And so as you see our gross margins expanding in the second quarter on an operational basis, excluding the impact of FX, we’re up 150 basis points and are really encouraged as we think about what we delivered in the first quarter, the improvements we’re guiding to and believe we can deliver in the second quarter and then the way that will accelerate through the balance of the year. So as we get into the second half of this year and we think about our gross margins, we’re going to start to see even more impact from ocean freight because those are rolling in midway through this quarter. We’re expecting to see lower product costs in the second half and our FX headwinds are going to abate a little bit as we get into the back half of this year. And so some of those elements will drive increasing margin expansion as we carry through the balance of the year.
I think the last part of your question was on China and profitability. What I would just say is that we know from a long history of managing this business that when you have a healthy marketplace and you’re driving full price sales and you are driving productivity in your retail formats, you’re — you’ve created the environment that’s ripe to drive profitability improvement. And as we look at the momentum that we’re seeing in Greater China, another quarter of double-digit growth, we’re increasingly confident that we’re going to begin to rebuild towards higher profitability in that marketplace. That’s on the product and marketplace side. And then also I referenced an example where we’re lowering our supply chain costs in Greater China. And so we feel we feel quite good with that as well.
Our reported numbers in China are going to be challenging for the next couple of quarters because of foreign exchange headwinds. And so we’ll continue to try to highlight the opportunities and what we’re driving from a profitability perspective, but that’s one of the reasons why our EBIT was down this quarter in Greater China as foreign exchange headwinds as a result of the strength of the U.S. dollar, definitely has created a bit of pressure in the short term. But that’s – we’re focused on what we can control and continuing to drive a healthy, profitable business in that market and believe the fundamentals for long-term growth and profitability are strong for NIKE.
Operator: We’ll go next to Aneesha Sherman, Bernstein.
Aneesha Sherman: Thank you. So as a result of your direct-to-consumer strategy, you’ve shifted, I guess, more than 20 points of sales mix from Wholesale to NIKE Digital over the last seven or so years. You’re seeing shoppers returning to stores this year. You did make some adjustments to adding physical distribution points. Do you feel like you are in enough physical retail doors today to appeal to a rebalancing of shopping habits? And then a quick follow-up on overheads. You talked about lowering some of the specific costs of direct split shipments and fulfillment costs. Can you give us more color on the investment cycle are on the investment cycle to support the direct business as well as centralized investments like ERP and kind of where you are this fiscal year and next fiscal year? Thank you.
John Donahoe: Matt, I’ll take the first part, maybe take the second. So Aneesha, again, our entire marketplace strategy is driven by giving consumers what they want, when they want it, how they want it. That starts with our digital properties, our own direct retail, which Matt will talk about in the second part of the answer, but wholesale plays a really important role for us to get the breadth and depth of access to consumers and consumers access to our products. And so as you know, we’ve really sharpened our wholesale focus over the last few years to focus on fewer multi-brand partners that where we’re investing in elevated retail experiences and connected digital membership at scale. And so that’s DSG, JD, Zalando, our partners in China.
We’ve got a great launch with Pro Direct, Hibbett will come online with connected membership in October. And so we think there’s a lot of growth opportunity with those strategic wholesale partners. We’re also putting increased attention on our neighborhood partners who are authenticators. They help authenticate both sport and lifestyle and drive energy and local connections. And then as we said, where we see gaps, whether it’s in a price point or a gap in a product segment will selectively add wholesale partners in different geographies and in different segments. And this will be a dynamic thing. I mean we’re led by the consumer. We have the blessing of the strongest direct connections in the industry. And with direct connected membership, we can be indifferent about which channel And Matt, you’re going to talk a little bit about, I guess, the margins are direct, but the Nike Rise our direct monobrand doors Nike Rise and our well collected doors are doing quite well, and we feel like we’re getting our concept right now that we have seasonal right assortments coming into them.
