When we look at long-term growth, there are eight things that define who we are, what we do, and how we operate to reach our potential.

Transcription

1 IT STARTED WITH A HANDSHAKE. It strted with hndshke. Two visionries, Bill Bowermn nd his University of Oregon runner Phil Knight, thought they could do better job of designing nd selling shoes to runners. They were right. Tody Nike is the world s leding innovtor in thletic footwer, pprel, equipment nd ccessories. Along the wy, Nike helped the world s best thletes win rces, gmes nd chmpionships. And the thletes helped Nike design nd mrket the products nd brnd tht chnged the fce of sports. Together we continue to push through the boundries of wht is possible. We re constntly t work creting growth opportunities tht set Nike prt from the competition nd provide vlue for our shreholders. Nike is mny things product designer, consumer goods mnufcturer, brnd communictor, leder in corporte responsibility, portfolio of uthentic nd relevnt brnds. Behind every corner of the Nike business is singulr focus innovtion. It is our nture to innovte. It is the fuel tht powers our performnce. When we look t long-term growth, there re eight things tht define who we re, wht we do, nd how we operte to rech our potentil. Let s tke look t these eight things.

2 NUMBER 1: WE LOVE SPORTS. Nike s mission sttement is, To bring inspirtion nd innovtion to every thlete in the world. And s co-founder Bill Bowermn once sid, If you hve body, you re n thlete. This is how Nike sees the world it defines the endless possibilities for humn potentil, sets the tone nd direction for the numerous long-term growth opportunities we see, nd continues to inspire new genertions of thletes nd consumers. Sports is universl lnguge. It trnscends cultures, borders nd brriers. It s n enduring pssion for consumers nd source of humn spirtion nd empowerment. Sports teches us bout life individul effort, temwork, respect, how to win, how to lose, how to compete intensely nd ply firly. Sports inspire, mze nd rewrd us in good times nd in bd. Sports is gret business to be in, nd n even better business to led.

3 NUMBER 2: WE ARE GLOBAL. From sleepy little town in Oregon, Nike hs grown into the world s lrgest thletic footwer nd pprel compny. We strted with shoe nd t-shirt. Tody we re diversified nd complex globl orgniztion: We sell our products in 170 countries. We hve more thn 30,000 worldwide employees. We hve dozen brnds tht serve more thn 30 mjor sports nd consumer lifestyles. We work with 600+ fctory prtners. We serve millions of consumers with thousnds of products. From the beginning, our business model ws built on prtnerships thletes, tems, retilers, mnufcturers, nd supply chin providers. We work with the best of the best ll over the world. And we do it ll with singulr purpose to serve the needs of our globl consumers. Since 2005, more thn 50 percent of our revenue hs come from outside the U.S. With ledership positions in estblished mrkets like the U.S. nd Western Europe nd in emerging mrkets like Chin nd Brzil, we believe we hve tremendous nd unique opportunities to grow.

4 NUMBER 3: WE ARE A STRONG PORTFOLIO OF BRANDS. When most people think of Nike, they think of the Swoosh. It s one of the most recognized symbols in the world. The brnd it represents is our strongest sset. We ve been very strtegic in dding dimension to the Nike Brnd, mking it powerful nd flexible engine for growth. Using the sme kind of thoughtful nd deliberte strtegy, we ve creted portfolio of brnds cpble of reching cross multiple sports, lifestyle ctegories, nd price points. In ddition to the Nike nd Jordn brnds, our wholly-owned subsidiries include Cole Hn (luxury shoes, hndbgs, ccessories nd cots); Converse (thletic nd lifestyle footwer, pprel nd ccessories); Hurley (ction sports nd youth lifestyle footwer, pprel nd ccessories); Nike Golf, nd Umbro ( leding U.K. bsed footbll/soccer brnd). Ech strengthens our bility to mximize our rech nd relevnce worldwide. Ech brnd speks to different, clerly defined consumer, which diversifies opportunities for long-term growth. And even s we benefit from the diversity of our brnd portfolio, we re lso leverging our resources nd core competencies in product, mrketing, nd opertions to drive consistent growth nd profitbility.

5 NUMBER 4: WE LEAD WITH INNOVATIVE PRODUCT. True innovtion isn t just new nd different. It s new nd better. It s surprising. Sometimes it s shocking. Nobody does tht better thn Nike. Yet we know you cn t noint yourself s innovtive the consumer ultimtely decides tht for themselves. Tht s why we spend so much time with thletes nd consumers listening, observing, studying nd then creting products tht enhnce thletic performnce nd overll consumer experiences. It s our connection to thletes nd consumers tht llows us to crete gme-chnging technologies nd products. Innovtions like the Nike Flywire support system, Lunrlite fom cushioning, Hyperdunk bsketbll shoe, new genertions of Free footwer, nd the new Triner 1 shoe continue to set the stndrd for the industry. Much of this insight into performnce hppens t the Nike Sport Reserch Lb. It s the premier center for dvnced R&D in biomechnics, exercise physiology, engineering, industril design nd relted fields. We lso rely on reserch committees nd dvisory bords mde up of thletes, coches, triners, equipment mngers, orthopedists, poditrists nd other experts who consult with us nd review designs, mterils nd concepts for product improvement. Just like in sports, tlent cn tke you only so fr. You hve to put in the hrd work. Tht s how we pproch product innovtion. Our tlent nd work ethic re key to our performnce nd continued success.

6 NUMBER 5: WE CONNECT WITH CONSUMERS. Connecting with consumers is the single most importnt competitive dvntge in business tody. And nobody does this better thn Nike. Deep meningful reltionships with consumers re t the center of everything we do. The dys of one size fits ll re long over for both products nd brnds. Consumers tody re smrt, sophisticted nd demnding. They hve more choices nd more ccess to those choices thn ever before. They vlue uthentic brnds tht interct with them on n intensely personl level. The converstion cn t be one wy. Consumers wnt to be surprised nd excited by their fvorite brnds, but they lso wnt to ply prt in defining them. Connecting with consumers is so importnt t Nike tht we reorgnized the Nike Brnd round seven ctegories tht we believe represent the lrgest growth opportunities: ction sports, bsketbll, footbll (soccer), men s trining, running, sportswer, nd women s trining. These businesses represent the vst mjority of our revenue, nd we believe will generte the mjority of our growth opportunity over the next five yers. Our ctegory tems re completely focused on their trget consumers. They spek their lnguge, they see the world through their eyes, nd they re completely t home in their culture. Being inside the world of our consumers gives us the bility to crete compelling product, to tell their stories in n exciting wy, nd deliver experiences t every level, from one-on-one reltionship to globl experience like World Cup or the Olympics.

7 NUMBER 6: WE MANAGE THE MARKETPLACE. As Nike hs evolved, so hs the consumer. They connect nd collborte with ech other ll over the world. As retil evolves to meet these chnging needs from thletic specilty to deprtment stores old, predictble formts tend to blur the line mong products nd brnds. So we sk tougher questions. Wht kind of choices does consumer hve? Wht type of experiences does consumer respond to best? We see this s opportunity for Nike nd our retil prtners. As the industry leder, we hve the bility nd the responsibility to tke the industry nd our prtners someplce new. Our retilers wnt Nike to led nd tht s exctly wht we re doing driving innovtive product nd brnd presenttion into the stores of our wholesle prtners. We do this by working with our wholesle prtners to crete differentited retil destintions nd product ssortments tht re tilored to their consumers. We do it by investing in direct retil concepts tht elevte our products nd our brnds online nd in store. And we tightly mnge the distribution of our products to blnce supply nd demnd, mintin the strength of our brnds nd the profitbility of our business. Wherever the consumer intercts with Nike it is n opportunity for us to shre our products, our stories nd our pssion in wy nobody else cn.

8 NUMBER 7: WE OPERATE WITH EXCELLENCE. (PAGE 1 OF 2) As Phil Knight, our co-founder nd Chirmn, once sid, It s not single product model, or single mnger, or one d, or single celebrity, not even single innovtion tht is key to Nike. It is the people of Nike, nd their unique nd cretive wy of working together tht mkes Nike specil. If our products, brnds, nd mrketplce mngement re the engines of profitble growth, operting with excellence is the trnsmission tht converts revenue growth into profitbility nd shreholder vlue. Our finncil model is built on expnding profit mrgins nd incresing cpitl productivity. This gol demnds tht we deliver on the fundmentls tht crete vlue: Driving top-line revenue Expnding gross mrgins Leverging SG&A expenses Focusing on the highest return opportunities Profit mrgins re dynmic globl eqution nd function of mny fctors some we control nd some we do not. We re deeply committed to driving productivity on those fctors tht we do control. Expnding profit mrgin strts with gross mrgins, where we ve worked to reduce product costs by pring down the number of styles, eliminting wste, nd stremlining our sourcing bse. Additionlly, we ve been mnging our supply chin to reduce closeouts nd improve their profitbility. And we ve become much more strtegic in mnging our product mix nd pricing to increse both revenue nd profitbility.

9 NUMBER 7: WE OPERATE WITH EXCELLENCE. (PAGE 2 OF 2) SG&A (selling, generl nd dministrtive) cost is n re where we ve mde good investments over the lst few yers, nd those investments hve delivered industry-leding growth in revenue, mrket shre nd profitbility. Tht sid, the current mcro-economic environment presents unique opportunity for us to reset our business both opertionlly nd fundmentlly mking strtegic investments to deliver consistent, profitble growth for the future. An opportunity we won t miss. While we certinly put gret del of focus on the P&L, we never forget tht csh is king. Operting with excellence mens incresing the productivity of the cpitl our shreholders entrust to us. We tightly mnge working cpitl by keeping our inventories len nd proctively mnging ccounts receivble. We deliver solid return on our cpitl investments being creful not to scrifice long-term growth for ner-term gin. From cpitl structure stndpoint, we work to consistently increse dividends nd pyout rtios. Over the pst 10 yers, Nike hs returned $5.5 billion to shreholders through stock repurchses nd dividends.

10 NUMBER 8: WE ARE COMMITTED TO GROWTH. And finlly number eight we re committed to consistent, profitble growth over the long term. From FY05 to the end of FY09 we verged 9% growth in revenue, 12% growth in EPS, nd delivered 60% increse in stock price while the S&P 500 verged down 18%. Tody s environment continues to chllenge every compny to leverge their core strengths while dpting quickly. At Nike, we do both by focusing on wht we do best crete gret product, tell compelling stories, nd seize every opportunity to increse competitive seprtion. We re strong nd competitive leder in our industry cross every dimension by geogrphy, by product type where the innovtion drives us nd now, nd most importntly, by sport performnce ctegories where we hve the most focus. When we do these things successfully, we re convinced over time, we will be lrger, more profitble, nd ultimtely more vluble compny.