Matthew Friend
Chief Financial Officer at NIKE
Thanks, John, and hello to everyone on the call. Nike's Second-quarter of fiscal '23 demonstrated again the power of our portfolio of brands. Throughout the quarter, we leveraged our brand momentum and deepened our connections with consumers to drive strong revenue growth. Before going into our second-quarter results and financial outlook. I want to provide more insight on the strong consumer demand and we continue to see. And the progress that we've made over the past 90 days regarding our inventory. Consumer demand for our brands drove double-digit currency-neutral revenue growth across Nike, Jordan, and Converse. With Nike Direct, retail traffic was up, conversion rates expanded, and member buying fueled record digital results.
Within wholesale, we saw strong retail sales and market-share gains across our top strategic partners. Since last quarter, our brand momentum has accelerated into the holiday season. In North America, our Black Friday and Cyber Week performance set record highs for demand in traffic fueling strong double-digit revenue growth and exceeding our plan. In EMEA, we closed our biggest Cyber Week ever increasing demand by 75% from last year. In Greater China, our 11-11 demand grew mid-teens outpacing the sports industry. And globally, our holiday season momentum has continued through the first few weeks of December.
Despite operating in a largely promotional marketplace, we are creating brand distinction, by driving healthy profitable growth. Full-price realization remained strong after strategic pricing increases. Especially for our top innovation products in our largest footwear franchises. Nike Brand ASP is up Year-over-Year across our geographies even with higher discounts to liquidate excess inventory. This quarter we also leveraged targeted promotions to serve and acquired Nike members, strengthening an important foundation for sustainable growth. Above all, our Q2 results reinforce our confidence that Nike's brand and business momentum starts with the value that we create for consumers. Through our product innovation, deep brand connection, and elevated experiences across the marketplace.
Now let me turn to inventory. Last quarter we talked specifically about the actions we are taking to address excess inventory, with a focus on pockets of seasonally light products, predominantly in apparel. At the end of Q2, we are tracking in-line with our plan, and we are pleased with the progress we have made over the last 90 days. Let me go deeper into what we're seeing and why I am optimistic about our path ahead.
First, inventory dollars units are down sequentially. Prior year comparisons are distorted by last year's Vietnam factory closures. But compared to the prior quarter, inventory dollars were down 3%. And units are down high-single-digits. With days in inventory at the lowest level in four quarters.
Second, we are making progress, where we are focused most. In North-America, Year-over-Year growth in inventory dollars decelerated from 55% in Q1 to 54% in Q2. More importantly, total inventory units are down low-double-digits from first-quarter levels even as spring product continues to arrive earlier with faster transit times.
Third, the composition of our inventory is improving. In North America, apparel inventory units and apparel close our units are both down mid-teens, from the prior quarter.
Last, we have proactively reduced forward supply. As I mentioned last quarter, we have tightened our second-half bias to prioritize inventory health across the marketplace. As transit times stabilized, we are optimistic that we will begin to see a more normal and predictable flow supply. In a more capital-efficient manner. Looking ahead, we are confident that our decisive actions have put us on the right track within the financial parameters that we provided last quarter. Our focus continues to be positioning Nike for future seasons of sustainable and profitable growth.
Now let me turn to our Nike Inc Second Quarter Financial Results. In Q2, Nike Inc, revenue grew 17% and 27% on a currency-neutral basis, with strong growth across the portfolio. Nike Direct, grew by 25%. Led by 34% growth in Nike Digital and 11% growth in NIKE stores, highlighted by strong season-to-date holiday results.
Wholesale grew by 30% driven by strong demand for seasonal products. Higher shipments based on earlier supply availability and lower shipments in the prior year given supply constraints. Second-quarter reported gross margins declined 300 basis-points to 42.9%. Primarily due to higher markdowns, mainly in North America. Unfavorable changes in net foreign currency exchange rates, elevated freight and logistics costs, and increased product input costs partially offset by strategic pricing actions. SG&A grew 10% in Q2, primarily due to wage-related expenses strategic technology investments, higher Nike direct costs and increased demand creation expenses. Our effective tax rate for the quarter was 19.3% compared to 10.9% for the same period last year, primarily due to decreased benefits from stock-based compensation and earnings mix. Second-quarter diluted earnings per share was $0.85.
Now let's review the operating segment results. In North America, we captured market share with strong holiday results and positive consumer response to do assortments. Q2 revenue grew 31% on a currency-neutral basis and EBIT grew 21% on a reported basis. Nike Direct, grew 23%, with Nike Digital up 31%, on double-digit growth in traffic and repeat member buying. Wholesale revenue grew 37% driven by strong marketplace partner demand and improved inventory supply. Performance, innovation and fresh seasonal product resonated deeply with consumers the LeBron 20, Katie [Phonetic] and Yonex feel [Phonetic] double-digit growth in basketball. And the AJ 11 diversity red shock drop highlighted Jordan brand momentum.
In womens our new statement leggings Nike go launch with positive early response as the free Medcom grew double-digits. Dunc [Phonetic] outperformed in mens and Pegasys continues to win with everyday runners. Beyond product innovation, Nike continues to create distinction at the intersection of culture and community. Ahead of homecoming season, our yard runners campaign elevated the voices of HPCU change makers alongside the release of co-created product through our sneakers app and neighborhood partners. In addition, with the recent announcement, the future Nike off-late collections, we are deeply honored to introduce the next chapter of Virgil Abloh continuing legacy with Nike.
In EMEA, our team landed yet another strong quarter. Q2 revenue grew 33% on a currency-neutral basis and EBIT grew 23% on a reported basis. Nike Direct, grew 44% on a currency-neutral basis with Nike Digital growing 62%. Membership was an accelerator as members drove over 85% of demand during Cyber Week, our highest demand week ever in EMEA. Our campaign led with sport, adding more than one million new Nike members as we invited consumers to join us in celebrating the World Cup.
The power of our portfolio drove momentum across the marketplace. Earlier this month we celebrated the Milan opening of Jordan world a flight. A premium retail concepts at the forefront of basketball culture. Meanwhile, Nike dominated shoe and apparel accounts at the Berlin and London marathons. As Alpha Fly drove strong sell-through. Pegasys shield and Winslow shield grew double-digits in womens running. The [Indecipherable] created energy and trail running. The sports fastest-growing segment. And global football grew double-digits as we continue to celebrate an incredible year of sport.
In Greater China, our brand and business momentum continued as Q2 revenue grew 6% on a currency-neutral basis and EBIT declined 10% on a reported basis. Nike Direct, grew 4% on a currency-neutral basis with Nike Digital growing 9%. In addition to delivering positive growth, we achieved our goal of returning to inventory held at the end of Q2. Inventory dollars declined 3% this quarter and closeout inventory was down high-double digits versus the prior year with the closeout mix now in line with pre-pandemic levels.
Our team delivered these results while managing through significant COVID-related disruption, including the closure of over 1,500 owned and partner stores at the end of November. We continue to closely monitor ongoing risk while focusing on what we can control deepening our connections with Chinese consumers. As 18,000 runners joined in the return of the Shanghai Marathon our brand presence was deeply felt. Not only is the title sponsor but also as Nike dominated the shoe count and local Nike athlete John Duchenne top the podium. The energy extended into double-digit growth for our running business, led by Zoom Fly and Vapor fly, as well as the Pegasus and Wind Flow. Nike's brand momentum with our youngest Chinese consumers continues to grow as well. On 11-11 [Indecipherable] demand for Nike grew by 45% on T-Mall. And with Nike leading on 11-11 as the number-one store on T-Mall kids footwear channel, plus our top kids lifestyle footwear franchises growing double-digits in Q2, we are more excited than ever about NIKE opportunity to serve the next-generation.
Finally, in APLA, our team continues to overdeliver in our fastest-growing most diverse geography. Q2 revenue grew 34% on a currency-neutral basis and EBIT grew 25% on a reported basis. Despite the transition of our circle territory through a distributor model. Nike Direct, grew 30% on a currency-neutral basis and Nike Digital grew 35%. We deepened consumer connections across territories with Member Days fueling robust growth. In Korea, one of our fastest-growing marketplaces, we're excited to integrate our digital business onto Nike's global platform which will enable us to serve Korean consumers through the Nike's Sneakers app. We also continue to strengthen local connections through our Express Lane with launches, such as our so most familiar collection.
Across APLA, this quarter show the power of our complete offense. In women's, we drove energy and lifestyle with local storytelling around the Air Force One's 40th anniversary, global football and running led the way in men's performance and kids' delivered balanced growth across apparel and footwear. Finally, the Jordan brand continues to be an incredible engine for growth, with momentum in streetwear and performance footwear.
Now, I will turn to our financial outlook. As I said last quarter, we are taking a measured approach in the second half against an uncertain macro outlook as we continue to prioritize a healthy pull market. That said, we remain positive regarding the strong consumer demand, we see across our portfolio of brands. As well as the health of our product franchises. From product innovation to Rich storytelling, the value that NIKE creates for the consumer continues to drive business momentum and competitive separation across the marketplace. Given our strong second-quarter performance. We now expect full-year revenue to grow low-teens on a currency-neutral basis. An improvement from our low-double-digit guidance in the prior quarter. As of today, we expect approximately 700 basis points of foreign-exchange headwinds. Resulting in-full year-reported revenue growth of mid-single-digits.
Third-quarter revenue growth is expected to be higher than the Fourth-quarter due to the timing of wholesale shipments. We continue to expect the gross margin to decline between 200 to 250 basis points versus the prior year. Reflecting ongoing liquidation actions in the second half. This outlook reflects our strong performance in Q2, mostly offset by an additional 25 basis points of negative foreign-exchange impact. Now totaling 95 basis points for the full year. We expect that the third-quarter gross margin will decline at a similar rate as the second quarter. Including 120 basis points of foreign-exchange headwinds. For the full year, we continue to expect SG&A to increase high-single-digits. We expect Third-quarter SG&A dollars to be in-line with the second quarter. And we now expect our effective tax rate to be in the high-teens range, primarily due to decreased benefits from stock-based compensation. As many of you know, we closed out Nike's 50th anniversary this year.
And for all the history NIKE has already made. It's the future that inspires us the most. After all, Nike's culture of innovation doesn't just shape the products we create and the stories we tell. It also defines the way we adapt and accelerate through dynamic conditions. Over this past year, no matter what. We have faced. Our teammates have continued to come together and deliver. I could not be more proud of their efforts. And as we turn toward Nike's next 50 years. I have every confidence in the future. This team will create. To every member of our NIKE Jordan Converse team around the world. Thank you for all that you do and happy holidays.
With that, let's open up the call for questions.
