Gabriella Carbone: Hi. Thank you so much for taking my question. Sorry about that. I want to dig in a little bit more on the running category, particularly, you know, how is your approach to this category maybe changed over the past year? And then I know you mentioned trail running. Are there any other products with this category? You mentioned scaling moving ahead, but then you’ve been seeing good customer responses that you’re excited about.
John Donahoe: Yeah, Gabriella, we’ve made running a key priority. We talked about three areas we’re really getting behind where we see huge growth opportunity that being Women’s, Jordan and running. And as you said, in running, we tend to break it into three categories. You know — and for us, it starts with road racing. That’s the pinnacle, that’s the peak. And as you know, in the past three to six months, we are dominating it through the Alphafly 3, which debuted in Chicago marathon. Kelvin Kiptum, as I mentioned in my remarks, set a world record. It’s dominating the podiums for both men and women. And that’ll actually be launching available to the public in Q3. And as we see people going into racing into the — to the Olympics, both marathon and otherwise, our performance running for racing is unmatched.
And then as trail, as you mentioned, that’s the fastest growing segment, grew 20% for us. And we do what we do. It’s innovations driving it. So, the Ultrafly trail, which is the first trail shoe with a carbon fiber plate, that’s again very NIKE, very classic NIKE innovation, performance innovation, along with Peg Trail and Zegama, trail is growing fast partly because trail running is growing. But increasingly, trail shoes are becoming lifestyle shoes. They’re being worn on the streets, particularly in EMEA and in Europe, but also around the world. So, we’ll continue to invest in great product there as well as, as I said in my remarks, at our ground game. And then in the road running or every day running category, this is the area where we have the most work.
And so we have good product. We had some nice wins in the quarter, the Structure 25 and the Vomero 17, which were our latest updates for everyday runners, they had positive response from consumers and specialty runners, but we’re very focused on building out our ground game with everyday runners. And that means getting into the RSGs, back into the RSGs and being present where runners are, whether it’s — not just at the marathons where the elite runners are, but the everyday races in the key cities around the world and the running communities. And you’ll see us, we are steadily investing in that and building our presence there. And as we look forward in terms of driving scale in everyday running, as I mentioned earlier, we’re focused on Pegasus.
That’s our largest franchise, one of the largest franchises in running history period. And we’re very excited about Peg 41 and updates across the Peg family which are coming in calendar ’24. So, a lot of focus. And we’ll report, you know, in road every day running. It’s going to be quarter by quarter. Steady progress, steady progress, steady progress toward our goal.
Matthew Friend: I’d just add too that we’re excited about the product portfolio we have below $100. And that product offering that’s coming to market in the coming quarters will also enable us to get back on our front foot at an important price point in both — across in — multiple markets across the world.
Operator: Your next question comes from the line of Lorraine Hutchinson from Bank of America. Please go ahead, your line is open.
Lorraine Hutchinson: Thank you. Good afternoon. I wanted to focus on the China margins for a minute and was just curious outside of the FX hit that you’re facing, do you see an opportunity to drive margins in China back toward pre-COVID levels or has something changed that makes that market less profitable?
John Donahoe: Well, Lorraine, let me first just step back and look at how we see China for a minute and then we’ll talk about margin because if you don’t have a great business, it’s hard to have great margins. And, you know, the fact is we feel very good about our position in China and our ability to compete. And that has not changed from 90 days ago. In China, sport is back. The China consumer is back out on the street with a real focus on active and healthy lifestyles. You see the government encouraging sport and healthy lifestyles and Gen Z is the most active generation ever. So that’s a tailwind for our industry. And so even in the face of macro uncertainty, our brand is continuing to resonate. And we’re doing what NIKE does so well, which is taking global products, global innovations, global brand, global athletes and powerfully combining them and connecting them to local culture and local sport and local consumer moments.
And a wonderful example last quarter is that Eliud Kipchoge, the world’s best marathoner, did a tour through China right before the China — the Shanghai marathon. As you know, we sponsored the Shanghai marathon. And sure enough, we dominated shoe counts in the top hundred. We swept the women’s podium. And that’s bringing energy and running and the lifestyle of running. And it’s growing the market. I mean, I think we’re in a great percent. We, yes, there’s some macro headwinds, but we feel very good about our position and our ability to compete.
Matthew Friend: Yeah. And on the profitability side, what I’d say, Lorraine, is that this quarter, if we exclude the impact of FX, our EBIT grew faster than revenue in greater China. And so I think it’s a great proof point that we can start to expand margins and move back towards where we were prior to the pandemic. I did mention that the marketplace is highly promotional and we’re seeing that especially on digital. And so in the near term, the promotional nature of the marketplace is holding us back. But what I would tell you is that our inventory units are down versus the prior year. Our full price realization is continuing to improve in our stores and our partner stores. And, you know, as we look at the environment that we’re in right now, we’re not going to race to the bottom on digital.
We’re going to focus on prioritizing brand health and brand strength. And right now, the digital marketplace, in particular, is a — is at the highest of promotional activity. And so an element of us revising our guidance for the balance of this year is an acknowledgement that we don’t want to chase that. That’s not who NIKE is. We’re going to focus on innovation and newness and building a strong business in the marketplace on things like the basketball products that John referenced. We’re super excited about bringing Kobe to market in greater China. The Jordan business continues to have tremendous resonance there and that’s how we’re going to grow and continue to compete in that market.
