NIKE(NKE) - 2026 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements This section presents NIKE, Inc.'s unaudited condensed consolidated financial statements and detailed accounting notes Unaudited Condensed Consolidated Statements of Income | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :----------------------------- | :-------------- | :-------------- | :--------- | | Revenues | $11,720 | $11,589 | 1% | | Cost of sales | $6,777 | $6,332 | 7% | | Gross profit | $4,943 | $5,257 | -6% | | Income before income taxes | $922 | $1,307 | -29% | | NET INCOME | $727 | $1,051 | -31% | | Earnings per common share: | | | | | Basic | $0.49 | $0.70 | -30% | | Diluted | $0.49 | $0.70 | -30% | Unaudited Condensed Consolidated Statements of Comprehensive Income | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :--------- | | Net income | $727 | $1,051 | -31% | | Other comprehensive income (loss), net of tax: | | | | | Change in net foreign currency translation adjustment | $134 | $138 | -2.9% | | Change in net gains (losses) on cash flow hedges | $(186) | $(227) | 18.06% | | Change in net gains (losses) on other | $2 | $9 | -77.8% | | Total other comprehensive income (loss), net of tax | $(50) | $(80) | 37.5% | | TOTAL COMPREHENSIVE INCOME | $677 | $971 | -30.3% | Unaudited Condensed Consolidated Balance Sheets | Metric | Aug 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (%) | | :-------------------------------- | :---------------------- | :---------------------- | :--------- | | Cash and equivalents | $7,024 | $7,464 | -5.89% | | Short-term investments | $1,551 | $1,687 | -8.06% | | Accounts receivable, net | $4,962 | $4,717 | 5.19% | | Inventories | $8,114 | $7,489 | 8.34% | | Total current assets | $23,898 | $23,362 | 2.29% | | TOTAL ASSETS | $37,334 | $36,579 | 2.06% | | Total current liabilities | $10,911 | $10,566 | 3.27% | | Long-term debt | $7,996 | $7,961 | 0.44% | | Total shareholders' equity | $13,468 | $13,213 | 1.93% | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $37,334 | $36,579 | 2.06% | Unaudited Condensed Consolidated Statements of Cash Flows | Metric | 2025 (Millions) | 2024 (Millions) | Change ($) | | :------------------------------------ | :-------------- | :-------------- | :--------- | | Cash provided (used) by operations | $222 | $394 | $(172) | | Cash provided (used) by investing activities | $(59) | $(166) | $107 | | Cash provided (used) by financing activities | $(598) | $(1,622) | $1,024 | | Effect of exchange rate changes on cash and equivalents | $(5) | $19 | $(24) | | Net increase (decrease) in cash and equivalents | $(440) | $(1,375) | $935 | | CASH AND EQUIVALENTS, END OF PERIOD | $7,024 | $8,485 | -17.22% | Unaudited Condensed Consolidated Statements of Shareholders' Equity | Metric | Aug 31, 2025 (Millions) | May 31, 2025 (Millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Capital in excess of stated value | $14,473 | $14,195 | | Accumulated other comprehensive income (loss) | $(308) | $(258) | | Retained earnings (deficit) | $(700) | $(727) | | Total shareholders' equity | $13,468 | $13,213 | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed notes to the unaudited condensed consolidated financial statements, covering accounting policies, liabilities, and segment data NOTE 1 Summary of Significant Accounting Policies - The Company is evaluating ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective June 1, 2025, to determine its impact on disclosures[13] - The Company is evaluating ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,' effective June 1, 2027, to determine its impact on disclosures[14] NOTE 2 Accrued Liabilities | Accrued Liability | Aug 31, 2025 (Millions) | May 31, 2025 (Millions) | | :------------------------ | :---------------------- | :---------------------- | | Sales-related reserves | $1,788 | $1,834 | | Compensation and benefits | $1,244 | $1,245 | | Dividends payable | $599 | $598 | | Other | $2,292 | $2,234 | | TOTAL ACCRUED LIABILITIES | $5,923 | $5,911 | NOTE 3 Fair Value Measurements Assets at Fair Value (August 31, 2025) | Asset Type | Fair Value (Millions) | | :------------------------ | :-------------------- | | Cash | $1,409 | | U.S. Treasury securities | $897 | | Commercial paper and bonds | $672 | | Money market funds | $5,309 | | Time deposits | $271 | | U.S. Agency securities | $17 | | TOTAL ASSETS AT FAIR VALUE | $8,575 | - Derivative assets at fair value increased to $188 million as of August 31, 2025, from $131 million as of May 31, 2025[18][19] - Derivative liabilities at fair value increased to $518 million as of August 31, 2025, from $371 million as of May 31, 2025[18][19] - The fair value of long-term debt was approximately $6,794 million at August 31, 2025, up from $6,673 million at May 31, 2025[21] NOTE 4 Income Taxes | Metric | Q1 FY26 | Q1 FY25 | Change (bps) | | :---------------- | :------ | :------ | :----------- | | Effective tax rate | 21.1% | 19.6% | 150 | - Total gross unrecognized tax benefits were $1,021 million as of August 31, 2025, with $748 million affecting the effective tax rate if recognized[24] - The Company estimates a possible decrease of up to $228 million in total gross unrecognized tax benefits within the next 12 months due to expected resolution of U.S. federal income tax matters[27] - The European Commission is investigating whether the Netherlands breached State Aid rules when granting certain tax rulings to the Company, which the Company believes is without merit[28] NOTE 5 Stock-Based Compensation | Compensation Type | Q1 FY26 (Millions) | Q1 FY25 (Millions) | | :------------------------ | :----------------- | :----------------- | | Stock options | $76 | $71 | | ESPPs | $15 | $13 | | Restricted stock and units | $94 | $99 | | TOTAL | $185 | $183 | - Unrecognized compensation costs from stock options totaled $309 million, with a weighted average remaining period of 2.4 years[32] - Unrecognized compensation costs from restricted stock and restricted stock units totaled $522 million, with a weighted average remaining period of 2.3 years[33] NOTE 6 Earnings Per Share | Metric | Q1 FY26 | Q1 FY25 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Net income available to common stockholders | $727 | $1,051 | -31% | | Basic EPS | $0.49 | $0.70 | -30% | | Diluted EPS | $0.49 | $0.70 | -30% | - The computation of diluted earnings per common share excluded an estimated 68.3 million shares for Q1 FY26 because the awards were assumed to be anti-dilutive[34] NOTE 7 Risk Management and Derivatives - The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $18.5 billion as of August 31, 2025, compared to $18.4 billion as of May 31, 2025[42] - Approximately $183 million of deferred net losses (net of tax) on cash flow hedges are expected to be reclassified to Net income during the next 12 months[42] - The total notional amount of outstanding interest rate swap contracts designated as fair value hedges was $2.4 billion as of August 31, 2025 and May 31, 2025[43] - The total notional amount of outstanding undesignated derivative instruments was $4.1 billion as of August 31, 2025, compared to $4.0 billion as of May 31, 2025[44] NOTE 8 Accumulated Other Comprehensive Income (Loss) | Component | Aug 31, 2025 (Millions) | May 31, 2025 (Millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Foreign currency translation adjustment | $20 | $(114) | | Net cash flow hedges | $(393) | $(207) | | Net investment hedges | $115 | $115 | | Other | $(50) | $(52) | | TOTAL | $(308) | $(258) | NOTE 9 Revenues Revenues by Product Line and Distribution Channel (Q1 FY26) | Revenue Type (Q1 FY26) | Amount (Millions) | | :--------------------- | :---------------- | | Footwear | $7,731 | | Apparel | $3,324 | | Equipment | $638 | | Sales to Wholesale Customers | $7,034 | | Sales through Direct to Consumer | $4,659 | | TOTAL REVENUES | $11,720 | Revenues by Product Line and Distribution Channel (Q1 FY25) | Revenue Type (Q1 FY25) | Amount (Millions) | | :--------------------- | :---------------- | | Footwear | $7,898 | | Apparel | $3,049 | | Equipment | $615 | | Sales to Wholesale Customers | $6,685 | | Sales through Direct to Consumer | $4,877 | | TOTAL REVENUES | $11,589 | NOTE 10 Segment Information Revenues by Segment (Q1 FY26) | Segment | Amount (Millions) | | :------------------------- | :---------------- | | North America | $5,020 | | Europe, Middle East & Africa | $3,331 | | Greater China | $1,512 | | Asia Pacific & Latin America | $1,490 | | Global Brand Divisions | $9 | | Converse | $366 | | Corporate | $(8) | | TOTAL NIKE, INC. REVENUES | $11,720 | EBIT by Segment (Q1 FY26) | Segment | Amount (Millions) | | :--------------------- | :---------------- | | North America | $1,134 | | Europe, Middle East & Africa | $735 | | Greater China | $377 | | Asia Pacific & Latin America | $350 | | Global Brand Divisions | $(1,192) | | Converse | $39 | | Corporate | $(539) | | TOTAL NIKE, INC. EBIT | $904 | Inventories by Segment (August 31, 2025) | Inventories (Aug 31, 2025) | Amount (Millions) | | :------------------------- | :---------------- | | North America | $3,524 | | Europe, Middle East & Africa | $2,128 | | Greater China | $1,097 | | Asia Pacific & Latin America | $1,066 | | Global Brand Divisions | $142 | | Converse | $247 | | Corporate | $(90) | | TOTAL NIKE, INC. INVENTORIES | $8,114 | NOTE 11 Commitments and Contingencies - The Company is disputing claims from Belgian Customs for alleged underpaid duties related to products imported beginning in fiscal 2018[65] - The potential loss from the Belgian Customs claim is currently unestimable, but an adverse resolution could have a material adverse effect on the Company's results of operations, financial position, and cash flows[65] NOTE 12 Supplier Finance Programs - Outstanding supplier obligations confirmed under voluntary supplier finance programs increased to $1,314 million as of August 31, 2025, from $1,101 million as of May 31, 2025[66] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of NIKE's business, financial highlights, and detailed analysis of operating results, liquidity, and capital OVERVIEW - NIKE is the largest seller of athletic footwear and apparel in the world, selling products through NIKE Direct and wholesale channels[67] - The company's strategy is to achieve sustainable, profitable long-term revenue growth by leading with sport, creating innovative products, building deep consumer connections, and delivering compelling consumer experiences through digital platforms and retail[68] QUARTERLY FINANCIAL HIGHLIGHTS Q1 FY26 Financial Highlights | Metric | Q1 FY26 (Billions) | Q1 FY25 (Billions) | Change (%) | | :--------------------- | :----------------- | :----------------- | :--------- | | Total Revenues | $11.7 | $11.6 | 1% | | NIKE Direct revenues | $4.5 | $4.7 | -4% | | NIKE Brand wholesale revenues | $6.8 | $6.4 | 7% | | Gross margin | 42.2% | 45.4% | -320 bps | | Inventories (Aug 31) | $8.1 | $7.489 (May 31) | 8% (QoQ) | - Gross margin decreased 320 basis points due to higher discounts with wholesale partners, higher discounts in NIKE Brand factory stores, an increase in product costs (including new tariffs), and changes in channel mix[71] - The company returned approximately $0.7 billion to shareholders in Q1 FY26 through dividends and share repurchases[71] - New tariffs are expected to result in a gross incremental cost of approximately $1.5 billion on an annualized basis, with a negative impact on gross margin for fiscal 2026[70] - Strategic actions include reducing the supply of certain footwear, repositioning NIKE Brand Digital as a full-price platform, reinvesting in wholesale distribution, and increasing investment in demand creation[72] USE OF NON-GAAP FINANCIAL MEASURES Earnings Before Interest and Taxes (EBIT) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | | Net income | $727 | $1,051 | -31% | | Add: Interest expense (income), net | $(18) | $(43) | 58.1% | | Add: Income tax expense | $195 | $256 | -23.8% | | EARNINGS BEFORE INTEREST AND TAXES | $904 | $1,264 | -28.5% | | EBIT MARGIN | 7.7% | 10.9% | -320 bps | - Currency-neutral revenues are calculated using actual exchange rates from the comparative prior year period to exclude the impact of foreign currency exchange rate fluctuations[75] COMPARABLE STORE SALES - Comparable store sales, a key metric, exclude NIKE Brand Digital sales and comprise revenues from NIKE-owned in-line and factory stores that have been open at least one year, with square footage changes of no more than 15% and no permanent repositioning within the past year[76] RESULTS OF OPERATIONS This section details consolidated operating results for Q1 FY26 vs Q1 FY25, highlighting decreased net income and diluted EPS due to gross margin contraction CONSOLIDATED OPERATING RESULTS | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :----------------------------- | :----------------- | :----------------- | :--------- | | Revenues | $11,720 | $11,589 | 1% | | Cost of sales | $6,777 | $6,332 | 7% | | Gross profit | $4,943 | $5,257 | -6% | | Gross margin | 42.2% | 45.4% | -320 bps | | Income before income taxes | $922 | $1,307 | -29% | | NET INCOME | $727 | $1,051 | -31% | | Diluted earnings per common share | $0.49 | $0.70 | -30% | REVENUES NIKE, Inc. Revenues (Q1 FY26 vs Q1 FY25) | Revenue Type | Reported Change (%) | Currency-Neutral Change (%) | | :-------------------------------- | :------------------ | :-------------------------- | | TOTAL NIKE, INC. REVENUES | 1% | -1% | | TOTAL NIKE BRAND REVENUES | 2% | 0% | | NIKE Brand Footwear | -1% | -2% | | NIKE Brand Apparel | 9% | 7% | | NIKE Brand Equipment | 4% | 3% | | Converse | -27% | -28% | | NIKE Brand Wholesale Revenues | 7% | 5% | | NIKE Direct Revenues | -4% | -5% | | NIKE Brand Digital Sales | -12% | -12% | GROSS MARGIN | Metric | Q1 FY26 | Q1 FY25 | Change (bps) | | :----------- | :------ | :------ | :----------- | | Gross margin | 42.2% | 45.4% | -320 | - Consolidated gross margin decreased by 320 basis points, primarily due to lower NIKE Brand average selling price (approx. 250 bps), higher NIKE Brand product costs (approx. 100 bps), and lower gross margin from Converse (approx. 30 bps)[83] - The decrease was partially offset by lower warehousing and logistics costs (approx. 50 bps increase) and favorable changes in net foreign currency exchange rates (approx. 30 bps increase)[83] TOTAL SELLING AND ADMINISTRATIVE EXPENSE | Expense Type | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :--------- | | Demand creation expense | $1,188 | $1,226 | -3% | | Operating overhead expense | $2,828 | $2,822 | 0% | | Total selling and administrative expense | $4,016 | $4,048 | -1% | | % of revenues | 34.3% | 34.9% | -60 bps | - Demand creation expense decreased 3% due to lower brand marketing expense, partially offset by higher sports marketing expense and unfavorable changes in foreign currency exchange rates[86] - Operating overhead expense was flat due to higher wage-related expense and unfavorable changes in foreign currency exchange rates, offset by lower other administrative costs[87] OTHER (INCOME) EXPENSE, NET | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | | :------------------------ | :----------------- | :----------------- | | Other (income) expense, net | $23 (expense) | $(55) (income) | - The shift from income to expense was primarily due to a net unfavorable change in foreign currency conversion gains and losses, including hedges[89] INCOME TAXES | Metric | Q1 FY26 | Q1 FY25 | Change (bps) | | :---------------- | :------ | :------ | :----------- | | Effective tax rate | 21.1% | 19.6% | 150 | - The increase in the effective tax rate was primarily due to decreased benefits from stock-based compensation[91] SEGMENT INFORMATION This section details revenues and EBIT by operating segment, highlighting varying regional performance with growth in North America and EMEA, and declines in other regions Revenues by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Reported Change (%) | Currency-Neutral Change (%) | | :------------------------- | :----------------- | :----------------- | :------------------ | :-------------------------- | | North America | $5,020 | $4,826 | 4% | 4% | | Europe, Middle East & Africa | $3,331 | $3,143 | 6% | 1% | | Greater China | $1,512 | $1,666 | -9% | -10% | | Asia Pacific & Latin America | $1,490 | $1,462 | 2% | 1% | | Global Brand Divisions | $9 | $14 | -36% | -39% | | TOTAL NIKE BRAND | $11,362 | $11,111 | 2% | 0% | | Converse | $366 | $501 | -27% | -28% | | Corporate | $(8) | $(23) | — | — | | TOTAL NIKE, INC. REVENUES | $11,720 | $11,589 | 1% | -1% | EBIT by Segment (Q1 FY26 vs Q1 FY25) | Segment | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :--------- | | North America | $1,134 | $1,216 | -7% | | Europe, Middle East & Africa | $735 | $792 | -7% | | Greater China | $377 | $502 | -25% | | Asia Pacific & Latin America | $350 | $402 | -13% | | Global Brand Divisions | $(1,192) | $(1,227) | 3% | | TOTAL NIKE BRAND | $1,404 | $1,685 | -17% | | Converse | $39 | $121 | -68% | | Corporate | $(539) | $(542) | 1% | | TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES | $904 | $1,264 | -28% | | EBIT margin | 7.7% | 10.9% | -320 bps | NORTH AMERICA North America Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Reported Change (%) | Currency-Neutral Change (%) | | :--------------------- | :----------------- | :----------------- | :------------------ | :-------------------------- | | TOTAL REVENUES | $5,020 | $4,826 | 4% | 4% | | Sales to Wholesale Customers | $2,736 | $2,475 | 11% | 11% | | Sales through NIKE Direct | $2,284 | $2,351 | -3% | -3% | | EBIT | $1,134 | $1,216 | -7% | | | Gross margin | 42.3% | 45.6% | -330 bps | | - North America footwear revenues were flat on a currency-neutral basis, with unit sales increasing 5% but average selling price (ASP) decreasing approximately 5% due to channel mix and higher discounts[96] - North America apparel revenues increased 11% on a currency-neutral basis, with unit sales increasing 16% but ASP decreasing approximately 5% due to channel mix and higher discounts[96] - Gross margin contraction of 330 basis points was primarily due to new tariffs and lower ASP, partially offset by lower warehousing and logistics costs[96] EUROPE, MIDDLE EAST & AFRICA EMEA Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Reported Change (%) | Currency-Neutral Change (%) | | :--------------------- | :----------------- | :----------------- | :------------------ | :-------------------------- | | TOTAL REVENUES | $3,331 | $3,143 | 6% | 1% | | Sales to Wholesale Customers | $2,261 | $2,074 | 9% | 4% | | Sales through NIKE Direct | $1,070 | $1,069 | 0% | -6% | | EBIT | $735 | $792 | -7% | | | Gross margin | 43.0% | 46.1% | -310 bps | | - EMEA footwear revenues decreased 2% on a currency-neutral basis, with unit sales increasing 4% but ASP decreasing approximately 6% due to higher discounts and channel mix[98] - EMEA apparel revenues increased 6% on a currency-neutral basis, with unit sales increasing 8% but ASP decreasing approximately 2% due to higher discounts[98] - Gross margin contraction of 310 basis points was primarily due to higher product costs and lower ASP, partially offset by lower warehousing and logistics costs[98] GREATER CHINA Greater China Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Reported Change (%) | Currency-Neutral Change (%) | | :--------------------- | :----------------- | :----------------- | :------------------ | :-------------------------- | | TOTAL REVENUES | $1,512 | $1,666 | -9% | -10% | | Sales to Wholesale Customers | $893 | $971 | -8% | -9% | | Sales through NIKE Direct | $619 | $695 | -11% | -12% | | EBIT | $377 | $502 | -25% | | | Gross margin | 47.2% | 48.7% | -150 bps | | - Greater China footwear revenues decreased 12% on a currency-neutral basis, with unit sales decreasing 11% and ASP decreasing approximately 1% due to higher discounts and channel mix[100] - Greater China apparel revenues were flat on a currency-neutral basis, with unit sales decreasing 2% but ASP increasing approximately 2% due to product mix[100] - Gross margin contraction of 150 basis points was primarily due to higher product costs, driven by product mix[100] ASIA PACIFIC & LATIN AMERICA APLA Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Reported Change (%) | Currency-Neutral Change (%) | | :--------------------- | :----------------- | :----------------- | :------------------ | :-------------------------- | | TOTAL REVENUES | $1,490 | $1,462 | 2% | 1% | | Sales to Wholesale Customers | $949 | $890 | 7% | 6% | | Sales through NIKE Direct | $541 | $572 | -5% | -6% | | EBIT | $350 | $402 | -13% | | | Gross margin | 43.8% | 46.5% | -270 bps | | - APLA footwear revenues were flat on a currency-neutral basis, with unit sales increasing 5% but ASP decreasing approximately 5% due to product mix, channel mix, and higher discounts[102] - APLA apparel revenues increased 5% on a currency-neutral basis, with unit sales increasing 10% but ASP decreasing approximately 5% due to higher discounts and channel mix[102] - Gross margin contraction of approximately 270 basis points was primarily due to lower ASP and unfavorable changes in standard foreign currency exchange rates[102] GLOBAL BRAND DIVISIONS Global Brand Divisions Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :------------------------------ | :----------------- | :----------------- | :--------- | | Revenues | $9 | $14 | -36% | | EARNINGS (LOSS) BEFORE INTEREST AND TAXES | $(1,192) | $(1,227) | 3% | | Demand creation expense | $203 | $242 | -16% | | Operating overhead expense | $831 | $846 | -2% | - The decrease in loss before interest and taxes was primarily due to lower demand creation expense (down 16%) and lower operating overhead expense (down 2%)[104] CONVERSE Converse Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Reported Change (%) | Currency-Neutral Change (%) | | :--------------------- | :----------------- | :----------------- | :------------------ | :-------------------------- | | TOTAL REVENUES | $366 | $501 | -27% | -28% | | Sales to Wholesale Customers | $195 | $275 | -29% | -31% | | Sales through Direct to Consumer | $145 | $190 | -24% | -25% | | EBIT | $39 | $121 | -68% | | | Gross margin | 47.3% | 53.5% | -620 bps | | - Converse unit sales decreased 22%, while lower average selling price reduced revenues by approximately 6 percentage points due to higher discounts and product mix[109] - Gross margin contraction of approximately 620 basis points was primarily due to lower ASP and higher warehousing and logistics costs[109] CORPORATE Corporate Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change ($) | | :-------------------------------- | :----------------- | :----------------- | :--------- | | EARNINGS (LOSS) BEFORE INTEREST AND TAXES | $(539) | $(542) | $3 | - Corporate's loss before interest and taxes decreased by $3 million, primarily due to a favorable change of $20 million in Operating overhead expense and a favorable change of $17 million in net foreign currency gains and losses related to standard rate differences[110] - This was partially offset by an unfavorable change of $37 million related to the remeasurement of monetary assets and liabilities denominated in non-functional currencies[110] FOREIGN CURRENCY EXPOSURES AND HEDGING PRACTICES This section outlines NIKE's foreign currency exchange rate risks and strategies for managing them through a centralized hedging program, distinguishing transactional and translational exposures OVERVIEW - NIKE manages global foreign exchange risk centrally on a portfolio basis to address material risks[112] - The hedging policy is designed to partially or entirely offset the impact of exchange rate changes on underlying net exposures, delaying their impact on financial statements[112] TRANSACTIONAL EXPOSURES - Significant transactional foreign currency exposures include product costs (non-functional currency purchases), non-functional currency denominated external sales (e.g., European operations), other costs (e.g., endorsement contracts), and non-functional currency denominated monetary assets and liabilities subject to remeasurement[116] MANAGING TRANSACTIONAL EXPOSURES - Transactional exposures are managed on a portfolio basis, utilizing natural offsets and currency correlations, and may involve currency forward and option contracts designated as cash flow hedges[114] - Changes in fair value of certain undesignated currency forward contracts, used to manage foreign exchange exposure of non-functional currency denominated monetary assets and liabilities, are recognized in Other (income) expense, net[115] TRANSLATIONAL EXPOSURES - Foreign exchange rate fluctuations had a favorable impact of approximately $213 million on consolidated Revenues for the three months ended August 31, 2025[117] - Foreign exchange rate fluctuations had a favorable impact of approximately $54 million on Income before income taxes for the three months ended August 31, 2025[117] MANAGING TRANSLATIONAL EXPOSURES - To minimize translational impact, foreign subsidiaries purchase U.S. Dollar denominated available-for-sale investments, and the company uses forward contracts and/or options as cash flow hedges[118] - The combination of translation of foreign currency-denominated profits and year-over-year change in foreign currency related gains and losses had a favorable impact of approximately $17 million on Income before income taxes for Q1 FY26[119] LIQUIDITY AND CAPITAL RESOURCES This section reviews the company's cash flow activities and capital resources, noting decreased operating cash flow and lower investing/financing outflows CASH FLOW ACTIVITY Cash Flow Activity (Q1 FY26 vs Q1 FY25) | Cash Flow Activity | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change ($) | | :------------------------------------ | :----------------- | :----------------- | :--------- | | Cash provided (used) by operations | $222 | $394 | $(172) | | Cash provided (used) by investing activities | $(59) | $(166) | $107 | | Cash provided (used) by financing activities | $(598) | $(1,622) | $1,024 | | NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS | $(440) | $(1,375) | $935 | - Cash provided by operations decreased by $172 million, driven by a decrease in Net income and changes in working capital[120] - The company purchased 1.8 million shares of Class B Common Stock for $123 million in Q1 FY26, moderating and ultimately stopping repurchases due to lower operating cash flows[122] CAPITAL RESOURCES - A shelf registration statement filed on July 17, 2025, permits the company to issue an unlimited amount of securities until July 17, 2028[123] - The company holds long-term debt ratings of A+ from Standard and Poor's Corporation and A1 from Moody's Investor Services[124] - As of August 31, 2025, no amounts were outstanding under committed credit facilities or the $3 billion commercial paper program[124][125] - Cash and equivalents and Short-term investments totaled $8.6 billion as of August 31, 2025[127] - The company believes existing cash, investments, and cash generated by operations, along with access to external funds, will be sufficient to meet capital needs for the next twelve months and beyond[128] OFF-BALANCE SHEET ARRANGEMENTS - As of August 31, 2025, the company did not have any off-balance sheet arrangements that are reasonably likely to have a material effect on its current or future financial condition, results of operations, liquidity, capital expenditures, or capital resources[129] RECENT ACCOUNTING PRONOUNCEMENTS - Refer to Note 1 — Summary of Significant Accounting Policies for details on recently adopted and issued accounting standards[130] CRITICAL ACCOUNTING ESTIMATES - The preparation of financial statements requires estimates and judgments that affect reported amounts, with critical accounting estimates having the greatest potential impact on the unaudited condensed consolidated financial statements[131] - The company is not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported for its critical accounting estimates[132] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section confirms no material changes in the company's quantitative and qualitative market risk disclosures from the prior Annual Report on Form 10-K - There have been no material changes in market risk disclosures from the information previously reported in the Annual Report on Form 10-K for the fiscal year ended May 31, 2025[133] ITEM 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of August 31, 2025, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2025[135] - There have been no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[136] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND ANALYST REPORTS This section provides a cautionary statement on forward-looking statements, outlining risks and uncertainties, and clarifies the company's policy against confirming analyst forecasts - Forward-looking statements involve risks and uncertainties, including intense competition, innovation, demographic changes, consumer preferences, global business risks (exchange rates, tariffs, political instability), IT systems, sustainability, operating results fluctuations, costs, intellectual property, and litigation, which may cause actual results to differ materially[137] - NIKE has a policy against confirming financial forecasts or projections issued by securities analysts and does not disclose material non-public information to them[138] PART II - OTHER INFORMATION ITEM 1. Legal Proceedings This section refers to Note 11 — Commitments and Contingencies for details on legal proceedings - Refer to Note 11 — Commitments and Contingencies for details on legal proceedings[139] ITEM 1A. Risk Factors This section confirms no material changes in the company's risk factors from those disclosed in the prior Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in Part I, Item 1A of its Annual Report on Form 10-K for the fiscal year ended May 31, 2025[140] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity under its $18 billion program, including Q1 FY26 repurchases and remaining authorization Summary of Share Repurchases (Q1 FY26) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--------------------- | :------------------------------- | :--------------------------- | | June 1 - June 30, 2025 | 1,028,990 | $63.14 | | July 1 - July 31, 2025 | 780,281 | $74.86 | | August 1 - August 31, 2025 | — | — | | Total | 1,809,271 | $68.20 | - As of August 31, 2025, approximately $5,866 million remained authorized under the four-year, $18 billion share repurchase program[142] ITEM 5. Other Information This section confirms that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 FY26 - None of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended August 31, 2025[143] ITEM 6. Exhibits This section lists the exhibits filed with the 10-Q report, including corporate governance documents, CEO/CFO certifications, and XBRL documents - Exhibits include Restated Articles of Incorporation, Sixth Amended and Restated Bylaws, Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer and Chief Financial Officer, Section 1350 Certifications, and Inline XBRL documents[144] Signatures This section confirms the official signing of the report on behalf of NIKE, Inc. by its Chief Financial Officer and Authorized Officer - The report was signed by Matthew Friend, Chief Financial Officer and Authorized Officer of NIKE, Inc., on October 1, 2025[146]