that you can take a portion of that and fund it back into demand creation, which has always been one of your key competitive advantage?

Yes. Simeon, thanks and also wishing you and your family a happy holidays as well. In terms of North America growth, Running, obviously, is a big piece, and it's not just growth, sell-in, what we're encouraged by sell-through. We're actually having -- taken market share. So we're feeling good about that.

Global football, soccer, we're seeing growth there. We're seeing growth in training. SKIMS as well would be another one I'd call out. And then basketball. The team is doing a really good job with basketball right now. And again, I touched on a few, but like the G.T. Future this weekend was phenomenal. And while sportswear is not growing, they've done a really nice job of rightsizing sportswear and starting to diversify the portfolio across the look of Running, which is primarily driving it. But we also have some footwear on the women's side in sportswear, Air Max Muse and the Superfly, that's doing well.

And then, of course, Jordan. I've got to call Jordan out when we speak about North America. They've done a really nice job, and we had a great sell-through of the AJ4 Black Cat. We're getting back to telling stories. By the way, that was our largest Black Friday ever. That Black Cat was launch ever. And then just recently it's not in this quarter, but the AJ11 Gamma, we had people lining up for that shoe again, which is fun to see, see kids lining up for sneakers again. So I think the team has done a really nice job of making certain that they're running a complete and balanced portfolio across the brands in sports.

Simeon, I'd just add that the growth that we delivered in North America in Q2 was certainly strong. And if you look at what our guidance for Q3, we said that we expect modest growth in North America, and you can really sort of connect the dots between the amount -- how much liquidation fueled the growth in Q3 versus what's going to be great comp full price growth as we get into the third quarter. And so hopefully, that helps you connect the dots a little bit between the second quarter and the guidance for Q3.

In terms of your question on cost leverage, absolutely correct. Growth creates leverage on the cost structure. Wholesale growth, in particular, creates meaningful growth on the cost structure led by unit growth. And you see it not only in the supply chain costs where you're shipping pallets of product to partners versus shipping 101 units to consumers, but you also will see it more broadly across our operating overhead.

We're certainly focused on continuing to prioritize our investment in demand creation. I wouldn't lead that to believe that we've necessarily decided we're going to go much higher than the 10% of revenue at this point in time because we feel like that gives us a good amount of investment to be able to continue to drive our brand forward. But if I'm prioritizing between the 2, we certainly want to have more flexible liquid demand creation to create big moments that impact consumers and to be able to activate that on the ground in key cities. And so we're going to continue to tightly manage costs on the operating overhead side. As Elliott said, we've got a number of things that we're looking at here, and we look forward to sharing more in the coming quarters.

And that will conclude our question-and-answer session and our call today. Thank you all for joining. You may now disconnect.