Nike Execs Discuss China Expansion and Challenges

From Nike's (NKE) fiscal Q3 2007 earnings conference call earlier tonight:

Don Blair - VP, CFO

In the Asia Pacific region, revenues increased 11% in the third quarter, driven by strong growth across all business units. Currency changes contributed 3 percentage points of that growth. While most countries in the region reported double-digit sales growth on a currency neutral basis, China was again the primary driver of the region's revenue growth as we continue to expand both the number of doors selling Nike product and sales through those existing doors.

Bob Drbul - Analyst, Lehman Brothers

On the gross margin outlook, can you talk a little bit about the trends around labor pressures and wage pressures in China, and is that at all changing for you guys on the outlook?

Mark Parker - CEO

We are continuing to see some headwind out of labor costs in Asia. We are certainly seeing the pressure of oil fees. The major headwinds would be labor and currency exchange rates in Asia. Balancing against that are some of the initiatives that we talked about at the investor call, which is things like lean manufacturing, raw material consolidation.

So if we look at what we saw in the third quarter and what we expect to see going forward, it is very similar to what we discussed at the investor meeting. We have got some continued headwind, but we have got some arrows in the quiver that we continue to push, and that way we want to come out in the right spot.

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