# NIKE, Inc. (NKE) — Business, risks and results through the first quarter of fiscal 2027

NIKE's fiscal year ends on May 31. The company calls the year ended May 31, 2026 "fiscal 2026", and the first quarter of fiscal 2027 is the three months ended August 31, 2026.

## Business

*Source: annual report on Form 10-K for fiscal 2026 (year ended May 31, 2026), accession 0000320187-26-000088, Items 1, 1A, 2, 5 and 7.*

NIKE designs, develops and markets athletic footwear, apparel, equipment and accessories under the NIKE, Jordan and Converse brands, and it is the largest seller of athletic footwear and apparel in the world. It makes money by selling those products through two channels. The first is wholesale accounts: footwear and sporting goods stores, athletic specialty and department stores, and independent distributors, licensees and sales representatives in nearly every country. The second is its own NIKE Direct business, made up of NIKE-owned stores and its digital platforms ("NIKE Brand Digital"). Fiscal 2026 revenues were $46.4 billion. Of the $45.2 billion of NIKE Brand revenues, $27.5 billion came from wholesale and $17.7 billion from NIKE Direct, and footwear was about two-thirds of the total ($29.5 billion, against $13.4 billion for apparel and $2.2 billion for equipment). Independent contract manufacturers make nearly all of the products, nearly all of them outside the United States.

**Brands and products.** NIKE footwear is designed mainly for specific athletic uses, although much of it is worn casually. Apparel carries the same trademarks and is sold through the same channels, as are performance equipment and accessories (bags, socks, balls, eyewear, gloves, protective gear and digital devices). Jordan Brand sells footwear, apparel and accessories under the Jumpman trademark, focused on sport performance and streetwear. Its fiscal 2026 sales of $7,034 million fell 3% as reported and are counted inside the NIKE Brand geographic segments. Converse, based in Boston, sells casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell marks and is reported as its own segment. NIKE also licenses its trademarks to third parties for some apparel, digital devices and equipment.

**Segments.** NIKE Brand results are reported in four geographic segments, each covering both the NIKE and Jordan brands, with Converse as a fifth reportable segment. Global Brand Divisions holds centrally managed costs such as product creation, design, global digital operations and enterprise technology, along with licensing revenue. Corporate holds unallocated overhead and foreign-currency hedge results. Fiscal 2026 revenues and EBIT (earnings before interest and taxes, the measure management uses to judge the segments) were:

- **North America**: revenues of $20,511 million (up 5%) and EBIT of $5,376 million.
- **Europe, Middle East & Africa (EMEA)**: revenues of $12,572 million (up 3% as reported, down 3% currency-neutral) and EBIT of $2,417 million.
- **Greater China**: revenues of $5,847 million (down 11%) and EBIT of $1,278 million.
- **Asia Pacific & Latin America (APLA)**: revenues of $6,243 million (flat) and EBIT of $1,387 million.
- **Converse**: revenues of $1,174 million (down 31%) and EBIT of $18 million, against $240 million a year earlier.

Global Brand Divisions recorded an EBIT loss of $4,603 million and Corporate a loss of $2,023 million.

**Customers and footprint.** The United States produced about 44% of fiscal 2026 revenues and other countries about 56%. The three largest U.S. customers took about 29% of U.S. sales and the three largest non-U.S. customers about 16% of non-U.S. sales. No single customer reached 10% of consolidated revenues. NIKE runs owned digital commerce platforms in over 40 countries. At May 31, 2026 it operated 347 stores in the United States (212 NIKE factory stores, 75 NIKE in-line stores and 60 Converse stores) and 641 elsewhere (537 factory, 50 in-line and 54 Converse), about 980 of them leased. It has eight significant U.S. distribution centers, four of them in or near Memphis, and ships from 65 distribution centers outside the United States. The largest of these are owned facilities in Laakdal, Belgium; Taicang, China; Tomisato, Japan; and Icheon, Korea. Headquarters is the roughly 400-acre Philip H. Knight Campus near Beaverton, Oregon, with regional headquarters in Hilversum (EMEA) and Shanghai (Greater China).

**Manufacturing.** At May 31, 2026, 15 contract manufacturers running 95 footwear factories in 11 countries made NIKE Brand footwear. Vietnam, Indonesia and China produced about 52%, 27% and 16% of it, and four manufacturers together made about 60%. Apparel came from 64 contract manufacturers running 321 factories in 34 countries, led by Vietnam (34%), Cambodia (15%) and China (12%). NIKE's wholly owned Air Manufacturing Innovation subsidiary, with sites near Beaverton, in Dong Nai City in Vietnam and in St. Charles, Missouri, makes Air-Sole cushioning components alongside contract suppliers in China and Vietnam. Sojitz Corporation of America, the sole holder of NIKE's redeemable preferred stock, has provided import-export financing since 1972.

**Competition and brand assets.** The company names adidas, Anta, ASICS, Deckers, Li Ning, lululemon athletica, New Balance, On, Puma, Under Armour and V.F. Corporation among its competitors. It competes on product innovation and quality, consumer connection through marketing, athlete endorsement and digital experiences, and sourcing and retail presentation. It counts the NIKE and Swoosh Design trademarks among its most valuable assets; both are registered in over 190 jurisdictions. Endorsement contracts are a large fixed commitment: at May 31, 2026, obligations to athletes, teams and leagues, including associated marketing commitments, totalled about $15.5 billion, of which about $1.7 billion is payable within 12 months. NIKE had about 73,000 employees at May 31, 2026.

**Ownership.** The Class B Common Stock trades on the New York Stock Exchange. The Class A Common Stock is not publicly traded, converts one-for-one into Class B, and elects three-quarters of the Board of Directors. At June 30, 2026, Swoosh, LLC, formed by Chairman Emeritus Philip Knight, beneficially owned about 79% of the Class A shares, which would be about 16% of Class B if converted.

## Risk factors

*Source: fiscal 2026 Form 10-K, accession 0000320187-26-000088, Item 1A, with legal detail from Note 16. The fiscal 2027 first-quarter Form 10-Q (accession 0000320187-26-000193) reports no material changes to the risk factors; the tax-audit years are from its Note 4.*

The risks NIKE describes that bear most directly on its current position are:

- **Consumer demand and the economy.** Sales depend on discretionary consumer spending. Inflation, interest rates and recession risk have in the past reduced demand and retailer orders and raised inventories, cancellations, returns and discounts. Weak retailers can also cut orders, pay late or fail, and NIKE generally extends credit to wholesale customers without collateral.
- **Competition and changing consumer preferences.** The industry is highly competitive, new brands enter easily, and long product lead times make it hard to react quickly to shifting trends. NIKE also cites competition in AI-enabled search, personalization and "agentic shopping" as a risk to traffic on its own digital platforms.
- **Demand forecasting and inventory.** NIKE buys some product ahead of customer orders. Over-forecasting has in the past forced inventory write-downs and discounted sales that hurt the brand, and under-forecasting leaves shelves empty.
- **The NIKE Direct investment.** Stores carry high fixed costs and substantial lease commitments, and the digital platforms need continual investment. A decline in sales or traffic could bring lease-termination costs and write-offs, and the company warns it may not earn a satisfactory return on these investments.
- **Brand, reputation and endorsers.** Negative publicity about NIKE, its suppliers, endorsers or positions on social issues can damage the brand. Endorsement costs have risen and competition for top athletes has intensified, partly because of athletes' growing personal brands and athlete-led ventures.
- **Concentrated sourcing.** All footwear comes from a concentrated group of contract manufacturers that NIKE does not own, with most production in Vietnam, Indonesia and China. Supply disruptions, port and freight delays and labour or wage changes at suppliers have hurt product availability and margins before.
- **Trade policy and tariffs.** Changes in U.S. and foreign trade policy, including higher tariffs and retaliatory measures, have raised NIKE's costs and could materially affect results. Supplier non-compliance with NIKE's code of conduct could also bring recalls, reputational harm or new trade restrictions.
- **Currency.** Most products are made and sold outside the United States, so a stronger dollar lowers the dollar value of foreign sales and earnings. Hedging delays the effect of exchange-rate moves but does not remove it.
- **Retailer consolidation.** In some countries a few large athletic retailers dominate, which concentrates NIKE's credit risk and leaves it with fewer alternative outlets if one of them cuts purchases.
- **Technology and data.** Supply chain, retail and financial reporting all depend on information systems. NIKE has experienced cyberattacks, so far without material impact, and it faces growing privacy and AI regulation, including the GDPR and China's data-security and personal-information laws.
- **Tax and legal exposure.** NIKE earns a large share of its income abroad and benefits from reduced rates, tax holidays and rulings. The European Commission's 2019 State Aid investigation into Dutch tax rulings granted to NIKE could raise prior-period Netherlands taxes if it goes against the company. The IRS is auditing fiscal years 2017 through 2023. Belgian customs authorities have claimed underpaid duties on imports since fiscal 2018; NIKE disputes the claims, has issued bank guarantees to appeal them and cannot yet estimate the possible loss.
- **Credit ratings.** S&P Global Ratings and Moody's Ratings both downgraded NIKE's long-term debt in 2025, although it remains investment grade (A+ and A2). Further downgrades would raise borrowing costs under its credit facilities.
- **Control and share overhang.** The Class A structure, Oregon's control-share and freeze-out statutes and separate class voting could deter a takeover. A sale of Swoosh, LLC's large holding could weigh on the share price. NIKE is also defending several securities class actions and shareholder derivative suits related to a past drop in its stock price.

## Management's discussion — fiscal 2026

*Source: fiscal 2026 Form 10-K, accession 0000320187-26-000088, Item 7. Fourth-quarter detail is from the fiscal 2026 fourth-quarter earnings release furnished on Form 8-K, accession 0000320187-26-000076.*

**A flat year in the middle of a reset.** Fiscal 2026 revenues were $46,398 million against $46,309 million, flat as reported and down 2% currency-neutral. Lower revenues in Greater China, Converse and EMEA took about 2, 1 and 1 points off growth, and North America added about 2 points. NIKE Brand revenues rose 1% to $45.2 billion. Footwear was flat at $29.5 billion (down 2% currency-neutral on 1% lower unit sales) and apparel rose to $13.4 billion. Revenues moved sharply between channels. Wholesale rose 6% to $27.5 billion, while NIKE Direct fell 6% to $17.7 billion because of reduced traffic: NIKE Brand Digital fell from $9.6 billion to $8.6 billion and stores from $9.2 billion to $9.1 billion, with comparable store sales down 4%. Jordan Brand fell 3% to $7,034 million.

**Why sales are being held back on purpose.** Management describes a set of deliberate actions that it says have hurt revenues and profitability and are meant to restore brand momentum. In product, it is accelerating innovation and cutting the supply of certain footwear lines to rebalance the portfolio. In the marketplace, it is repositioning NIKE Brand Digital as a full-price platform and reinvesting in wholesale distribution, which has meant heavier markdowns in NIKE Direct and higher returns and discounts with wholesale partners to clear inventory. In brand, it is spending more on marketing around key sports moments. In the 10-K, management expected to complete these actions by the end of December 2026. North America had made the most progress, while Greater China and Converse would take longer, with their drag expected to last through fiscal 2027.

**Margins and costs.** Gross margin rose 20 basis points to 42.9%. Lower warehousing and logistics costs, favourable currency and lower other costs each added about 20 basis points, while Converse and higher NIKE Brand product costs each took away about 20. Selling and administrative expense was flat at $16,114 million: demand creation rose 1% to $4,754 million and operating overhead was $11,360 million. Fiscal 2026 included $385 million of employee severance costs from realigning costs across the supply chain and technology. Of that, $231 million was in operating overhead and $154 million in cost of sales.

**The tariff refund.** On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unauthorized. In the fourth quarter NIKE judged recovery of the IEEPA tariffs it had paid to be probable and recorded a $986 million benefit in cost of sales ($965 million in North America and $21 million in Converse), largely offsetting the IEEPA tariff cost booked during the year. That benefit lifted fourth-quarter gross margin by about 900 basis points to 49.2% and added $0.52 to fourth-quarter diluted EPS of $0.72. At May 31, 2026, NIKE had received $302 million of the refund and carried $684 million as a receivable.

**Earnings.** Income before income taxes was $3,900 million against $3,885 million. The effective tax rate rose from 17.1% to 20.3%, because the prior year had a one-time, non-cash deferred tax benefit, so net income fell 3% to $3,108 million and diluted EPS fell 3% to $2.10. Fiscal 2024 diluted EPS had been $3.73. EBIT was $3,850 million, an 8.3% margin, and return on invested capital fell to 18.7% from 20.2%.

**Segments.** Fiscal 2026 segment results diverged widely:

- **North America** grew 5% currency-neutral. Wholesale rose 14% on expanded distribution, higher shipments and fewer marketplace actions, while NIKE Direct fell 6%. EBIT rose 14% on a 210-basis-point gross margin gain, with the IEEPA benefit booked in this segment.
- **EMEA** fell 3% currency-neutral. Higher discounts and adverse standard currency rates cut gross margin by 140 basis points, and EBIT fell 6%.
- **Greater China** fell 13% currency-neutral. Wholesale fell 14%, which NIKE attributes to its actions to prioritize marketplace health, and digital fell 29%. EBIT fell 20%.
- **APLA** fell 1% currency-neutral, and EBIT fell 9% on a 200-basis-point gross margin decline driven mainly by currency.
- **Converse** fell 32% currency-neutral, with declines in every territory. Its gross margin dropped 490 basis points on lower prices, inventory obsolescence reserves and severance, and EBIT fell 93%.

**Cash and capital.** Cash from operations fell to $2,868 million from $3,698 million. Higher receivables (mainly the outstanding IEEPA refund) and U.S. federal tax payments absorbed cash. NIKE returned about $2.5 billion to shareholders, mostly through dividends of $2.4 billion. It bought back only 1.8 million shares for $122.4 million, having paused repurchases in the first quarter of fiscal 2026. In June 2026 the Board reapproved the $18 billion repurchase program, first approved in June 2022, to continue without a fixed expiration; $12.1 billion had been used and about $5.9 billion remained. Cash and short-term investments were $9.0 billion at May 31, 2026. NIKE has a $2 billion five-year credit facility maturing March 7, 2030 and a $1 billion 364-day facility entered on March 6, 2026, plus a $3 billion commercial paper program. Nothing was drawn on any of them.

## Current quarter — first quarter of fiscal 2027

*Source: Form 10-Q for the quarter ended August 31, 2026, accession 0000320187-26-000193, and the first-quarter earnings release furnished on Form 8-K on October 1, 2026, accession 0000320187-26-000184.*

**Headline results.** Revenues were $11,213 million against $11,720 million, down 4% as reported and 5% currency-neutral. Lower revenues in Greater China, EMEA and Converse more than offset growth in North America. Gross margin still rose 60 basis points to 42.8%. Lower warehousing and logistics costs added about 90 basis points, currency about 40 and lower NIKE Brand product costs about 10. Higher other costs (mainly third-party royalties) took away about 40 basis points, lower NIKE Brand selling prices from discounting and channel mix about 30, and Converse about 10. Selling and administrative expense fell 3% to $3,910 million. Demand creation rose 5% to $1,252 million on brand marketing around key sports events, while operating overhead fell 6% to $2,658 million on lower wage-related and administrative costs. The effective tax rate rose to 22.7% from 21.1% because of foreign tax audit settlements. Net income was $712 million, down 2%, and diluted EPS was $0.48 against $0.49.

**Channels and categories.** NIKE Brand revenues were $10,952 million, down 4%. Wholesale was $6,804 million, down 1%, while NIKE Direct fell 8% to $4,142 million (down 9% currency-neutral) as NIKE Brand Digital fell 13% and NIKE-owned stores fell 5%. Footwear fell 6% to $6,951 million on 5% lower unit sales, with lower prices from channel mix and discounting. Apparel rose 2% to $3,384 million, helped by higher prices from product mix and strategic pricing.

**Segments.** First-quarter results by segment were:

- **North America**: revenues of $5,127 million (up 2%) and EBIT of $1,170 million (up 3%). Wholesale rose 9% and NIKE Direct fell 6%, and gross margin rose 110 basis points.
- **EMEA**: revenues of $3,176 million (down 5%) and EBIT of $728 million (down 1%). Footwear fell 11% currency-neutral and digital sales fell 26%, while gross margin rose 140 basis points.
- **Greater China**: revenues of $1,180 million (down 22% as reported, 26% currency-neutral) and EBIT of $248 million (down 34%). Wholesale fell 31% and digital 28% currency-neutral, and footwear unit sales fell 26%.
- **APLA**: revenues of $1,463 million (down 2% as reported, flat currency-neutral) and EBIT of $324 million (down 7%). Southeast Asia & India and Central & South America grew, while Japan, Korea and Mexico declined. Gross margin fell 150 basis points.
- **Converse**: revenues of $263 million (down 28%) and EBIT of $25 million (down 36%), with unit sales down 34%.

**How the turnaround has shifted.** In the 10-Q, management says the segments are at different stages. Additional actions in NIKE Sportswear and Jordan Brand are now expected to run beyond fiscal 2027, reflecting higher discounting and broader marketplace pressure in those businesses. The Converse reset is expected to continue through fiscal 2027, and the Greater China actions beyond it. That compares with the 10-K's expectation, quoted above, of completing the actions by the end of December 2026.

**Balance sheet and cash.** Inventories were $7.8 billion at August 31, 2026, up 5% from May 31, 2026 (the 10-Q's comparison) and down 3% from August 31, 2025 (the earnings release's comparison), with both changes attributed to product mix. Cash from operations was only $135 million. Payments of employee compensation and U.S. federal income tax and the build in inventories absorbed cash, partly offset by collection of the IEEPA tariff receivable. Cash and short-term investments were $8.4 billion. Long-term debt was $5.9 billion, with a further $2.0 billion classified as current. No commercial paper or credit-facility borrowings were outstanding, and debt ratings remained A+ and A2. NIKE paid about $610 million in dividends, having declared $0.41 per share for the quarter against $0.40 a year earlier, and repurchased no shares.

**Fiscal 2027 outlook.** The October 1, 2026 release guides to:

- revenues down by a high-single-digit percentage for fiscal 2027;
- an effective tax rate in the mid-20% range;
- adjusted diluted EPS of $1.15 to $1.35, which excludes about $0.15 of Pace restructuring costs. Adjusted EPS is a non-GAAP measure.

## Subsequent events

*Source: Form 10-Q for the quarter ended August 31, 2026, accession 0000320187-26-000193, Note 14 (Subsequent Events) and Item 2 "Recent Developments"; Form 8-K filed October 1, 2026, accession 0000320187-26-000184, Item 2.05.*

- **Pace restructuring program (October 2026).** NIKE announced Pace, a multi-year enterprise program that includes and builds on the cost realignment plan announced in March 2026. The Board approved steps expected to cost about $1.0 billion in pre-tax charges, mainly employee severance and other employee-related costs. That is in addition to about $0.3 billion of severance recognized in fiscal 2026 under the March 2026 plan. About $0.3 billion is expected in fiscal 2027, largely in operating overhead, with the rest recognized through fiscal 2031. Most of the charges are expected to be paid in cash. The program is expected to deliver about $2.5 billion of cumulative savings through fiscal 2031, before the charges and any reinvestment. Its initiatives are:
  - further optimizing the global supply chain;
  - a new campus in India;
  - further streamlining of the organization to reduce costs;
  - reorganizing in fiscal 2028 from the current geographic structure into three geographies: the Americas (North America and Latin America), APGC (Asia Pacific and Greater China) and EMEA.

The 10-Q's subsequent-events note discloses no acquisition, divestiture or financing.