Nike, Inc.

    NKE ·NYSE ·Rubber & Plastics Footwear ·Inc. in OR
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    data from SEC XBRL filings. Values are as-reported; restatements supersede originals.

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    From 10-Q filed 2026-04-01 (period ending 2026-02-28).

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    OVERVIEW
    NIKE designs, develops, markets and sells athletic footwear, apparel, equipment, accessories and services worldwide. We are the largest seller of athletic footwear and apparel in the world. We sell our products through two distribution channels: NIKE Direct operations which are comprised of both NIKE-owned retail stores and sales through our digital platforms (also referred to as "NIKE Brand Digital") and to wholesale accounts, which include a mix of independent distributors, licensees and sales representatives in nearly all countries around the world. Our goal is to deliver value to our shareholders by building a profitable global portfolio of branded footwear, apparel, equipment and accessories.
    Our strategy is to achieve sustainable, profitable long-term revenue growth by leading with sport, creating innovative, "must-have" products, building deep personal consumer connections with our brands and delivering compelling consumer experiences through digital platforms and at retail.
    QUARTERLY FINANCIAL HIGHLIGHTS
    •NIKE, Inc. Revenues were $11.3 billion for the third quarter of fiscal 2026, flat on a reported basis and down 3% on a currency-neutral basis.
    •NIKE Brand wholesale revenues were $6.5 billion for the third quarter of fiscal 2026 compared to $6.2 billion for the third quarter of fiscal 2025. The increase on a currency-neutral basis was driven by higher revenues in North America and Asia Pacific & Latin America ("APLA"), partially offset by lower revenues in Greater China and Europe, Middle East & Africa ("EMEA").
    •NIKE Direct revenues were $4.5 billion for the third quarter of fiscal 2026 compared to $4.7 billion for the third quarter of fiscal 2025, primarily driven by a decrease in traffic.
    •Gross margin for the third quarter of fiscal 2026 decreased 130 basis points to 40.2% primarily due to higher tariffs in North America.
    •Inventories as of February 28, 2026, were $7.5 billion, flat compared to May 31, 2025, primarily reflecting an increase in units, offset by product mix.
    •We returned approximately $609 million to our shareholders in the third quarter of fiscal 2026 through dividends.
    FACTORS IMPACTING OUR BUSINESS
    We are navigating through several external factors that create uncertainty and volatility in the operating environment, including, but not limited to, geopolitical dynamics, tax regulation, fluctuating foreign currency exchange rates and evolving tariff policies. These factors, and any changes to these factors, among others, could have a material adverse impact on consumer behavior and on our future Revenues and overall profitability. For a discussion of these factors and other risks, refer to Risk Factors in Item 1A of Part 1 within our Annual Report on Form 10-K for the fiscal year ended May 31, 2025 (the "Annual Report").
    Despite these factors, we are focused on driving distinction within key sports, building a complete product portfolio, creating stories to inspire and emotionally connect with consumers, and elevating and growing the entire marketplace as we continue to take actions across the following areas:
    •Product Management: Accelerating product innovation and reducing the supply of certain footwear products in the marketplace to rebalance the mix of our footwear portfolio.
    •Marketplace Management: Repositioning NIKE Brand Digital as a full-price platform and reinvesting in wholesale distribution. This includes liquidating inventory through increased markdowns across NIKE Direct, and higher sales returns and discounts with our wholesale partners to reduce inventory and create capacity for new product. We are also making investments to elevate the presentation of our brands in physical retail.
    •Brand Management: Increasing investment in demand creation, including brand marketing and sports marketing, to support key product launches and sports moments.
    25
    Our reportable operating segments are at different stages of progress and we expect to complete these actions by the end of December 2026. The timing of financial impacts has and will continue to vary by segment. North America has made the most progress against these actions, while Greater China and Converse will take more time. In Greater China, a trend of declining store traffic, elevated promotional activity and higher levels of inventory across the marketplace are negatively impacting revenues and overall profitability, while Converse is in the midst of a strategic reset of the brand and marketplace. We expect negative impacts from Greater China to continue throughout fiscal 2027. While these product, marketplace and brand management actions taken across our portfolio have had, and in the future may have, a negative impact on our Revenues and overall profitability, we believe they will reignite brand momentum and reposition our business to drive long-term shareholder value.
    We have also been evaluating opportunities to operate more efficiently and profitably through realigning costs across our supply chain and technology to serve an integrated marketplace. For the three and nine months ended February 28, 2026, we recognized pre-tax charges of $230 million and $304 million, respectively, primarily associated with employee severance costs. We continue to evaluate opportunities and may take additional actions which could lead to additional charges in future quarters. For more information, refer to Note 13 — Severance and Other Employee Costs within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
    OTHER MATTERS
    On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the U.S. were unauthorized. Total IEEPA tariffs paid as of the date of this report is approximately $1.0 billion. The ruling did not address potential refunds, and therefore the ultimate availability, timing and amount of any potential refunds of these tariffs is highly uncertain. As such, we have determined that potential recovery of any funds is not probable. We will continue to monitor changes to the import and export policies of the U.S. and other countries that could impact our financial position, results of operations and cash flows.
    USE OF NON-GAAP FINANCIAL MEASURES
    Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures, which should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). References to these measures should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. Management uses these non-GAAP measures when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional financial information that should be considered when assessing our underlying business performance and trends.
    Earnings Before Interest and Taxes ("EBIT") and EBIT margin: Calculated as Net income before Interest (income) expense, net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income and total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues, respectively. Total NIKE, Inc. EBIT and our EBIT margin calculations for the three and nine months ended February 28, 2026 and February 28, 2025 are as follows:
    THREE MONTHS ENDED FEBRUARY 28,NINE MONTHS ENDED FEBRUARY 28,
    (Dollars in millions)
    		2026202520262025
    Net income$520 $794 $2,039 $3,008 
    Add: Income tax expense130 50 532 559 
    Add: Interest (income) expense, net
    		(15)(18)(42)(85)
    EBIT$635 $826 $2,529 $3,482 
    Total NIKE, Inc. Revenues11,279 11,269 35,426 35,212 
    Net income margin4.6 %7.0 %5.8 %8.5 %
    EBIT margin5.6 %7.3 %7.1 %9.9 %
    Currency-neutral revenues: Currency-neutral revenues enhance visibility to underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period in place of the exchange rates in use during the current period.
    26
    COMPARABLE STORE SALES
    Comparable store sales: This key metric, which excludes NIKE Brand Digital sales, comprises revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met: (1) the store has been open at least one year, (2) square footage has not changed by more than 15% within the past year and (3) the store has not been permanently repositioned within the past year. Comparable store sales represents a performance metric that we believe is useful information for management and investors in understanding the performance of our established NIKE-owned in-line and factory stores. Management considers this metric when making financial and operating decisions. The method of calculating comparable store sales varies across the retail industry. As a result, our calculation of this metric may not be comparable to similarly titled metrics used by other companies.
    27
    RESULTS OF OPERATIONS
    THREE MONTHS ENDED FEBRUARY 28,NINE MONTHS ENDED FEBRUARY 28,
    (Dollars in millions, except per share data)
    		20262025% CHANGE20262025% CHANGE
    Revenues$11,279 $11,269 0 %$35,426 $35,212 1 %
    Cost of sales6,749 6,594 2 %20,908 19,891 5 %
    Gross profit4,530 4,675 -3 %14,518 15,321 -5 %
    Gross margin40.2 %41.5 %41.0 %43.5 %
    Demand creation expense1,090 1,088 0 %3,551 3,436 3 %
    Operating overhead expense2,887 2,799 3 %8,481 8,504 0 %
    Total selling and administrative expense3,977 3,887 2 %12,032 11,940 1 %
    % of revenues35.3 %34.5 %34.0 %33.9 %
    Interest (income) expense, net
    		(15)(18)— (42)(85)— 
    Other (income) expense, net(82)(38)— (43)(101)— 
    Income before income taxes650 844 -23 %2,571 3,567 -28 %
    Income tax expense130 50 160 %532 559 -5 %
    Effective tax rate20.0 %5.9 %20.7 %15.7 %
    NET INCOME$520 $794 -35 %$2,039 $3,008 -32 %
    Diluted earnings per common share$0.35 $0.54 -35 %$1.38 $2.02 -32 %
    CONSOLIDATED OPERATING RESULTS
    REVENUES
    THREE MONTHS ENDED FEBRUARY 28,NINE MONTHS ENDED FEBRUARY 28,
    (Dollars in millions)
    		20262025% CHANGE
    % CHANGE EXCLUDING CURRENCY CHANGES(1)
    		20262025% CHANGE
    % CHANGE EXCLUDING CURRENCY CHANGES(1)
    NIKE, Inc. Revenues:
    NIKE Brand Revenues by:
    Footwear$7,353 $7,208 2 %-1 %$22,422 $22,325 0 %-1 %
    Apparel3,184 3,193 0 %-4 %10,403 9,963 4 %2 %
    Equipment468 477 -2 %-6 %1,648 1,624 1 %-1 %
    Global Brand Divisions(2)
    		7 12 -42 %-37 %25 39 -36 %-34 %
    TOTAL NIKE BRAND REVENUES
    		11,012 10,890 1 %-2 %34,498 33,951 2 %0 %
    Converse264 405 -35 %-37 %930 1,335 -30 %-32 %
    Corporate(3)
    		3 (26)— — (2)(74)— — 
    TOTAL NIKE, INC. REVENUES$11,279 $11,269 0 %-3 %$35,426 $35,212 1 %-1 %
    Supplemental NIKE Brand Revenues Details:
    NIKE Brand Revenues by:
    Sales to Wholesale Customers$6,466 $6,155 5 %1 %$20,804 $19,485 7 %5 %
    Sales through NIKE Direct4,539 4,723 -4 %-7 %13,669 14,427 -5 %-7 %
    Global Brand Divisions(2)
    		7 12 -42 %-37 %25 39 -36 %-34 %
    TOTAL NIKE BRAND REVENUES$11,012 $10,890 1 %-2 %$34,498 $33,951 2 %0 %
    (1)The percent change excluding currency changes represents a non-GAAP financial measure. For additional information, see "Use of Non-GAAP Financial Measures".
    (2)Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.
    (3)Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program.
    28
    THIRD QUARTER OF FISCAL 2026 COMPARED TO THIRD QUARTER OF FISCAL 2025
    •NIKE, Inc. Revenues for the third quarter of fiscal 2026 were $11.3 billion, flat on a reported basis. On a currency-neutral basis, NIKE, Inc. Revenues decreased 3%, primarily due to lower revenues in EMEA, Greater China and Converse, which reduced NIKE, Inc. Revenues by approximately 2, 1, and 1 percentage points, respectively. Higher revenues in North America increased NIKE, Inc. Revenues by approximately 1 percentage point.
    •NIKE Brand revenues increased 1% on a reported basis and decreased 2% on a currency-neutral basis.
    •NIKE Brand footwear revenues decreased 1% on a currency-neutral basis. Unit sales of footwear decreased 2%, while higher average selling price ("ASP") per pair contributed approximately 1 percentage point of footwear revenue growth. Higher ASP per pair was primarily due to product mix and strategic pricing, partially offset by channel mix.
    •NIKE Brand apparel revenues decreased 4% on a currency-neutral basis. Unit sales of apparel decreased 3%, while lower ASP per unit reduced apparel revenues by approximately 1 percentage point. Lower ASP per unit was primarily due to higher discounts, partially offset by product mix and strategic pricing.
    •NIKE Brand wholesale revenues were $6.5 billion for the third quarter of fiscal 2026, up 5% on a reported basis and up 1% on a currency-neutral basis. The increase on a currency-neutral basis was driven by higher revenues in North America and APLA, partially offset by lower revenues in Greater China and EMEA.
    •NIKE Direct revenues were $4.5 billion for the third quarter of fiscal 2026, down 4% on a reported basis and down 7% on a currency-neutral basis, due to declines in NIKE Brand Digital sales of 9% and declines in NIKE store sales of 5%. NIKE Brand Digital sales were $2.3 billion for the third quarter of fiscal 2026 compared to $2.5 billion for the third quarter of fiscal 2025, with declines primarily due to reduced traffic. Comparable store sales decreased 5%. For additional information regarding comparable store sales, including the definition, see "Comparable Store Sales".
    FIRST NINE MONTHS OF FISCAL 2026 COMPARED TO FIRST NINE MONTHS OF FISCAL 2025
    •NIKE, Inc. Revenues for the first nine months of fiscal 2026 were $35.4 billion, up 1% on a reported basis. On a currency-neutral basis, NIKE, Inc. Revenues decreased 1%, primarily due to lower revenues in Greater China and Converse, which reduced NIKE, Inc. Revenues by approximately 2 and 1 percentage points, respectively. Higher revenues in North America increased NIKE, Inc. Revenues by approximately 2 percentage points.
    •NIKE Brand revenues increased 2% on a reported basis and were flat on a currency-neutral basis.
    •NIKE Brand footwear revenues decreased 1% on a currency-neutral basis. Unit sales of footwear were flat, while lower ASP per pair reduced footwear revenues by approximately 1 percentage point. Lower ASP per pair was primarily due to channel mix and higher discounts, partially offset by product mix and strategic pricing.
    •NIKE Brand apparel revenues increased 2% on a currency-neutral basis. Unit sales of apparel increased 3%, while lower ASP per unit reduced apparel revenues by approximately 1 percentage point. Lower ASP per unit was primarily due to higher discounts and channel mix, partially offset by product mix.
    •NIKE Brand wholesale revenues were $20.8 billion for the first nine months of fiscal 2026, up 7% on a reported basis and up 5% on a currency-neutral basis. The increase on a currency-neutral basis was driven by higher revenues in North America and APLA, partially offset by lower revenues in Greater China.
    •NIKE Direct revenues were $13.7 billion for the first nine months of fiscal 2026, down 5% on a reported basis and down 7% on a currency-neutral basis, due to declines in NIKE Brand Digital sales of 12% and declines in NIKE store sales of 3%. NIKE Brand Digital sales were $6.8 billion for the first nine months of fiscal 2026 compared to $7.6 billion for the first nine months of fiscal 2025, with declines primarily due to reduced traffic. Comparable store sales decreased 3%.
    29
    GROSS MARGIN
    THREE MONTHS ENDED FEBRUARY 28,NINE MONTHS ENDED FEBRUARY 28,
    (Dollars in millions)
    		20262025% CHANGE20262025% CHANGE
    Gross profit$4,530 $4,675 -3 %$14,518 $15,321 -5 %
    Gross margin40.2 %41.5 %-130 bps41.0 %43.5 %-250 bps
    THIRD QUARTER OF FISCAL 2026 COMPARED TO THIRD QUARTER OF FISCAL 2025
    Consolidated gross margin was 130 basis points lower than the prior year due to:
    •Higher NIKE Brand product costs (decreasing gross margin approximately 270 basis points), primarily due to higher tariffs in North America; and
    •Lower gross margin from Converse (decreasing gross margin approximately 30 basis points).
    This was partially offset by:
    •Higher NIKE Brand ASP (increasing gross margin approximately 80 basis points), primarily due to strategic pricing and product mix;
    •Lower other costs (increasing gross margin approximately 60 basis points), primarily due to lower inventory obsolescence reserves;
    •Lower warehousing and logistics costs (increasing gross margin approximately 20 basis points); and
    •Favorable changes in net foreign currency exchange rates, including hedges (increasing gross margin approximately 10 basis points).
    FIRST NINE MONTHS OF FISCAL 2026 COMPARED TO FIRST NINE MONTHS OF FISCAL 2025
    Consolidated gross margin was 250 basis points lower than the prior year due to:
    •Higher NIKE Brand product costs (decreasing gross margin approximately 240 basis points), primarily due to higher tariffs in North America;
    •Lower NIKE Brand ASP (decreasing gross margin approximately 80 basis points), primarily due to channel mix and higher discounts, partially offset by strategic pricing; and
    •Lower gross margin from Converse (decreasing gross margin approximately 30 basis points).
    This was partially offset by:
    •Lower warehousing and logistics costs (increasing gross margin approximately 40 basis points), primarily due to channel mix;
    •Favorable changes in net foreign currency exchange rates, including hedges (increasing gross margin approximately 30 basis points); and
    •Lower other costs (increasing gross margin approximately 30 basis points), primarily due to lower inventory obsolescence reserves.
    TOTAL SELLING AND ADMINISTRATIVE EXPENSE
    THREE MONTHS ENDED FEBRUARY 28,NINE MONTHS ENDED FEBRUARY 28,
    (Dollars in millions)
    		20262025% CHANGE20262025% CHANGE
    Demand creation expense(1)
    		$1,090 $1,088 0 %$3,551 $3,436 3 %
    Operating overhead expense(2)
    		2,887 2,799 3 %8,481 8,504 0 %
    Total selling and administrative expense$3,977 $3,887 2 %$12,032 $11,940 1 %
    % of revenues35.3 %34.5 %80 bps34.0 %33.9 %10 bps
    (1)Demand creation expense consists of brand marketing expense and sports marketing expense. Brand marketing expense includes advertising and promotion costs such as production and media costs, digital marketing expense, brand events and retail brand presentation costs. Sports marketing expense includes expenses related to endorsement contracts, complimentary product and sports marketing events.
    (2)Operating overhead expense consists primarily of wage and benefit-related expenses and other administrative costs, such as research and development costs, bad debt expense, rent, depreciation and amortization and costs related to professional services, certain technology investments, meetings and travel.
    30
    THIRD QUARTER OF FISCAL 2026 COMPARED TO THIRD QUARTER OF FISCAL 2025
    Demand creation expense was flat as higher sports marketing expense and unfavorable changes in foreign currency exchange rates were offset by lower brand marketing expense. Changes in foreign currency exchange rates increased Demand creation expense by approximately 3 percentage points.
    Operating overhead expense increased 3% due to higher wage-related expense, driven by employee severance costs, and unfavorable changes in foreign currency exchange rates, partially offset by lower other administrative costs. Changes in foreign currency exchange rates increased Operating overhead expense by approximately 2 percentage points.
    FIRST NINE MONTHS OF FISCAL 2026 COMPARED TO FIRST NINE MONTHS OF FISCAL 2025
    Demand creation expense increased 3% due to higher sports marketing expense and unfavorable changes in foreign currency exchange rates, partially offset by lower brand marketing expense, reflecting higher investment in key sports events in the prior year. Changes in foreign currency exchange rates increased Demand creation expense by approximately 2 percentage points.
    Operating overhead expense was flat as lower other administrative costs were offset by higher wage-related expense, driven by employee severance costs, and unfavorable changes in foreign currency exchange rates. Changes in foreign currency exchange rates increased Operating overhead expense by approximately 1 percentage point.
    OTHER (INCOME) EXPENSE, NET
    THREE MONTHS ENDED FEBRUARY 28,NINE MONTHS ENDED FEBRUARY 28,
    (Dollars in millions)
    		2026202520262025

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