NIKE, Inc. (NKE)

ITEM 7. 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 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 businesses.

Our strategy is to achieve sustainable profitable long-term revenue growth by creating innovative, "must-have" products, building deep personal consumer connections with our brands and delivering compelling consumer experiences through digital platforms and at retail. We are focused on growing the entire marketplace by continuing to invest in our NIKE Direct operations while also increasing investment to elevate and differentiate our brand experience within our wholesale partners.

In addition, in the third quarter of fiscal 2024, we announced an enterprise-wide initiative to prioritize investment to fuel future growth including taking steps to streamline the organization. This resulted in a net reduction of our global workforce and we expect to reinvest a majority of the future annual wage savings from these actions to support this initiative.

We also continue to invest in a global Enterprise Resource Planning Platform, data and analytics, demand sensing, insight gathering and other areas to create an end-to end technology foundation to serve our consumer with speed and scale.

FISCAL 2024 FINANCIAL HIGHLIGHTS

•NIKE, Inc. Revenues for fiscal 2024 were $51.4 billion compared to $51.2 billion for fiscal 2023

•NIKE Direct revenues grew 1% from $21.3 billion in fiscal 2023 to $21.5 billion in fiscal 2024, and represented approximately 44% of total NIKE Brand revenues for fiscal 2024

•NIKE Brand wholesale revenues increased 1% on a reported basis and 2% on a currency-neutral basis

•Gross margin increased 110 basis points to 44.6%, primarily due to strategic pricing actions and lower ocean freight rates and logistics costs, partially offset by higher product input costs, lower margin in NIKE Direct and unfavorable changes in net foreign currency exchange rates

•Income before income taxes included a restructuring charge of $443 million related to the streamlining of our organization, primarily associated with employee severance costs and accelerated stock-based compensation expense. For more information, refer to Note 19 — Restructuring within the accompanying Notes to the Consolidated Financial Statements.

•Inventories as of May 31, 2024 were $7.5 billion, a decrease of 11% compared to the prior year, primarily due to a decrease in units

•We returned $6.4 billion to our shareholders in fiscal 2024 through share repurchases and dividends

•Return on Invested Capital ("ROIC") was 34.9% as of May 31, 2024, compared to 31.5% as of May 31, 2023. ROIC is considered a non-GAAP financial measure, see "Use of Non-GAAP Financial Measures" for additional information.

For discussion related to the results of operations and changes in financial condition for fiscal 2023 compared to fiscal 2022 refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2023 Form 10-K, which was filed with the United States Securities and Exchange Commission on July 20, 2023.

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CURRENT ECONOMIC CONDITIONS AND OTHER FACTORS IMPACTING OUR BUSINESS

The operating environment could remain volatile in fiscal 2025 as the risk remains that these factors, among others, could have a material adverse impact on our future revenue growth as well as overall profitability.

•Consumer Spending: In fiscal 2024, consumers continued to spend more cautiously as the global economy remains uncertain and promotional activity remained high across our industry. We will continue to closely monitor macroeconomic and geopolitical conditions, including potential impacts of inflation and higher interest rates on consumer spending behavior.

•Cost Inflationary Pressures: Inflationary pressures, including higher product input costs, continued to negatively impact our gross margin with more pronounced impacts in the first nine months of fiscal 2024. These negative impacts were more than offset by the strategic pricing actions we have taken through fiscal 2024, as well as improvements in ocean freight rates and logistics costs we started to realize at the beginning of the second quarter of fiscal 2024.

•Supply Chain Conditions: During fiscal 2024 and as of May 31, 2024, our inventory levels were healthy, reflecting our proactive actions taken to manage our inventory supply.

•Foreign Currency Impacts: As a global company with significant operations outside the United States, we are exposed to risk arising from changes in foreign currency exchange rates. For additional information, refer to "Foreign Currency Exposures and Hedging Practices".

•Product Lifecycle Management: We are currently reducing the supply of certain footwear products as we scale new and innovative products across the marketplace. This had a negative impact on our revenues, specifically NIKE Brand Digital revenues in the fourth quarter of fiscal 2024.

For more information refer to Item 1A Risk Factors, within Part 1, Item 1, Business.

USE OF NON-GAAP FINANCIAL MEASURES

Throughout this Annual Report on Form 10-K, 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"): Calculated as Net income before Interest expense (income), net and Income tax expense in the Consolidated Statements of Income. Total NIKE, Inc. EBIT for fiscal 2024, 2023 and 2022 are as follows:

EBIT Margin: Calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. Our EBIT Margin calculation for fiscal 2024, 2023 and 2022 are as follows:

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Return on Invested Capital ("ROIC"): Represents a performance measure that management believes is useful information in understanding the Company's ability to effectively manage invested capital. Our ROIC calculation as of May 31, 2024 and 2023 is as follows:

(1)Equals Earnings before interest and taxes multiplied by the effective tax rate as of each of the respective quarter ends.

(2)Total debt includes the following: 1) Current portion of long-term debt, 2) Notes Payable, 3) Current portion of operating lease liabilities, 4) Long-term debt and 5) Operating lease liabilities.

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.

Wholesale equivalent revenues: References to wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our NIKE Direct operations, which are charged at prices comparable to those charged to external wholesale customers. Beginning in fiscal 2025, with the continued rollout of a new Enterprise Resource Planning Platform, the Company will replace wholesale equivalent revenues and gross margin drivers with a comparable U.S. GAAP metric.

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.

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RESULTS OF OPERATIONS

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CONSOLIDATED OPERATING RESULTS

REVENUES

(1)The percent change excluding currency changes and the presentation of wholesale equivalent revenues represent non-GAAP financial measures. 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.

(4)Others include products not allocated to Men's, Women's, Kids' and Jordan Brand, as well as certain adjustments that are not allocated to products designated by consumer.

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FISCAL 2024 NIKE BRAND REVENUE HIGHLIGHTS

The following tables present NIKE Brand revenues disaggregated by reportable operating segment, distribution channel and major product line:

FISCAL 2024 COMPARED TO FISCAL 2023

•NIKE, Inc. Revenues for fiscal 2024 were $51.4 billion compared to $51.2 billion for fiscal 2023. On a currency-neutral basis, NIKE, Inc. Revenues increased 1%, as higher revenues in Greater China and Asia Pacific & Latin America ("APLA"), which each increased NIKE, Inc. Revenues by 1 percentage point, were partially offset by lower revenues in Converse, which reduced NIKE, Inc. Revenues by approximately 1 percentage point.

•NIKE Brand revenues, which represented over 90% of NIKE, Inc. Revenues, increased 1% on both a reported and currency-neutral basis. The increase, on a currency-neutral basis, was primarily due to higher revenues in the Jordan Brand and Men's.

•NIKE Brand footwear revenues increased 1% on a currency-neutral basis, primarily due to higher revenues in the Jordan Brand, Men's and Women's. Unit sales of footwear decreased 2%, while higher average selling price ("ASP") per pair contributed approximately 3 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

•NIKE Brand apparel revenues were flat on a currency-neutral basis, primarily due to lower revenues in Men's and Women's, offset by higher revenues in Kids'. Unit sales of apparel decreased 9%, while higher ASP per unit contributed approximately 9 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price, off-price and NIKE Direct ASPs.

•NIKE Brand wholesale revenues increased 1% on a reported basis and 2% on a currency-neutral basis, compared to fiscal 2023. Higher revenues in Greater China and APLA were partially offset by lower revenues in North America.

•NIKE Direct revenues increased 1% to $21.5 billion in fiscal 2024 compared to $21.3 billion in fiscal 2023. On a currency-neutral basis, NIKE Direct revenues increased 1%, primarily driven by comparable store sales growth of 3% and the addition of new stores, partially offset by declines in NIKE Brand Digital sales of 3%, reflecting reduced digital traffic. For additional information regarding comparable store sales, including the definition, see "Comparable Store Sales". NIKE Brand Digital sales were $12.1 billion for fiscal 2024 compared to $12.4 billion for fiscal 2023. Within NIKE Direct revenues, there were certain reclassifications made between NIKE-owned retail stores and NIKE Brand Digital in the prior period to conform to current period presentation. The reclassifications did not have a material impact on our Consolidated Financial Statements.

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GROSS MARGIN

FISCAL 2024 COMPARED TO FISCAL 2023

For fiscal 2024, our consolidated gross profit increased 3% to $22,887 million compared to $22,292 million for fiscal 2023. Gross margin increased 110 basis points to 44.6% for fiscal 2024 compared to 43.5% for fiscal 2023 due to the following:

The increase in gross margin for fiscal 2024 was primarily due to:

•Higher NIKE Brand full-price ASP, net of discounts, on a wholesale equivalent basis (increasing gross margin approximately 200 basis points), primarily due to strategic pricing actions;

•Lower NIKE Brand product costs, on a wholesale equivalent basis (increasing gross margin approximately 10 basis points), primarily due to lower ocean freight rates and logistics costs largely offset by higher product input costs; and

•Lower other costs (increasing gross margin approximately 10 basis points).

This was partially offset by:

•Unfavorable changes in net foreign currency exchange rates, including hedges (decreasing gross margin approximately 40 basis points);

•Lower margin in our NIKE Direct business (decreasing gross margin approximately 40 basis points);

•Lower off-price margin, on a wholesale equivalent basis (decreasing gross margin approximately 20 basis points); and

•Restructuring charges (decreasing gross margin approximately 10 basis points).

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

(1)Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, complimentary product, television, digital and print advertising and media costs, brand events and retail brand presentation.

FISCAL 2024 COMPARED TO FISCAL 2023

Demand creation expense increased 6% for fiscal 2024, primarily due to higher advertising and marketing expense, digital marketing and sports marketing expense. Changes in foreign currency exchange rates did not have a material impact on Demand creation expense.

Operating overhead expense was flat, as lower wage-related expenses and lower technology spend were offset by restructuring charges. Changes in foreign currency exchange rates did not have a material impact on Operating overhead expense.

For more information related to our organizational realignment and related costs, refer to Note 19 — Restructuring within the accompanying Notes to the Consolidated Financial Statements.

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OTHER (INCOME) EXPENSE, NET

Other (income) expense, net comprises foreign currency conversion gains and losses from the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, as well as unusual or non-operating transactions that are outside the normal course of business.

FISCAL 2024 COMPARED TO FISCAL 2023

Other (income) expense, net decreased from $280 million of other income, net in fiscal 2023 to $228 million in the current fiscal year, primarily due to a net unfavorable change in foreign currency conversion gains and losses, including hedges, as well as net favorable settlements of legal matters in the prior year. These items were partially offset by the loss recognized in the prior year upon completion of the sale of our entities in Argentina and Uruguay to a third-party distributor.

For more information related to the sale of our entities in Argentina and Uruguay to a third-party distributor, see Note 18 — Divestitures within the accompanying Notes to the Consolidated Financial Statements.

We estimate the combination of the translation of foreign currency-denominated profits from our international businesses, and the year-over-year change in foreign currency-related gains and losses included in Other (income) expense, net had an unfavorable impact on our Income before income taxes of $68 million for fiscal 2024.

INCOME TAXES

FISCAL 2024 COMPARED TO FISCAL 2023

Our effective tax rate was 14.9% for fiscal 2024, compared to 18.2% for fiscal 2023, primarily due to changes in earnings mix and one-time items including the benefit provided by the delay of the effective date of certain U.S. foreign tax credit regulations in the first quarter of fiscal 2024.

The OECD and the Inclusive Framework has put forth Pillar Two proposals that ensure a minimal level of taxation. Several countries in which we operate, including several European Union member states, have adopted domestic legislation to implement the Inclusive Framework's global corporate minimum tax rate of fifteen percent which will be effective for NIKE beginning June 1, 2024. Other countries are also actively considering changes to their tax laws to adopt certain parts of the Inclusive Framework's proposals. Based on our current analysis of Pillar Two provisions, we do not expect these tax law changes to have a material impact on our Consolidated Financial Statements; however, we will continue to evaluate their impact as additional information becomes available.

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OPERATING SEGMENTS

As discussed in Note 15 — Operating Segments and Related Information in the accompanying Notes to the Consolidated Financial Statements, our operating segments are evidence of the structure of the Company's internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity.

The breakdown of Revenues is as follows:

(1)    The percent change excluding currency changes represents a non-GAAP financial measure. For additional information, see "Use of Non-GAAP Financial Measures".

(2)    For additional information on the transition of our NIKE Brand businesses within our Central and South America ("CASA") territory to a third-party distributor, see Note 18 — Divestitures of the Notes to Consolidated Financial Statements.

(3)    Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.

(4)    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.

The primary financial measure used by the Company to evaluate performance is Earnings Before Interest and Taxes ("EBIT"). As discussed in Note 15 — Operating Segments and Related Information in the accompanying Notes to the Consolidated Financial Statements, certain corporate costs are not included in EBIT.

The breakdown of EBIT is as follows:

(1)    Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT Margin represent non-GAAP financial measures. See "Use of Non-GAAP Financial Measures" for additional information.

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NORTH AMERICA

FISCAL 2024 COMPARED TO FISCAL 2023

•North America revenues decreased 1% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's, partially offset by higher revenues in the Jordan Brand. Wholesale revenues decreased 2%, primarily reflecting liquidation of excess inventory in the prior year. NIKE Direct revenues increased 1%, primarily driven by the addition of new stores, partially offset by a decline in digital sales of 1%. Comparable store sales for fiscal 2024 were flat.

•Footwear revenues decreased 2% on a currency-neutral basis due to lower revenues in Men's, Kids' and Women's, partially offset by higher revenues in the Jordan Brand. Unit sales of footwear decreased 7%, while higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

•Apparel revenues were flat on a currency-neutral basis due to lower revenues in Men's, Women's and the Jordan Brand, offset by higher revenues in Kids'. Unit sales of apparel decreased 6%, while higher ASP per unit contributed approximately 6 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price ASP.

Reported EBIT increased 7% reflecting lower revenues and the following:

•Gross margin expansion of 220 basis points primarily due to higher full-price ASP, net of discounts, largely due to strategic pricing actions and lower discounts, as well as lower product costs. Lower product costs were primarily due to lower ocean freight rates and logistics costs, partially offset by higher product input costs.

•Selling and administrative expense increase of 1% due to higher demand creation expense, partially offset by lower operating overhead expense. The increase in demand creation expense was primarily due to higher digital marketing and sports marketing expense. Operating overhead expense decreased primarily due to lower wage-related expenses, partially offset by higher other administrative costs.

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EUROPE, MIDDLE EAST & AFRICA

FISCAL 2024 COMPARED TO FISCAL 2023

•EMEA revenues were flat on a currency-neutral basis, primarily due to lower revenues in Women's and Kids', offset by higher revenues in Men's. Wholesale revenues were flat. NIKE Direct revenues were flat as a decline in digital sales of 5% was offset by comparable store sales growth of 7% and the addition of new stores.

•Footwear revenues increased 1% on a currency-neutral basis, primarily due to higher revenues in Men's, partially offset by lower revenues in Kids'. Unit sales of footwear decreased 4%, while higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

•Apparel revenues decreased 6% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's. Unit sales of apparel decreased 17%, while higher ASP per unit contributed approximately 11 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs.

Reported EBIT decreased 4% reflecting higher revenues and the following:

•Gross margin contraction of 110 basis points largely due to unfavorable changes in standard foreign currency exchange rates, partially offset by higher full-price ASP, net of discounts, primarily due to strategic pricing actions, as well as lower other costs and lower product costs, reflecting lower ocean freight rates and logistics costs.

•Selling and administrative expense increase of 3% due to higher demand creation and operating overhead expense. Demand creation expense increased primarily due to higher advertising and marketing expense, unfavorable changes in foreign exchange rates and higher sports marketing expense. Operating overhead expense increased primarily due to unfavorable changes in foreign currency exchange rates.

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GREATER CHINA

FISCAL 2024 COMPARED TO FISCAL 2023

•Greater China revenues increased 8% on a currency-neutral basis due to higher revenues in Men's, Women's, the Jordan Brand and Kids'. Wholesale revenues increased 15%. NIKE Direct revenues increased 1%, driven by comparable store sales growth of 1% and the addition of new stores, partially offset by a decline in digital sales of 8%.

•Footwear revenues increased 6% on a currency-neutral basis due to higher revenues in Men's, Women's, the Jordan Brand and Kids'. Unit sales of footwear increased 8%, while lower ASP per pair reduced footwear revenues by approximately 2 percentage points. Lower ASP per pair was primarily due to lower NIKE Direct ASP, partially offset by higher full-price ASP.

•Apparel revenues increased 14% on a currency-neutral basis, primarily due to higher revenues in Men's and Women's. Unit sales of apparel increased 7%, while higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher NIKE Direct, full-price and off-price ASPs as well as a higher mix of full-price sales.

Reported EBIT increased 1% reflecting higher revenues and the following:

•Gross margin contraction of approximately 80 basis points, primarily due to unfavorable changes in standard foreign currency exchange rates, partially offset by higher full-price ASP, net of discounts, and lower other costs. The higher full-price ASP, net of discounts, was largely due to strategic pricing actions, partially offset by product mix.

•Selling and administrative expense increase of 2% due to higher demand creation and operating overhead expense. Demand creation expense increased primarily due to higher advertising and marketing expense and retail brand presentation expense, partially offset by favorable changes in foreign currency exchange rates. Operating overhead expense increased primarily due to higher other administrative costs, partially offset by favorable changes in foreign currency exchange rates.

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ASIA PACIFIC & LATIN AMERICA

We completed the sale of our entity in Chile and our entities in Argentina and Uruguay to third-party distributors in the first and second quarters of fiscal 2023, respectively. The impacts of closing these transactions are included within Corporate and are not reflected in the APLA operating segment results. This completed the transition of our NIKE Brand businesses within our CASA marketplace, which now reflects a full distributor operating model. For more information see Note 18 — Divestitures within the accompanying Notes to the Consolidated Financial Statements.

FISCAL 2024 COMPARED TO FISCAL 2023

•APLA revenues increased 5% on a currency-neutral basis primarily due to higher revenues in Southeast Asia & India, Mexico and Japan. Within our CASA territory, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model did not have a material impact on APLA revenues. Revenues increased due to overall growth in Men's, Women's, the Jordan Brand and Kids'. Wholesale revenues increased 6%. NIKE Direct revenues increased 4%, driven by comparable store sales growth of 10% and the addition of new stores, partially offset by a decline in digital sales of 2%.

•Footwear revenues increased 7% on a currency-neutral basis due to higher revenues in Men's, Women's, the Jordan Brand and Kids'. Unit sales of footwear increased 6%, while higher ASP per pair contributed approximately 1 percentage point of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, off-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

•Apparel revenues decreased 2% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's, partially offset by higher revenues in the Jordan Brand. Unit sales of apparel decreased 9%, while higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price ASP, off-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

Reported EBIT decreased 2% reflecting higher revenues and the following:

•Gross margin contraction of approximately 220 basis points primarily due to unfavorable changes in standard foreign currency exchange rates, lower margin in NIKE Direct and higher product costs, reflecting higher product input costs and product mix. This was partially offset by higher full-price ASP, net of discounts, primarily due to product mix and strategic pricing actions.

•Selling and administrative expense increase of 4% due to higher demand creation and operating overhead expense. Demand creation expense increased primarily due to higher digital marketing and sports marketing expense. Operating overhead expense increased primarily due to higher other administrative costs.

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GLOBAL BRAND DIVISIONS

Global Brand Divisions primarily represent demand creation and operating overhead expense, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.

FISCAL 2024 COMPARED TO FISCAL 2023

Global Brand Divisions' loss before interest and taxes decreased 2% primarily due to lower operating overhead expense, partially offset by higher demand creation expense. Lower operating overhead expense was primarily due to lower wage-related expenses, technology spend and other administrative costs. The increase in demand creation expense was primarily due to higher advertising and marketing expense as well as digital marketing.

CONVERSE

(1)    Other revenues consist of territories serviced by third-party licensees who pay royalties to Converse for the use of its registered trademarks and other intellectual property rights. We do not own the Converse trademarks in Japan and accordingly do not earn revenues in Japan.

FISCAL 2024 COMPARED TO FISCAL 2023

•Converse revenues decreased 15% on a currency-neutral basis primarily due to declines in North America and Western Europe. Combined unit sales within the wholesale and direct to consumer channels decreased 12%, driven primarily by a decrease in wholesale, while ASP decreased 3%, primarily driven by increased promotional activity in direct to consumer.

•Wholesale revenues decreased 16% on a currency-neutral basis, driven by declines in all geographies.

•Direct to consumer revenues decreased 14% on a currency-neutral basis as declines in North America and Western Europe, driven by reduced traffic, were partially offset by growth in Asia.

Reported EBIT decreased 30% reflecting lower revenues and the following:

•Gross margin contraction of approximately 130 basis points due to unfavorable changes in standard foreign currency exchange rates, lower full-price ASP, net of discounts, higher other costs and lower margin in direct to consumer, partially offset by lower ocean freight rates.

•Selling and administrative expense decrease of 2% due to lower operating overhead expense, primarily as a result of lower wage-related expenses.

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CORPORATE

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.

The Corporate loss before interest and taxes primarily consists of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to our corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses.

In addition to the foreign currency gains and losses recognized in Corporate revenues, foreign currency results in Corporate include gains and losses resulting from the difference between actual foreign currency exchange rates and standard rates used to record non-functional currency denominated product purchases within the NIKE Brand geographic operating segments and Converse; related foreign currency hedge results; conversion gains and losses arising from remeasurement of monetary assets and liabilities in non-functional currencies; and certain other foreign currency derivative instruments.

FISCAL 2024 COMPARED TO FISCAL 2023

Corporate's loss before interest and taxes decreased $221 million during fiscal 2024, primarily due to the following:

•a favorable change in net foreign currency gains and losses of $588 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses; these results are reported as a component of consolidated Gross profit;

•a favorable change of $80 million primarily related to lower wage-related expenses, partially offset by higher professional services, reported as a component of consolidated Operating overhead expense;

•a favorable change of $27 million primarily related to the loss recognized in the prior year upon completion of the sale of our entities in Argentina and Uruguay to a third-party distributor, partially offset by the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, as well as net favorable settlements of legal matters in the prior year, reported as a component of consolidated Other (income) expense, net; and

•an unfavorable change of $443 million related to restructuring charges, $379 million reported as a component of consolidated Operating overhead expense and $64 million reported as a component of consolidated Cost of sales.

FOREIGN CURRENCY EXPOSURES AND HEDGING PRACTICES

OVERVIEW

As a global company with significant operations outside the United States, in the normal course of business we are exposed to risk arising from changes in currency exchange rates. Our primary foreign currency exposures arise from the recording of transactions denominated in non-functional currencies and the translation of foreign currency denominated results of operations, financial position and cash flows into U.S. Dollars.

Our foreign exchange risk management program is intended to lessen both the positive and negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows. We manage global foreign exchange risk centrally on a portfolio basis to address those risks material to NIKE, Inc. We manage these exposures by taking advantage of natural offsets and currency correlations existing within the portfolio and, where practical and material, by hedging a portion of the remaining exposures using derivative instruments such as forward contracts and options. As described below, the implementation of the NIKE Trading Company ("NTC") and our foreign currency adjustment program enhanced our ability to manage our foreign exchange risk by increasing the natural offsets and currency correlation benefits existing within our portfolio of foreign exchange exposures. Our hedging policy is designed to partially or entirely offset the impact of exchange rate changes on the underlying net exposures being hedged. Where exposures are hedged, our program has the effect of delaying the impact of exchange rate movements on our Consolidated Financial Statements; the length of the delay is dependent upon hedge horizons. We do not hold or issue derivative instruments for trading or speculative purposes.

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Refer to Note 4 — Fair Value Measurements and Note 12 — Risk Management and Derivatives in the accompanying Notes to the Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end.

TRANSACTIONAL EXPOSURES

We conduct business in various currencies and have transactions which subject us to foreign currency risk. Our most significant transactional foreign currency exposures are:

•Product Costs — NIKE's product costs are exposed to fluctuations in foreign currencies in the following ways:

1.Product purchases denominated in currencies other than the functional currency of the transacting entity:

a.Certain NIKE entities purchase product from the NTC, a wholly-owned sourcing hub that buys NIKE branded products from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the products to NIKE entities in their respective functional currencies. NTC sales to a NIKE entity with a different functional currency results in a foreign currency exposure for the NTC.

b.Other NIKE entities purchase product directly from third-party factories predominantly in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.

In both purchasing scenarios, a weaker U.S. Dollar reduces inventory costs incurred by NIKE whereas a stronger U.S. Dollar increases its cost.

2.Factory input costs: NIKE operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories' foreign currency exposures, some of which are natural offsets to our existing foreign currency exposures. Under this program, our payments to these factories are adjusted for rate fluctuations in the basket of currencies ("factory currency exposure index") in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products ("factory input costs") are denominated.

As an offset to the impacts of the fluctuating U.S. Dollar on our non-functional currency denominated product purchases described above, a strengthening U.S. Dollar against the foreign currencies within the factory currency exposure indices reduces NIKE's U.S. Dollar inventory cost. Conversely, a weakening U.S. Dollar against the indexed foreign currencies increases our inventory cost.

•Non-Functional Currency Denominated External Sales — A portion of our NIKE Brand and Converse revenues associated with European operations are earned in currencies other than the Euro (e.g., the British Pound) but are recognized at a subsidiary that uses the Euro as its functional currency. These sales generate a foreign currency exposure.

•Other Costs — Non-functional currency denominated costs, such as endorsement contracts, also generate foreign currency risk, though to a lesser extent.

•Non-Functional Currency Denominated Monetary Assets and Liabilities — Our global subsidiaries have various assets and liabilities, primarily receivables and payables, including intercompany receivables and payables, denominated in currencies other than their functional currencies. These balance sheet items are subject to remeasurement which may create fluctuations in Other (income) expense, net within our Consolidated Statements of Income.

MANAGING TRANSACTIONAL EXPOSURES

Transactional exposures are managed on a portfolio basis within our foreign currency risk management program. We manage these exposures by taking advantage of natural offsets and currency correlations that exist within the portfolio and may also elect to use currency forward and option contracts to hedge the remaining effect of exchange rate fluctuations on probable forecasted future cash flows, including certain product cost exposures, non-functional currency denominated external sales and other costs described above. Generally, these are accounted for as cash flow hedges.

Certain currency forward contracts used to manage the foreign exchange exposure of non-functional currency denominated monetary assets and liabilities subject to remeasurement are not formally designated as hedging instruments. Accordingly, changes in fair value of these instruments are recognized in Other (income) expense, net and are intended to offset the foreign currency impact of the remeasurement of the related non-functional currency denominated asset or liability being hedged.

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TRANSLATIONAL EXPOSURES

Many of our foreign subsidiaries operate in functional currencies other than the U.S. Dollar. Fluctuations in currency exchange rates create volatility in our reported results as we are required to translate the balance sheets, operational results and cash flows of these subsidiaries into U.S. Dollars for consolidated reporting. The translation of foreign subsidiaries' non-U.S. Dollar denominated balance sheets into U.S. Dollars for consolidated reporting results in a cumulative translation adjustment to Accumulated other comprehensive income (loss) within Shareholders' equity. In the translation of our Consolidated Statements of Income, a weaker U.S. Dollar in relation to foreign functional currencies benefits our consolidated earnings whereas a stronger U.S. Dollar reduces our consolidated earnings. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $141 million for the year ended May 31, 2024. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a benefit of approximately $48 million for the year ended May 31, 2024.

MANAGING TRANSLATIONAL EXPOSURES

To minimize the impact of translating foreign currency denominated revenues and expenses into U.S. Dollars for consolidated reporting, certain foreign subsidiaries use excess cash to purchase U.S. Dollar denominated available-for-sale investments. The variable future cash flows associated with the purchase and subsequent sale of these U.S. Dollar denominated investments at non-U.S. Dollar functional currency subsidiaries creates a foreign currency exposure that qualifies for hedge accounting under U.S. GAAP. We utilize forward contracts and/or options to mitigate the variability of the forecasted future purchases and sales of these U.S. Dollar investments. The combination of the purchase and sale of the U.S. Dollar investment and the hedging instrument has the effect of partially offsetting the year-over-year foreign currency translation impact on net earnings in the period the investments are sold. Hedges of the purchase of U.S. Dollar denominated available-for-sale investments are accounted for as cash flow hedges.

We estimate the combination of translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in Other (income) expense, net had an unfavorable impact of approximately $68 million on our Income before income taxes for the year ended May 31, 2024.

NET INVESTMENTS IN FOREIGN SUBSIDIARIES

We are also exposed to the impact of foreign exchange fluctuations on our investments in wholly-owned foreign subsidiaries denominated in a currency other than the U.S. Dollar, which could adversely impact the U.S. Dollar value of these investments and therefore the value of future repatriated earnings. We have, in the past, hedged and may, in the future, hedge net investment positions in certain foreign subsidiaries to mitigate the effects of foreign exchange fluctuations on these net investments. These hedges are accounted for as net investment hedges in accordance with U.S. GAAP. There were no outstanding net investment hedges as of May 31, 2024 and 2023. There were no cash flows from net investment hedge settlements for the years ended May 31, 2024, 2023 and 2022.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $7,429 million for fiscal 2024, compared to $5,841 million for fiscal 2023. Net income, adjusted for non-cash items, generated $6,713 million of operating cash inflow for fiscal 2024, compared to $6,354 million for fiscal 2023. The net change in working capital and other assets and liabilities resulted in an increase to Cash provided (used) by operations of $716 million for fiscal 2024 compared to a decrease of $513 million for fiscal 2023. For fiscal 2024, the favorable net change in working capital compared to the prior year was primarily impacted by favorable changes to Inventories due to reduced inventory purchases and improved lead times, partially offset by unfavorable changes to Accounts receivable due to the timing of wholesale shipments.

Cash provided (used) by investing activities was an inflow of $894 million for fiscal 2024, compared to an inflow of $564 million for fiscal 2023, primarily driven by the net change in short-term investments (including sales, maturities and purchases). For fiscal 2024, the net change in short-term investments resulted in a cash inflow of $1,721 million compared to a cash inflow of $1,481 million for fiscal 2023.

Cash provided (used) by financing activities was an outflow of $5,888 million for fiscal 2024 compared to an outflow of $7,447 million for fiscal 2023. The decreased outflow in fiscal 2024 was driven by lower share repurchases of $4,250 million for fiscal 2024 compared to $5,480 million for fiscal 2023, partially offset by higher dividend payments of $2,169 million for fiscal 2024 compared to $2,012 million for fiscal 2023.

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In fiscal 2024, we purchased a total of 41.4 million shares of NIKE's Class B Common Stock for $4.3 billion (an average price of $102.72 per share) under the four-year, $18 billion share repurchase plan authorized by the Board of Directors in June 2022. As of May 31, 2024, we had repurchased 84.9 million shares at a cost of approximately $9.1 billion (an average price of $106.65 per share) under this program. We continue to expect funding of share repurchases will come from operating cash flows. The timing and the amount of share repurchases will be dictated by our capital needs and stock market conditions.

CAPITAL RESOURCES

On July 21, 2022, we filed a shelf registration statement (the "Shelf") with the U.S. Securities and Exchange Commission (the "SEC") which permits us to issue an unlimited amount of debt securities from time to time. The Shelf expires on July 21, 2025.

On March 11, 2022, we entered into a five-year committed credit facility agreement with a syndicate of banks which provides for up to $2 billion of borrowings, with the option to increase borrowings up to $3 billion in total with lender approval. The facility matures on March 11, 2027, with options to extend the maturity date up to an additional two years. Refer to Note 5 — Short-Term Borrowings and Credit Lines for additional information.

On March 8, 2024, we entered into a 364-day committed credit facility agreement with a syndicate of banks which provides for up to $1 billion of borrowings, with the option to increase borrowings up to $1.5 billion in total with lender approval. The facility matures on March 7, 2025, with an option to extend the maturity date an additional 364 days. This facility replaces the prior $1 billion 364-day credit facility agreement entered into on March 10, 2023, which matured on March 8, 2024. Refer to Note 5 — Short-Term Borrowings and Credit Lines for additional information.

We currently have long-term debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively. As it relates to our committed credit facilities entered into on March 11, 2022 and March 8, 2024, if our long-term debt ratings were to decline, the facility fees and interest rates would increase. Conversely, if our long-term debt ratings were to improve, the facility fees and interest rates would decrease. Changes in our long-term debt ratings would not trigger acceleration of maturity of any then-outstanding borrowings or any future borrowings under the committed credit facilities. Under these facilities, we have agreed to various covenants. These covenants include limits on the disposal of assets and the amount of debt secured by liens we may incur. In the event we were to have any borrowings outstanding under these facilities, failed to meet any covenant and were unable to obtain a waiver from a majority of the banks in the applicable syndicate, any borrowings would become immediately due and payable. As of May 31, 2024, we were in full compliance with each of these covenants, and we believe it is unlikely we will fail to meet any of these covenants in the foreseeable future.

Liquidity is also provided by our $3 billion commercial paper program. As of and for the fiscal years ended May 31, 2024 and 2023, we did not have any borrowings outstanding under our $3 billion program. We may issue commercial paper or other debt securities depending on general corporate needs.

To date, we have not experienced difficulty accessing the capital or credit markets; however, future volatility may increase costs associated with issuing commercial paper or other debt instruments or affect our ability to access those markets.

As of May 31, 2024, we had Cash and equivalents and Short-term investments totaling $11.6 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S. Treasury obligations and other investment grade fixed-income securities. Our fixed-income investments are exposed to both credit and interest rate risk. All of our investments are investment grade to minimize our credit risk. While individual securities have varying durations, as of May 31, 2024, the weighted-average days to maturity of our cash equivalents and short-term investments portfolio was 65 days.

We believe that existing Cash and equivalents, Short-term investments and cash generated by operations, together with access to external sources of funds as described above, will be sufficient to meet our domestic and foreign capital needs in the foreseeable future.

Our material cash requirements as of May 31, 2024, were as follows:

•Debt Obligations — Refer to Note 5 — Short-Term Borrowings and Credit Lines and Note 6 — Long-Term Debt in the accompanying Notes to the Consolidated Financial Statements for additional information.

•Operating Leases — Refer to Note 17 — Leases in the accompanying Notes to the Consolidated Financial Statements for additional information.

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•Endorsement Contracts — As of May 31, 2024, we had endorsement contract obligations of $10.6 billion, with $1.7 billion payable within 12 months, representing approximate amounts of base compensation and minimum guaranteed royalty fees we are obligated to pay athlete, public figure, sport team and league endorsers of our products. Actual payments under some contracts may be higher than these amounts as these contracts provide for bonuses to be paid to the endorsers based upon athletic achievements and/or royalties on product sales in future periods. Actual payments under some contracts may also be lower as these contracts include provisions for reduced payments if athletic performance declines in future periods. In addition to the cash payments, we are obligated to furnish our endorsers with NIKE product for their use. It is not possible to determine how much we will spend on this product on an annual basis as the amount of product provided to the endorsers will depend on many factors and the contracts generally do not stipulate a minimum amount of cash to be spent on the product.

•Product Purchase Obligations — As of May 31, 2024, we had product purchase obligations of $5.7 billion, all of which are payable within the next 12 months. Product purchase obligations represent agreements (including open purchase orders) to purchase products in the ordinary course of business that are enforceable and legally binding and specify all significant terms. We generally order product at least four to five months in advance of sale based primarily on advanced orders received from external wholesale customers and internal orders from our direct to consumer operations. In some cases, prices are subject to change throughout the production process.

•Other Purchase Obligations — As of May 31, 2024, we had $3.5 billion of other purchase obligations, with $1.9 billion payable within the next 12 months. Other purchase obligations primarily include technology investments, construction, service and marketing commitments, including marketing commitments associated with endorsement contracts, made in the ordinary course of business. The amounts represent the minimum payments required by legally binding contracts and agreements that specify all significant terms, and may include open purchase orders for non-product purchases.

In addition to the above, we have long-term obligations for uncertain tax positions and various post-retirement benefits for which we are not able to reasonably estimate when cash payments will occur. Refer to Note 7 — Income Taxes and Note 11 — Benefit Plans in the accompanying Notes to the Consolidated Financial Statements for additional information related to uncertain tax positions and post-retirement benefits, respectively.

As a part of the transition tax related to the Tax Cuts and Jobs Act, as of May 31, 2024, we had $483 million in estimated future cash payments, with $215 million payable within the next 12 months. These amounts represent the transition tax on deemed repatriation of undistributed earnings of foreign subsidiaries, which are reflected net of foreign tax credits we utilized.

Refer to Note 16 — Commitments and Contingencies in the accompanying Notes to the Consolidated Financial Statements for additional information related to our off-balance sheet arrangements, bank guarantees and letters of credit.

OFF-BALANCE SHEET ARRANGEMENTS

As of May 31, 2024, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current and future financial condition, results of operations, liquidity, capital expenditures or capital resources. In connection with various contracts and agreements, we routinely provide indemnification relating to the enforceability of intellectual property rights, coverage for legal issues that arise and other items where we are acting as the guarantor. Currently, we have several such agreements in place. Based on our historical experience and the estimated probability of future loss, we have determined that the fair value of such indemnification is not material to our financial position or results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 — Summary of Significant Accounting Policies within the accompanying Notes to the Consolidated Financial Statements for recently adopted and issued accounting standards.

CRITICAL ACCOUNTING ESTIMATES

Our previous discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.

We believe the assumptions and judgments involved in the accounting estimates described below have the greatest potential impact on our Consolidated Financial Statements, so we consider these to be our critical accounting estimates. Management has reviewed and discussed these critical accounting estimates with the Audit & Finance Committee of the Board of Directors.

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Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in the preparation of our Consolidated Financial Statements. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

SALES-RELATED RESERVES

Provisions for anticipated sales returns consist of both contractual return rights and discretionary authorized returns. Provisions for post-invoice sales discounts consist of both contractual programs and discretionary discounts that are expected to be granted at a later date.

Estimates of discretionary authorized returns, discounts and claims are based on (1) historical rates, (2) specific identification of outstanding returns not yet received from customers and outstanding discounts and claims and (3) estimated returns, discounts and claims expected but not yet finalized with customers. Actual returns, discounts and claims in any future period are inherently uncertain and may differ from estimates recorded. If actual or expected future returns, discounts or claims were significantly different than reserves established, a reduction or increase to net revenues would be recorded in the period in which such determination was made.

Refer to Note 14 — Revenues in the accompanying Notes to the Consolidated Financial Statements for additional information.

INVENTORY RESERVES

We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions. If we estimate the net realizable value of our inventory is less than the cost of the inventory, we record a reserve equal to the difference between the cost of the inventory and the estimated net realizable value. This reserve is recorded as a charge to Cost of sales. If changes in market conditions result in reductions to the estimated net realizable value of our inventory below our previous estimate, we would increase our reserve in the period in which we made such a determination.

HEDGE ACCOUNTING FOR DERIVATIVES

We use derivative contracts to hedge certain anticipated foreign currency and interest rate transactions as well as certain non-functional currency monetary assets and liabilities. When the specific criteria to qualify for hedge accounting has been met, changes in the fair value of contracts hedging probable forecasted future cash flows are recorded in Accumulated other comprehensive income (loss), rather than Net income, until the underlying hedged transaction affects Net income. In most cases, this results in gains and losses on hedge derivatives being released from Accumulated other comprehensive income (loss) into Net income sometime after the maturity of the derivative. One of the criteria for this accounting treatment is that the notional value of these derivative contracts should not be in excess of the designated amount of anticipated transactions. By their very nature, our estimates of anticipated transactions may fluctuate over time and may ultimately vary from actual transactions. When the designated amount of anticipated or actual transactions decline below hedged levels, or if it is no longer probable a forecasted transaction will occur by the end of the originally specified time period or within an additional two-month period of time thereafter, we reclassify the cumulative change in fair value of the over-hedged portion of the related hedge contract from Accumulated other comprehensive income (loss) to Other (income) expense, net during the quarter in which the decrease occurs. In rare circumstances, the additional period of time may exceed two months due to extenuating circumstances related to the nature of the forecasted transaction that are outside our control or influence.

Refer to Note 12 — Risk Management and Derivatives in the accompanying Notes to the Consolidated Financial Statements for additional information.

INCOME TAXES

We are subject to taxation in the United States, as well as various state and foreign jurisdictions. The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. On an interim basis, we estimate our effective tax rate for the full fiscal year. This estimated annual effective tax rate is then applied to the year-to-date Income before income taxes excluding infrequently occurring or unusual items, to determine the year-to-date Income tax expense. The income tax effects of infrequent or unusual items are recognized in the interim period in which they occur. As the fiscal year progresses, we continually refine our estimate based upon actual events and earnings by jurisdiction during the year. This continual estimation process periodically results in a change to our expected effective tax rate for the fiscal year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs.

On a quarterly basis, we evaluate the probability a tax position will be effectively sustained and the appropriateness of the amount recognized for uncertain tax positions based on factors including changes in facts or circumstances, changes in tax law, settled audit issues and new audit activity. Changes in our assessment may result in the recognition of a tax benefit or an

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additional charge to the tax provision in the period our assessment changes. We recognize interest and penalties related to income tax matters in Income tax expense.

Refer to Note 7 — Income Taxes in the accompanying Notes to the Consolidated Financial Statements for additional information.

OTHER CONTINGENCIES

In the ordinary course of business, we are subject to various legal proceedings, claims and government investigations related to our business, products and actions of our employees and representatives, including contractual and employment relationships, product liability, antitrust, customs, tax, intellectual property and other matters. We record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable. Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants and courts. Recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. If future adjustments to estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record additional charges during the period in which the actual loss or change in estimate occurred. In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility the ultimate loss will materially exceed the recorded liability.

Refer to Note 16 — Commitments and Contingencies in the accompanying Notes to the Consolidated Financial Statements for additional information.

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ITEM 7. 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 NIKE Direct operations, which is comprised of both NIKE-owned retail stores and sales through our digital platforms (also referred to as "NIKE Brand Digital"), to wholesale accounts and to 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 businesses. Our strategy is to achieve long-term revenue growth by creating innovative, "must-have" products, building deep personal consumer connections with our brands and delivering compelling consumer experiences through digital platforms and at retail.

Through the Consumer Direct Acceleration strategy, we are focused on creating the marketplace of the future with more premium, consistent and seamless consumer experiences, leading with digital and our owned stores, as well as select wholesale partners. In addition, our product creation and marketing organizations are aligned to a consumer construct focused on sports dimensions through Men's, Women's and Kids', which allows us to better serve consumer needs. We continue to invest in a new Enterprise Resource Planning Platform, data and analytics, demand sensing, insight gathering, and other areas to create an end-to-end technology foundation, which we believe will further accelerate our digital transformation. We believe this unified approach will accelerate growth and unlock more efficiency for our business, while driving speed and responsiveness as we serve consumers globally.

FINANCIAL HIGHLIGHTS

•In fiscal 2023, NIKE, Inc. achieved record Revenues of $51.2 billion, which increased 10% and 16% on a reported and currency-neutral basis, respectively

•NIKE Direct revenues grew 14% from $18.7 billion in fiscal 2022 to $21.3 billion in fiscal 2023, and represented approximately 44% of total NIKE Brand revenues for fiscal 2023

•Gross margin for the fiscal year decreased 250 basis points to 43.5% primarily driven by higher product costs, higher markdowns and unfavorable changes in foreign currency exchange rates, partially offset by strategic pricing actions

•Inventories as of May 31, 2023 were $8.5 billion, flat compared to the prior year, driven by the actions we took throughout fiscal 2023 to manage inventory levels

•We returned $7.5 billion to our shareholders in fiscal 2023 through share repurchases and dividends

•Return on Invested Capital ("ROIC") as of May 31, 2023 was 31.5% compared to 46.5% as of May 31, 2022. ROIC is considered a non-GAAP financial measure, see "Use of Non-GAAP Financial Measures" for further information.

For discussion related to the results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2022 Form 10-K, which was filed with the United States Securities and Exchange Commission on July 21, 2022.

CURRENT ECONOMIC CONDITIONS AND MARKET DYNAMICS

•Consumer Spending: Our fiscal 2023 growth in Revenues reflects strong demand for our products despite ongoing uncertainty in the global economy. We will continue to closely monitor macroeconomic conditions, including potential impacts of inflation and rising interest rates on consumer behavior.

•Inflationary Pressures: Inflationary pressures, including higher product input, freight and logistics costs negatively impacted gross margin for fiscal 2023. The strategic pricing actions we have taken partially offset the impacts of these higher costs.

•Supply Chain Volatility: Supply chain challenges, macroeconomic conditions and the impact of the COVID-19 pandemic on the manufacturing of our product disrupted the flow of seasonal product in fiscal 2022 and the first quarter of fiscal 2023, resulting in elevated inventory levels at the end of the first quarter of fiscal 2023. Throughout fiscal 2023, we took action to reduce excess inventory by decreasing future inventory purchases and increasing promotional activity. These actions, along with the stabilization of inventory transit times in the second and third quarters of fiscal 2023, resulted in the normalization of the seasonal flow of product in the fourth quarter of fiscal 2023.

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•COVID-19 Impacts in Greater China: During the first and second quarters of fiscal 2023, we managed through continued temporary store closures and reduced retail traffic in Greater China, primarily due to COVID-19 related local government restrictions. At the beginning of the third quarter of fiscal 2023, the government mandated restrictions were lifted and we experienced improvement in physical retail traffic.

•Foreign Currency Impacts: As a global company with significant operations outside the United States, we are exposed to risk arising from foreign currency exchange rates. For fiscal 2023, fluctuations in foreign currency exchange rates negatively impacted our reported Revenues by approximately $2,859 million, reducing our revenue growth rate to 10% on a reported basis from 16% on a currency-neutral basis. Foreign currency impacts, net of hedges, also reduced our reported Income before income taxes by approximately $1,023 million. For further information, refer to "Foreign Currency Exposures and Hedging Practices".

The operating environment could remain volatile in fiscal 2024 as the risk exists that worsening macroeconomic conditions could have a material adverse impact on our future revenue growth as well as overall profitability. For more information refer to Item 1A Risk Factors, within Part I, Item 1. Business.

RECENT DEVELOPMENTS

During the first and second quarters of fiscal 2023, we completed the sale of our entity in Chile and our entities in Argentina and Uruguay to third-party distributors, respectively. Now that we have completed the shift from a wholesale and direct to consumer operating model to a distributor model within our Central and South America ("CASA") territory, we expect consolidated NIKE, Inc. and Asia Pacific & Latin America ("APLA") revenue growth will be reduced due to different commercial terms. However, over time we expect the future operating model to have a favorable impact on our overall profitability as we reduce selling and administrative expenses, as well as reduce exposure to foreign exchange rate volatility.

USE OF NON-GAAP FINANCIAL MEASURES

Throughout this Annual Report on Form 10-K, 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 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"): Calculated as Net income before Interest expense (income), net and Income tax expense in the Consolidated Statements of Income. Total NIKE, Inc. EBIT for fiscal 2023 and fiscal 2022 is as follows:

EBIT Margin: Calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. Our EBIT Margin calculation for fiscal 2023 and fiscal 2022 is as follows:

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Return on Invested Capital ("ROIC"): Represents a performance measure that management believes is useful information in understanding the Company's ability to effectively manage invested capital. Our ROIC calculation as of May 31, 2023 and 2022 is as follows:

(1)Equals Earnings before interest and taxes multiplied by the effective tax rate as of the respective quarter end.

(2)Total debt includes the following: 1) Current portion of long-term debt, 2) Notes Payable, 3) Current portion of operating lease liabilities, 4) Long-term debt and 5) Operating lease liabilities.

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.

Wholesale equivalent revenues: References to wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our NIKE Direct operations, which are charged at prices comparable to those charged to external wholesale customers.

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 includes revenues from stores that were temporarily closed during the period as a result of COVID-19. 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.

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RESULTS OF OPERATIONS