Welcome to our Bloomberg audiences worldwide. Romaine Bostick here in Milan, Italy, with Elliott Hill, the CEO of Nike. Great to have you here, Elliott.
It's great to be here. Thanks so much for having me in this great city.
Well, thanks for inviting me. You didn't just invite me here to Italy. You invited me to actually oversee what has become a big relaunch here of your ACG brand here at the Milano Cortina Winter Games.
Yes. Yeah, it's been part of a clearly, we led with some innovation in apparel on our Air Milano jacket. But we also use this as an opportunity to reintroduce, if you will, the ACG brand to the trail running consumer. And we thought there was no better place to do it than here in Milan when the eyes of the world were watching. But also with the backdrop of the Alps and the Dolomites. And I don't know if you saw the train that we brought in, the ACG Express, where we brought consumers and we took them to the wild, we call it, and we took them out on a trail run. And it's been a really, really fun launch for us. And I think it's done a great job of positioning the brand moving forward.
Well, you guys, Nike, I should say, has been masters at branding. You've been in the CEO chair now for 16 months or so. You've been at Nike for much longer than that. I want to talk a little bit, though, about how these types of launches, the innovation that you see, the buzz that it creates, how that actually translates into sales.
Yeah. So I think a couple of things. Number one, these moments, these sport moments are critically important to our brand and frankly, to the industry. They're tentpole moments where, again, whether it's on an Olympics and a Winter Olympics, a World Cup or a Super Bowl or NBA All-Star Game. And frankly, they're really, I think, galvanizing moments for our teams internally to make certain we show up at our best and we use those moments to take the relationships that we have with the world's greatest athletes and translate that into coveted, beautiful, innovative product as only Nike can do. And so these are critical moments for our company and for our brands. And no question, they're the moments that can help create a halo over the business side of the sport as well.
When we talk about the evolution of Nike, at your core, you are a road running company. Back the most recent quarter with the relaunch of the Miler and the Pegasus line, 28% growth in your running business. There's another aspect of this, though, that's been picking up. A report that went viral a couple of years ago about the explosion of off-road running, trail running, if you will. And ACG, I would assume, fits into that in some capacity. Have you actually sat down and kind of gone over what the market is for trail running?
No question. So when we, and by the way, it's not just trail running, it's the overall outdoor industry, if you will. And there's no question that consumers are, there is a movement to getting outdoors and whether it's in China or Europe or the United States. And so we looked at the overall outdoor market and the opportunity that exists there. And it is a, there is some crossover, but it is incremental opportunity from a branding and positioning and a revenue perspective. So we decided to go after that through the lens of trail running, which is a point of strength from us where we can bring innovation to the market and newness and freshness and decided to do it with the ACG brand because there is some awareness already around that brand and it has an attitude and that we think is new and fresh and it brings something different to the outdoor market. So we're really excited about what ACG is going to do for us long term. So we're going to see more products, you will see on this line, no question. You will see us continue to invest in the ACG brand. It's going to be around design, protection, attitude, innovation and you'll see us extend beyond trail running moving forward.
I'm curious though, ACG has been around for a long time. It started out as a performance brand to top, top of the mountain. Top of the mountain. A bunch of K2 climbers. You guys for some reason decided that you had a pair of Nike sneakers and they sent it back to Nike, said, Look, here's some feedback. Here's how we can make this better. But ACG has been through some fits and starts, and I am curious as to why there hasn't been that continuity in the brand. Was it the marketing of it? Was it the innovation or lack thereof?
No, I think with anything it comes down to positioning and I'm really excited about where the team is going to take this brand. We're calling it, we're going for the Wild Ones. So you think about the outdoor world with a little bit of an attitude and a swagger with an element and an approach around design and innovation. And so again, I'm excited for what the team has come up with and the positioning and the opportunity that lies ahead.
You've seen a lot of athletes under the age, the Nike ACG brand. Now you're sponsoring events in that space as well. There has been, I guess, some concern about this idea that a lot of what you see in the outdoor space, particularly when it comes to ultramarathons and a lot of the off-road type of racing that there's a certain counterculture to that. And how does Nike, which is probably one of the biggest sportswear companies in the world, a mainstream brand. Are you at risk of maybe alienating some of those folks who just kind of want to be on the fringe?
No, I think that is a risk if we just showed up as the big bad Nike. But I think this team and if you were able to meet the team that we've put on this, they live and breathe this space so they understand it deeply and we're trying to show up and without question, in the most authentic way from an athlete perspective. And we've seen some, as you've already pointed out, some of the greatest athletes. And how do we bring something new and different to the sport? I don't know if you saw what happened at Western States with Caleb. He shows up at the starting line. It's over 100 degrees out and he's wearing, you know, the Radical Air long sleeve top. People are looking like, are you crazy running in long sleeve? But it's about performance and innovation that helped him obviously win the race and set the second fastest time. So we're going to come at it through the lens of innovation, design and an attitude that I think is new, fresh and frankly, I believe and we believe the outdoor consumer is ready for it.
So the Air Flow shirt that Caleb was wearing got a lot of attention when you look at the outdoor space. So, I mean, there are a lot of names that are already dominant. Ultra, Salomon, Smartwool, Patagonia. Is this strategy of going for that outdoor consumer, is that actually playing offense or are you catching up to the rest of the folks?
I think we're always on the offense. We have actually have a maxim that says on the offense always. And so the team's definitely approaching it from an offensive perspective and trying to make certain that, you know, that we're coming with something new, fresh perspective. And so far, the consumer is responding extremely well to the product. And it's not just an apparel conversation. The same thing in the, I don't know if you saw the Alphafly shoe that we also launched with a fully carbon plate and something new and different to the sport.
I've seen a lot of these products. Alphafly, Hyper, I saw, I'm forgetting a couple others, the Nike Mind, all these things come out and I am curious. These are new products and they seem like risky products. And forgive me for saying this, but it seemed like for a while Nike wasn't taking as much risk. It was relying on, you know, your classics, your Dunks, you know, retro styles and such. Are you giving your team a little bit more of a leash to be able to sort of come up with these crazy ideas and try to make them into products?
I think innovation with the athlete in mind has been at the heart of Nike from day one. And so as I've come in, I am nurturing the design and innovation teams. And we have one of the world's largest sports research lab, if not the largest sports research lab in the world. And the Nike Sports Research Lab, that you are able to see that and how we nurture those teams to dream and think and solve problems and then translate that into beautiful, coveted, innovative product that the consumer wants, needs and maybe sometimes doesn't even know they need. That's what I'm trying to bring to this role and to the team is to make sure they understand the importance of it and we nurture it.
But your return, you were at Nike for three decades. You left for about four years or so. At some point, you got a call to come back and to actually be the CEO of this company 16 months roughly. Now that you've been in that chair, you talk about that Nike Innovation Lab. I remember somebody said something to me, you could tell me if this is true and forgive my French, but there was some mantra going around, some memo saying, create epic. That from you or was that from Phil Knight? Where did that come from?
I mean, I don't know if I can take credit for it. I know. So where that came from is Phil and his leadership team, Marty here today or sitting around thinking about the future and more importantly, what we need to do at this moment in time and always here at Nike. And so, yeah, I guess I can confirm that is true. That's one of the mantras coming out of that building. And frankly, I love it. I love the irreverence of it. I like the attitude of it, I like the commitment around it. And I keep telling this team, run at, don't ask for, forget our, for permission, ask for forgiveness. And they're bringing some really interesting things to the marketplace.
Right. And that translates to the consumer. The consumer, like you touched on, on Nike Mind that came out of the Nike Sports Research Lab, this idea of how to use neuroscience and reflexology, underfoot reflexology to get the athlete ready for their performance. That came out of the sports research lab. And it has now launched into the consumer. And there's been a tremendous demand for it. It was selling. I just only wish we would have made more, but it's selling out. There's the consumer is responding to it not only from what it does for them from an innovation perspective, but aesthetically how the product looks.
You spend a lot of time meeting with your athletes, meeting with your designers as well. You also have to spend as a CEO of a public company, a lot of time meeting with investors. Have they bought into it yet?
I think there's no question if you see where the stock, we've held up over the six months, the focus on sport, the focus on growth there, they understand then the portfolio that we have, three strong brands, Nike, Converse and Jordan. The focus on sport and how we're segmenting each of the brands by sport and then ultimately paying it off in 190 countries around the world is only Nike can do with the size and scale that we are.
But when I talk to analysts on Wall Street, they're relatively complimentary of what you've done, but they are still concerned about sales growth, which is still relatively flat. They're concerned about profitability, which to a certain extent is not quite there, at least not to their liking. When do you get there? When do you get back to a sustainable growth rate on revenue and more importantly, generating more profits in wider markets?
One of the things that we've talked a lot about is what is the top line growth rate with our investors and the bottom line expectations that we're confident that we'll be able to get there. We're confident that the sport offense is the path forward. Those three brands, our portfolio brands, portfolio sports, footwear, apparel, accessories and then again paying it off in the marketplace. And so the newness and freshness is working. We had some proof points in the last quarter, North America being back to growth, which was a strong result for us. So our largest reporting segment, running back to double digit growth. And then, of course, our wholesale business, which is critically important to the future of our business, to serve consumers wherever they choose to shop. Also, back to growth.
So running North America was up more than 20% overall. In North America was up 9% across the board. I want to talk about the wholesale, though. Yeah, in North America that did great. I think it was roughly about 20% as well. But there has been some criticism that maybe the sell-in that you've done is maybe too heavy into North America and not necessarily broad based across the globe, that the focus was across the entire globe in terms of wholesale side of the business.
I think the team in North America, led by Tom Petty, who's a seasoned veteran, he has the relationships, not to say no, no, no, that's BDD for correction, but he has tremendous understanding of the marketplace, the consumer. And he and his team have done a really nice job of getting back in with the wholesale partners and driving that level of growth. And you'll start to see that across the rest of the world as well. I'm confident in the leaders that we have in place and the desire for our retail partners to serve their consumers. We have a joint consumer and they want access to our brands and that relationship better with them.
I mean, Nike gravitated away from those retail partners to a certain extent back in the early 2020s. I know they kind of tried to reset under Donahoe before you then came in. When you talk about being able to sell through Amazon or Macy's or whoever else here, they're comfortable with what you're giving them selection wise, price?
Yes, I think there's no question we're having to pull a lot of our products forward and to really drive that innovation and that newness and freshness. And I think we have an opportunity around depth that we're still working through to make sure that we have the depth to drive the revenue and profits that they expect from us. And we are committed to doing that because ultimately when we're driving growth and profitability for our retailers, that's how we take market share. And that's certainly something that I am really challenging our team around, is that growth, profitability and then ultimately taking back market share.
What's the balance now between what you're doing with the wholesale partners and what you're doing with your own Nike Digital, which has seen a lot of softness, contraction, if you will? Is that just the natural transition as you try to sort of right size things, or is there something else going on?
No, no, no. So I think I talked a lot about in the five actions I talk about an elevated and integrated marketplace and really what the team now has lined up on is making certain that wherever a consumer chooses to shop for our brand, we show up in a thoughtful, meaningful way. And what does that mean? It's the consumer that shops, whether it's digital, physical owned or partner, making certain that we have the right assortment for that consumer in the right presentation, the right depth and the right level of service around it to create the overall experience. And that's what we're driving right now, and that's where our focus is.
How closely do you work with those retailers? I mean, I saw you had last over the holidays in the U.S., something with Urban Outfitters, kind of a pop up there. Are you trying to be more integrated into what your displays look like in those?
The elevation piece that I talk about is being proud of where our brand shows up and wherever that is. Again, digital, physical owned or partner. And it's not just the assortment, it is the presentation of that assortment. Because at the point of sale, when a consumer's interacting with our brand, it can't just be about the product, it has to be about the stories that we tell and the beauty of it. So there's no question that we're putting an emphasis on really elevating the premium nature of our brands in terms of being able to preserve that premium nature.
I know you've pulled some inventory. Yeah, you're trying to right size that. How much further do you have to go to get inventory levels back to a situation that are going to not cost you any money or any additional money, but at the same time puts you on a better path with your supply?
