Pamela Catlett - VP of IR Mark Parker - CEO Don Blair - CFO Charlie Denson - President of the Nike Brand

Robby Ohmes - Banc of America Securities Jeffrey Edelman - UBS John Shanley - Susquehanna International Group Margaret Mager - Goldman Sachs

Thank you, good afternoon everyone. Thank you for joining us today to discuss Nike's fiscal 2007 fourth quarter results.

We issued our results about an hour ago, if you need to reference them, you can find our press release and the reconciliation as the operator mentioned on our website, as well as the prepared remarks at the conclusion of the call. Joining us on today's call will be Nike Inc.

CEO, Mark Parker; followed by Charlie Denson, President of the Nike Brand; and finally you will hear from our Chief Financial Officer, Don Blair who will give you an in-depth review of our financial results. Following their prepared remarks, we'll take your questions, as it is year-end we have a lot of ground to cover.

So, we'd appreciate you limiting your initial questions to two, so that we could allow as many of you as possible to ask questions. In the event that you have additional questions after your first two, we'd ask that you please re-queue and we'll do our best to get back to you.

Thanks for your cooperation on this, and it's my pleasure now to introduce Nike Inc. CEO, Mark Parker.

Thanks Pam, and welcome everybody to our year-end call. We just finished another strong year at Nike, and let me start with the big numbers.

Net revenue for the quarter was up 9%, that's 23 consecutive quarters of year-over-year revenue growth. For the year, we added nearly $1.4 billion of incremental revenues, total of $16.3 billion, up 9% year-over-year.

Global futures are up 11% on a constant dollar basis. EPS grew 34% for the quarter and 11% for the year, even as we absorbed over a $140 million of incremental expense under new stock option accounting rules.

All of this is in line with our commitment to deliver consistent profitable growth. The Nike Brand had a very good year, every region saw fiscal year revenue and futures increase.

More on this from Charlie in just a few minutes. The Nike subsidiary had a tremendous financial year growing revenue 16% on the year.

The big story here is Converse, which continues its white hot performance. Revenue increased 23%, PTI increased 133%.

Chuck Taylor, also our franchise, continues to have terrific sell-through of every model, whether we design it or consumers customize it for themselves. In fact Q4 was the biggest global sales quarter ever for Converse.

We just opened a branded space on Carnaby Street in London to tremendous consumer response. And we expect the continued international expansion of Converse to be just as successful.

Next year is the 100th anniversary of Converse, so you can look forward to some special concepts to pop up in celebration of the brand. Clearly, we see Converse continuing to deliver strong growth.

NIKE Golf continues to perform exceptionally well. We extended our leadership as the world's number one golf apparel brand.

We moved into the top three brands and drivers in the US and finished the 2006 PGA Tour with the most wins in drivers, irons, fairway woods and wedges. On the year revenue from NIKE Golf grew 12% and pre-tax income grew 33%.

In total, our six subsidiaries delivered combined annual revenue of $2.3 billion, and PTI essentially doubled to $304 million. We saw record revenues in PTI for Converse and Hurley, record revenues for Cole Haan, and record PTI for Bauer NIKE Hockey.

Every sub as a team and the tool they need to accelerate their performance and collectively contribute 25% of our portfolio growth over the next four years. I am very bullish on the subs.

To convert our financial performance to value for our shareholders, we continue to optimize the business. We delivered $1.6 billion in free cash flow from operations last year, up almost $300 million versus prior year.

By deploying cash effectively in fiscal '07, we increased dividends 20%, bought back 975 million stocks and increased ROIC 80 basis points, excluding the expense of stock-option. I said a year ago that, inventory levels were unacceptable, that they would improve over the fiscal year and take the rightful place relative to revenue in futures growth and we've kept that promise.

For Q4, inventory growth was 2%, a decrease from the 15% year-over-year growth we had last year and far below, our rate of revenue growth. Another big part of our growth strategy is our focus on retail.

We’ll talk for a while now about retail consolidation and the effects of sameness in the malls. I think any lingering resistance to change in our industry is gone.

We are jumping on that opportunity to lead change. We've had a very productive year with our wholesale partners, exploring new ways to more effectively alleviate and differentiate their stores.

We are moving ahead with Nike-owned concepts to bring an entirely new experience to our consumers and you will see some of those concepts come to live in early spring. And, expanding our digital footprint, we're building and tapping into online communities based on the passion for sport.

We are expanding the tools consumers used to customize their products online. We are going to use our digital brand tools to do what we did with traditional advertising.

To innovate, entertain elite consumers to products that only Nike can create. Retail, both partner and direct, physical and digital will continue to differentiate Nike from our competitors, deliver premium experience to consumers and challenge and energies the industry.

Our performance and our goals are both based on our exceptional management agility. As we move into the New Year, we are reorganizing the brand into high growth category, intensifying our focus in high growth cities, countries and regions, implementing a new vision for energizing retail through our partners and through our Nike-owned concepts and strengthening our leadership position in corporate responsibility.

We are accompanied with a lot of confidence and that doesn't happen by accident or good luck. We got here because we take a total performance approach to growth, by striving to be the best-in-class in every part of the business.

We have a lot of competitive advantages, and behind them all is our relentless pursuit of performance and innovation in product. That's something either you have or you don't.

You can't buy it, you can't take it, all you can do is live it and strive to get better at it everyday, which is what we do. To end where I started we had a really strong year and we are well on our way to reaching our goal of $23 billion in revenue by fiscal year '11.

Well our performance is outpacing that of the industry we do not operate based on a GAAP between Nike and our competitors. We're focused on a GAAP between Nike and our potential because that's where real growth and true leadership happens.

Now, I'll turn it over to Charlie for few comments on the power of the Nike brand.

Thanks Mark. And how about those organs they deal in.

Back-to-back National Championships, congratulations to one of the local teams. I wanted to start by picking up something Mark mentioned, and that's the retail environment we are in.

I think the challenges of consolidation and lack of distinction are clear to everybody, but we've been talking about these issues for a while now. Our position is always been that of leadership in creating differentiation.

Athletics especially had become the journalist of the industry. We think it’s especially critical to put back into athletic specialty.

At the same time, we believe that the Nike brand has an opportunity to be better representative at point of sale and we've announced our intention to invest here. A big part of that leadership will come out of our category alignment.

We now have these teams and leaders in place. The teams have relocated and the leadership, products, marketing and operational support are all sitting together, forming the beginnings of a portfolio of a world class team.

And I have to say, this is one of the most energizing things we have done around here in quite some time, we have business plans being reworked, new consumer concepts beginning to take shape, and we've already started to create category of destination formats. An example, is our House of Hoops concept with Foot Locker stores that combine NIKE Basketball, the Jordan brand and Converse in a way that will create a new level of excitement for consumers here in the US.

It's an important first step in rolling out a series of new ideas that will impact specialty retail and influence the entire industry. Let's stay with basketball for a minute.

The take outside the company is that the US basketball business is underperforming compared to its exponential growth from few years ago. Well, that may be true for now, but we think its only temporary, basketball is a sports and cultural phenomenon, it is not going to go away anytime soon.

Inside Nike, we are very excited about the potential of basketball. The game has gone global and so is the business, there is tremendous passion for basketball in places like China, Taiwan and across Europe.

Non American NBA players, Dirk Nowitzki, Tony Parker and Manu Ginóbili, are bringing the game to a new generation of players and fans everywhere. In China, there are millions of kids playing basketball today, and we are just beginning to establish a relationship with them.

So the potential is huge. Here in the US, we hold home court advantage with the most exciting players in a game, LeBron, Kobe, Amare Stoudemire and Steve Nash to name a few.

There is nobody more entrenched in the power and future of basketball than Nike and we are excited about the direction of the game and the business of basketball around the world. Now let's go to soccer.

This is a category where footwear innovation drives competitive success and we feel great about our new product launches as well as our innovation pipeline. We just launched the fourth generation of our Total 90 boot three weeks ago, and is generating great response from both consumers and retailers.

We brought a carbon composite chassis and upper concept to the Mercurial Vapor III. Now, let me explain that in layman terms, we made the shoes lighter.

That means on average, over a distance of 10 meters, the Vapor III was 500th of a second faster than our competitors shoes. To the player at this level, the difference means an advantage of the length of one football shoe, that's huge in soccer and we'll be advancing that technology for the Euro Champs in 2008.

And by the way, as we look forward, our futures numbers are up strong double-digit. In running, Nike Plus continues to expand beyond even our own expectations.

The Bowerman Series, it continues to catch bar, up 20% globally year-on-year. Then the Mercurial was one of the top selling shoes in running specialty shops this month and we received nine Editor's Choice Awards from Runners World Magazine over the last 18 months, including the International Shoe of the Year, the Air Pegasus.

Even with all that, the most exciting part of the running story doesn't come from the US, but from Europe, specifically Germany. On behalf of the running business on the continent, Nike is the fastest growing performance brand in running in Germany, and we are now number two after grabbing four points of additional market share in this last year.

We do plan on being number one. I have been around this place for a while and I have never seen our teams more excited and energized than they are today.

Around the world, we continue to see tremendous opportunity in the key geographies. The US continues to deliver consistent growth.

We had $6 billion in revenue for the first time ever. Footwear had its first ever $1 billion quarter in Q4 and for the year, apparel passed the $1.7 billion mark for the first time.

It was led by strong sell through of performance products, like our new Sports Essential line. We are very pleased with the Asia-Pacific business, especially China, where revenue increased 29% in fiscal '07.

We are gearing up for the Olympics; but Beijing is just the beginning. We believe that by 2009, China will be our second largest market in the world.

Our latest consumer data for China indicates that we gained about four points of combined footwear and apparel market share in the last year to add to our already substantial lead. In Japan, we are seeing some improving trends.

The team has done a lot of work over the last 18 months to improve our business and brand position, reduced discounting, a cleaner marketplace, lower inventory levels and increased futures and sell-throughs are all signs of an improving environment. And, in our American region, the big news is that in fiscal year '08, we will own our Brazilian apparel business rather than working through our licensees and we are very optimistic about the impact of that new distribution model.

And in Europe, our EMEA region is bouncing back; every country in the region saw growth in their futures orders. Up an aggregate of 12.5% in real dollars, up over 3 percentage points from our last reporting and we cracked $1 billion in pre-tax for the first time.

It has taken some time here, but our discipline and patience are beginning to pay off. We are seeing a much cleaner retail environment across the region.

In short, we've had a great year and we are off to a good start for '08. I believe that we are ideally positioned for growth.

Our category focus is amplifying our connections with consumers, and the communities that they live and work in, and bringing a sharper focus to how we prioritize our business. Mark spoke to our inventory levels, which positioned us well to grab market share in the short-term, and to leverage the power of our category focus to lead marketplace expansion in the long-term.

And we have great agility in the way we balance our portfolio of businesses to sustain global growth. Now, I am going to turn it over to Don, to give you some detail on the numbers.

Thanks Charlie. As Mark told you earlier, we delivered another year of strong profitable growth in fiscal 2007.

For the year, revenues grew 9% over $16 billion, and we delivered double digit EPS growth, even after the change in stock option accounting. Our balance sheet is stronger than it has ever been, and with futures orders up double digits, we brought great momentum in our affiliated brand businesses.

The Nike portfolio is well positioned to deliver continued growth in fiscal '08 and beyond. Revenues for both the fourth quarter and fiscal year grew 9%, with two points of growth from currency changes.

All three of our product business units, and all four of our geographic regions delivered revenue growth for the year. Revenues for the businesses reported as other, grew 16% for the year and contributed two points to our overall revenue growth.

Futures orders scheduled for delivery from June through November 2007, grew 12% versus last year, as all regions reported strong growth. Excluding currency changes futures were up 11%.

Diluted EPS for the quarter were $0.86, 34% higher than last year. As expected, EPS growth for the quarter was boosted by comparisons to prior year earnings, reduced by world cup demand creation, and the Converse arbitration ruling.

For the year diluted EPS were $2.93 up 11% versus fiscal 2006. Excluding the impact of stock-option accounting and the Converse arbitration, EPS would have grown 15% for the year, within our target growth range.

Gross margins for the quarter were flat to the prior year, as initiatives to improve gross margins offset higher product cost in Asia and higher closeouts. For fiscal 2007 as a whole, gross margins were slightly below last year.

For the full year, reported SG&A grew 12% and as expected the timing of demand creation spending and the change in stock-option accounting created significant swings in SG&A growth over the course of the year. Excluding the change in accounting for options, SG&A grew 9% in line with revenue growth.

In fiscal 2007, we delivered $1.6 billion of free cash flow from operations and paid out $1.3 billion to our shareholders in the form of dividends and share repurchases. For the 12 months ended May 2007, our return on invested capital was 22%.

Excluding the change in stock-option accounting our ROIC increased about 80 basis points versus the prior year. So, with that recap of our consolidated performance, let me now give you some additional perspective on our results.

In our European region, which includes the Middle East and Africa, fourth quarter revenues increased 12% with 9 points of growth from currency changes. Currency neutral footwear and equipment revenues increased 4% and 10% respectively, while apparel revenues increased only slightly versus a World Cup year in 2006.

For the year, revenues for the region grew 9% with 6 points of growth from currency. On a currency neutral basis, all countries in the region except the UK and France posted higher sales.

As a group, the emerging market countries were up over 30%, driven by strong results in Greece, Russia and Turkey. After a period of challenging conditions in UK and France, we've begun to see tangible signs of improvement.

Revenue growth accelerated in the second half of fiscal 2007 and futures orders are up 12%, driven by growth in every major country. Fourth quarter pre-tax income for the European region grew 29%, reflecting leverage from lower demand creations spending, as well as stronger European currencies.

For all of fiscal 2007, the region delivered pre-tax income of over $1 billion, up 4% versus the prior year. In the Asia Pacific region, fourth quarter revenues increased 7% with 2 percentage points of growth from currency.

Currency neutral revenues for footwear and apparel, both grew 5% and equipment advanced 6%. For the year, reported revenues grew 11% with one point of growth from currency.

For the year, most countries in the region reported double-digit sales growth on a currency neutral basis. China revenues increased over 25% and continue to be the primary driver of the region's increased revenue.

Excluding changes in the value of the Yen, revenues in Japan, were up slightly for both the quarter and full year and we continue to see encouraging signs of return in that market. Pre-tax income for Asia Pacific grew 37% for the fourth quarter, reflecting the timing of demand creation spending and expanding gross margins.

For the fiscal year, pre-tax income for the region grew 17% to $484 million as revenue growth and better gross margins more than offset investments in China and Korea. The Americas region reported flat revenues for the fourth quarter as top world cup comparisons and softness in Brazil offset positive trends elsewhere.

For the year, revenues grew 5% with one point of growth coming from currency changes. Growth in all other countries in the region offset softer results in Brazil.

For fiscal 2008, we expect to return to growth in Brazil. We're seeing some positive signs for footwear and as Charlie mentioned, we've begun shipping apparel for the fall season following the takeover of that business from a licensee.

Fourth quarter pre-tax income for the Americas region grew 20%, primarily as a result of lower demand creation spending versus last year's World Cup campaign. For the year, pre-tax income grew 9% to $187 million driven by higher revenues in gross margins partially offset by investments in demand creation and infrastructure.

And that brings us to the USA. Fourth quarter revenue for the region grew 10% in part reflecting the benefit of shipment timing across quarters.

Sales at Nike-owned retail stores in the USA grew 16% for the quarter and comp store sales at Nike first quality stores increased 8%. For the full year, revenues for the region grew 7% as 9 of our top 10 wholesale accounts grew.

Futures orders also increased 7% versus a year ago. Revenue for US footwear grew 9% in the fourth quarter reflecting double-digit growth in units and the mid single-digit decline in average price per pair.

The reduction in average price per pair was driven by a shift in mix to lower price kids and sandal styles, as well as a higher percentage of closeout sales. For the year, US footwear revenues grew 6% driven by high single-digit growth in units and a slight decline in average price per pair.

US apparel revenues rose 11% for the quarter and 8% for the year on strong growth from performance and team apparel, partially offset by softer revenue from sports culture styles. US Equipment posted fourth quarter revenue growth of 23%, driven by strong growth from our repositioned sock line and higher sales of team sports equipment.

For the year this business grew 8%. Pre-tax income for the US region grew 20% in the fourth quarter, bringing full year pre-tax income to $1.3 billion, up 4% for the year.

Favorable timing of SG&A spending drove strong P&L leverage in the fourth quarter. For the full year, higher supply chain costs and a larger mix of closeout sales reduced pre-tax income growth.

Fourth quarter revenues from our other businesses grew 9%, bringing full year reported revenues to $2.3 billion, up 16% versus fiscal 2006. For the year revenues at Converse grew 23% to $564 million, driven by strong consumer demand particularly outside the US.

NIKE Golf also turned in a stellar year, as revenues grew 12% to $676 million. Revenues at Cole Haan grew 8% to $471 million, driven by strong results at owned retail stores.

While NIKE Bauer Hockey, Hurley and Exeter, each grew revenues at a double digit rate, fuelled by great product and brand momentum. For the year, reported pre-tax income for the other businesses nearly doubled, excluding the impact of the Converse arbitration ruling last year and the settlement this year, pre-tax income for the other businesses grew over 40% driven by higher revenues and improved gross margins.

Fourth quarter SG&A spending for Nike Inc. grew 3%, excluding the impact of stock option accounting and currency, SG&A spending fell 2%.

For the year, SG&A spending increased 12%, excluding the impact of stock option accounting and currency changes, SG&A grew 7%, in line with constant currency revenue growth. For the year, demand creation grew 10%, currency changes accounted for three points of that growth.

The remainder was driven by advertising campaigns by Nike Air, Nike Plus and Nike Pro. Fourth quarter demand creation spending fell 10%, reflecting lower demand creation spending versus last year's World Cup campaign.

Operating overhead grew 14% for the year, five points of growth came from the change in stock option accounting with an additional two points of growth due to currency changes. Key drivers of the balance of the increase were investments in owned retail and non-Nike brands, as well as normal wage inflation and performance based compensation.

For the year, we reported net interest income of $67 million, $30 million more than the prior year. The improvement was due to both higher levels of invested cash and higher interest rates.

For the fourth quarter, other expense was $12 million, primarily due to losses on currency hedges. For the year we reported other income of about $1 million, as gains from the sale of our Oregon distribution center and the Converse arbitration settlement were mostly offset by currency hedge losses.

The combination of currency hedge losses and favorable translation of foreign currency denominated profits from our international businesses, decreased year-over-year pre-tax incomes by $11 million for the quarter and $2 million for the year. Our effective tax rate for the year was 32.2%, an improvement of 2.8 points versus last year.

The tax-rate reflects benefits from operations outside of the United States. Our taxrates for earnings from these operations are generally lower than the US statutory rate.

These benefits include the European tax agreement, finalized in the second quarter of fiscal '07. We are particularly proud of our cash flow results for fiscal '07.

Working capital management is one of the key drivers of our cash flow and return on invested capital. And in fiscal '07, we improved our cash conversion cycle by over 8 days, driven by strong management of inventory and account receivable.

As Mark noted, year-end inventories were only 2% higher than a year ago, significantly below our forecasted revenue growth for the first quarter of fiscal 2008. May 31 accounts receivable increased 5%, well below the rate of revenue growth in the fourth quarter.

So, now that we have fiscal 2007 in the books, its time to talk about our expectations for the new year. As many of you recall, we introduced our long-term financial model in 2001.

We aim to create shareholder value by delivering high single-digit revenue growth, mid-teens earnings per share growth, and improving returns on invested capital. We are very pleased with our track record over the past six fiscal years.

We've compounded revenue at 9%, EPS at 18%, and increased our return on invested capital from 14% to 22%. We remain focused on delivering sustainable growth in revenue and earnings, while continuing to use our capital efficiently.

For fiscal 2008, we expect revenue growth toward the top end of our high single-digit target range and modest growth in gross margins. As the benefits of clean inventories and continued progress on our gross margin initiatives offset cost pressures from Asia.

For the year, we expect SG&A to grow about in line with revenue. We expect to invest in demand creation to drive growth, and product sell-through and an infrastructure for direct retail and digital commerce.

We do plan to continue to leverage operating overhead spending against core functions. We are also targeting ongoing improvement in our working capital efficiency; we are planning for another year of strong cash flows, and expect to make significant purchases of Nike stock.

We'll also continue to focus on achieving tax efficiencies across our global operations. As a result, we estimate that our fiscal '08 effective tax rate will be 50 to a 100 basis points below the fiscal 2007 rate.

At this time, we expect the growth model for the first quarter to be fairly consistent with the outlook for the full year. So, in summary, we are very pleased that we've delivered another year of profitable growth in fiscal 2007, and we are committed to continuing to do so in fiscal 2008 and beyond.

So, now we'd be happy to take your questions.

Thank you. Two quick questions, the first question, in the futures orders, can you give us the sort of the ASP break out for the US and for Europe?

And then, my second question is, can you give us for the US futures any sort of sense on the relative strength by channel? Thanks.

Well, on the futures, Robby, we are seeing still some slightly lower ASP’s on the futures order book, and as we said earlier, most of that’s really a mix driven impact. We are seeing pretty much consistent performance out of the very top end of our price range.

But we are seeing very strong growth at our products like kids and as I said our sandal business has been really strong. So, combination of those mix impacts, we are seeing a little bit of lower ASPs worldwide.

And then future?

Well, and then the other question was channel perspective.

Yeah, Robby this is Charlie. I have a channel breakdown in front of me.

I would say that it's pretty relatively strong across the board. In the US, we got strong performance in every channel.

So, we've got people that are continuing to grow at a great cliff and then obviously there is a few within each of the channels that are, I wouldn't say they are down, but they are not growing as fast. Pam might be able to give you some of the exact channel breakdowns after the call.

I don't have anything in front of me, right now.

And just one last quick follow up, the category alignment that you guys are going through, when should we be thinking about when that would start to benefit your numbers?

Well, that's a great question and we think it's starting to benefit as we speak in the way we are approaching the business and some of the decisions that we are making. That the first full blown category led seasonal initiative will probably come to market somewhere around spring '09 or fall '08.

But there, the alignment is starting to inform our decision makings literally right up the back.

Great. Thanks a lot.

Thank you. First of all Pam, can I get the channel breakdown also--?

Charlie, first for you, as we think about the orders and as Robby asked you about the channels and we think about what you are talking about the efforts to create excitement with some of the mall based retailers. Is that embedded in some of the futures growth?

Not really, not yet, because there is really nothing out there yet with other than some announcements and some directional arrows. So, nothing is being reflected in the futures numbers as of yet.

We are still working on plans on as to what it represents over the next 12 to 18 months.

Okay. And then, Don could sort of give us a sense, why there is such a spread in the currency differential between your fourth quarter sales and first half futures?

It is the difference in the FX impact seems to like greater than that we typically see

You mean on which one are you talking about, because we've about ten?

I am sorry, European fourth quarter sales reported constant dollars and then European futures reported constant dollars. I'm sorry I hate to ask you to do this.

Can you either repeat the question for me?

Which two numbers are you trying to reconcile here? The European orders were up 12%.

Going into the fourth quarter, that's what you are saying?

I am saying at the end of the fourth quarter

Yeah, okay, 12.5% on a reported basis, right?

And on a constant dollar basis, 11% your fourth quarter revenues in Europe were up 12 and constant dollars were up 3%.

Jeff, I think I'm going to ask you to see if we can take this one to a different conversation, because I don’t think there is a fundamental principal involved here. But, I am not sure I can give you a good answer.

I am not sure I entirely I understand your question.

Okay, well, we'll follow up.

Yeah. And just to make sure that we're all clear and how we do this.

Obviously, the way we do report futures numbers on a go forward basis, as we use our estimate of what we think exchange rates are going to be, that's obviously subject to a lot of fluctuation based on where the exchange rates actually land, but that's our estimate at this point.

Okay. Thanks.

Thank you and good evening guys. Charlie, you gave us a good insight in terms of the China business, sales up in the quarter 29%.

I wonder if you could give us the same level of detail from some of your other major international markets, specifically the UK, France, Germany and Japan?

Yeah, I don't have the all the revenue numbers in front of me. I think the most important part that you are trying to get out, we've consistently talked about those markets as being challenges.

Let me take the UK and France, to start with. Futures for both countries are up, so that's a first force for a while and an encouraging sign.

I think in France, we've got two successive quarters of revenue gains, year-on-year and so we are starting to see a little bit of movement there. Our inventory situations both at retail and obviously in Europe has improved over the last reporting period, and we feel very good about that.

So we've been talking about the UK and France for a while and they take time. I feel like the French marketplace is probably in a little better shape with a little less volatility.

But the UK market shape is obviously a bigger market and it has probably a little bit more volatility right now than France based on where we are at. But both markets are improving and I feel very confident in talking about that.

As well as in Japan, I think in Japan the marketplace again, inventory levels are in very good shape, our sell-throughs are starting to improve. The promotional activity in the marketplace certainly around the Nike Brand, is really becoming very minimal and we really like our brand position and our business position right now going forward.

So, things in Japan have never really been that bad. They just haven't been as good as we'd like them to be, and I think Japan now is starting to come back in to focus with respect to what the potential of that marketplace really is reflected.

That's great to hear.

Hi, John. Just to give you the clarification the UK was down, France and Japan were both up slightly in the fourth quarter and as Charlie said, futures for all three of those markets are up going forward.

Super. Also on the forward order questions that have come up already.

Can you break down the forward order position between footwear apparel and accessories for us, at the end of the fourth quarter?

We don't usually do that John and we are not prepared to make an exception at this point.

Okay. Sometimes you do and sometimes you don't, but okay.

Then the last question I had Don is, maybe if you can clarify, you mentioned the fourth quarter comps for the first quality retail stores were up 8%. Is that just Niketown or/and may be you can just give us the comps for the outlet stores if it doesn't include those retail outlets?

Okay. Well the first quality stores for Nike includes certain other concepts.

For example we have got some women store concepts out there in the US. So that will be all of our first quality, but the overall majority of that is Niketown and the comp store results for the outlet stores were a little more challenging, consistent with many of the other outlet retailers I have seen.

But overall, our retail business, particularly on the first quality side has been very strong, and we think that's reflective of the strength of the brand.

Well, the comps in the outlet store is negative?

It was a challenging set of comp numbers, so yeah, they were negative.

Okay, great. Thanks a lot, appreciate it.

Hi, good morning or good afternoon, its Margaret Mager and congratulations on a great fiscal year Mark, your first one as CEO.

Thank you, Margaret.

I have a few questions. First if I could just focus on the US market a little bit.

Is there any inventory in the channels that needs to be dealt with at all, and how do you keep that balanced when you've got clearly disappointing results at two important customers If you could speak about that. And then secondly, could you talk about your apparel business.

And I know you said Sports Essentials is driving it, but what else is going on in apparels, how is the women's business doing and I know the Sports Essential is 40-60 cotton, non-cotton. What is your view of performance apparel that has cotton in it if you could talk about that?

And then lastly if you would please, when will Olympic marketing start to kick-in, in a significant way? Thanks.

Okay. This is Charlie.

Hi, Charlie.

Margaret, I'm trying to go to the top, so US inventory, probably the US marketplace, is probably our best managed marketplace around the world. We've got the most resources.

We have a full blown outlet store piece for the puzzle in play. And so that team has gotten pretty damn good at managing the product flow and the inventory level through the US market.

I think the key thing for us now is, again, as we continue to do well here in the marketplace and may be some of the other competition starts to struggle little bit, we've got to be disciplined and up to make sure that we keep an eye on the appropriate level of product in the marketplace. And I think, it's something that we demonstrated we have the ability to do and we will certainly do as we go forward in the future.

So, that would be the easiest and most simply to answer that first part of the question. I think--

How do you make sure, you don't over sell the customers, is there a component on that front?

Well, I think that's pretty much something, that's a little bit of what we call the art and the science. That's the art piece and making sure that we are gauging the appropriate level of demand in the market and putting the right amount of product in the marketplace to liquidate.

I think, we've over the last six or seven years, I think we've developed a pretty good discipline around that

Seems to work

And that's something that we'll continue to stay focused on and keep an eye on. At the same time, we still believe the US market place is the growth engine for us and for the most parts it's pretty healthy right now.

I mean, we got a little bit of challenge going on in the mall but overall all the channels of distribution are still pretty healthy. And I think that sometimes everybody kind of gets a little obsessed with some of the tougher information that's coming out, but overall the entire marketplace is still pretty healthy for us.

So, we feel good about the US market.

Okay.

I think the apparel business. Let's go back to specifics around what's performing, I think the thing that we feel great about right now in apparel is the move forward that we've made around performance apparel.

Both in Nike Pro and the compression part of the business as well as Nike Sports Essentials. And I think one of the things that we've really started to understand is this idea of franchised type items that have been always a very successful part of the footwear merchandising line plan, is now becoming a bigger and more important part of the apparel line planning as well.

And Nike Pro and Nike Sport, essentials are two great examples of that type of execution.

Okay, is women’s doing well?

Yes.

Yes, Pam says, womens is doing well.

Excellent. Thank you, Pam.

And then, I think it won’t be the advertising, we will start to gear up and back half a little bit. But with the games, it will be pretty much the summer timeframe when things will really heat up around the world.

So, and we don’t have all of our Olympic plans in place or confirmed just yet. So, I am not prepared to really start to get any more specific on that.

Okay, well thanks and keep up the good work, enjoy the summer.

Thanks.

Thanks, Margaret.

Thanks, bye.

Virginia?

We lost again.

Hello. Okay, can we go to the next person please operator?

Pam?

Yes.

I am still on.

Hi, Margaret.

Hi. You could talk about gross margin and how you are going to achieve higher gross margins over the next two to three years if you care to?

You know, we’ve talked about that one on many previous occasions.

Okay.

Lean manufacturing, SKU productivity, raw material consolidation, sales SKU reduction, between footwear and apparel. Actually, we are seeing benefits in all those areas.

Lean is a big story with and if you remember by about a year ago Lean, was about 19% of our footwear this past year, we jumped up to about 42%. And we see that continuing to grow in ’08, and then also being leveraged into apparel.

That’s a big one.

Okay, excellent, alright. Well, I’ll hang up, maybe I am causing the problem.

And actually, what I am going to do is take the opportunity to answer Jeff Edelman’s question, I had a little bit of remedial instruction here from Pam. As I understand the question it is, there was about an 8 point spread between constant currency and real dollars in Europe for the fourth quarter revenue, but there is only a one point spread, so the future is between constant dollars and real dollars.

And the key issue is actually in the base years. So the fourth quarter of '06 our average euro-dollar conversion rate was about $1.20.

So, when we were comparing the fourth quarter of '07 we were at about $1.33 against the $1.20. The first quarter of '07 rate is $1.27, so we are comparing against a stronger first quarter euro in the beginning of '07 versus the beginning of '08 than we were in the fourth quarter of '07 versus the fourth quarter of '06.

So, hopefully Jeff, that answers your question.