NIKE, Inc. - Quarter Report: 2023 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

Commission File No. 1-10635

NIKE, Inc.

(Exact name of Registrant as specified in its charter)


Oregon						93-0584541
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Bowerman Drive, Beaverton, Oregon 97005-6453

(Address of principal executive offices and zip code)

(503) 671-6453

(Registrant's telephone number, including area code)


SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Class B Common Stock	NKE	New York Stock Exchange
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

Indicate by check mark:

YES

•

whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☐

•

whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☐

•

whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

•

if an emerging growth company, if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

•

whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

☐


As of March 30, 2023, the number of shares of the Registrant's Common Stock outstanding were:
Class A			304,897,252
Class B			1,232,091,564
			1,536,988,816

Table of Contents

NIKE, INC.

FORM 10-Q

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION		1
ITEM 1.	Financial Statements	1
	Unaudited Condensed Consolidated Statements of Income	1
	Unaudited Condensed Consolidated Statements of Comprehensive Income	2
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Unaudited Condensed Consolidated Statements of Shareholders' Equity	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	44
ITEM 4.	Controls and Procedures	44
PART II - OTHER INFORMATION		46
ITEM 1.	Legal Proceedings	46
ITEM 1A.	Risk Factors	46
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
ITEM 6.	Exhibits	48
	Signatures	49

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(In millions, except per share data)	2023		2022		2023		2022
Revenues	$	12,390	$	10,871	$	38,392	$	34,476
Cost of sales	7,019		5,804		21,695		18,500
Gross profit	5,371		5,067		16,697		15,976
Demand creation expense	923		854		2,968		2,789
Operating overhead expense	3,036		2,584		9,035		7,980
Total selling and administrative expense	3,959		3,438		12,003		10,769
Interest expense (income), net	(7)		53		22		165
Other (income) expense, net	(58)		(94)		(283)		(235)
Income before income taxes	1,477		1,670		4,955		5,277
Income tax expense	237		274		916		670
NET INCOME	$	1,240	$	1,396	$	4,039	$	4,607
Earnings per common share:
Basic	$	0.80	$	0.88	$	2.59	$	2.91
Diluted	$	0.79	$	0.87	$	2.57	$	2.85
Weighted average common shares outstanding:
Basic	1,543.8		1,579.0		1,556.7		1,581.1
Diluted	1,564.8		1,610.7		1,574.4		1,615.8

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		2023		2022
Net income	$	1,240	$	1,396	$	4,039	$	4,607
Other comprehensive income (loss), net of tax:
Change in net foreign currency translation adjustment	153		(6)		281		(289)
Change in net gains (losses) on cash flow hedges	(433)		(29)		(279)		775
Change in net gains (losses) on other	23		(11)		(18)		(7)
Total other comprehensive income (loss), net of tax	(257)		(46)		(16)		479
TOTAL COMPREHENSIVE INCOME	$	983	$	1,350	$	4,023	$	5,086

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	FEBRUARY 28,		MAY 31,
(In millions)	2023		2022
ASSETS
Current assets:
Cash and equivalents	$	6,955	$	8,574
Short-term investments	3,847		4,423
Accounts receivable, net	4,513		4,667
Inventories	8,905		8,420
Prepaid expenses and other current assets	1,815		2,129
Total current assets	26,035		28,213
Property, plant and equipment, net	4,939		4,791
Operating lease right-of-use assets, net	2,834		2,926
Identifiable intangible assets, net	277		286
Goodwill	281		284
Deferred income taxes and other assets	3,928		3,821
TOTAL ASSETS	$	38,294	$	40,321
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	500	$	500
Notes payable	14		10
Accounts payable	2,675		3,358
Current portion of operating lease liabilities	435		420
Accrued liabilities	5,594		6,220
Income taxes payable	330		222
Total current liabilities	9,548		10,730
Long-term debt	8,925		8,920
Operating lease liabilities	2,692		2,777
Deferred income taxes and other liabilities	2,598		2,613
Commitments and contingencies (Note 13)
Redeemable preferred stock	—		—
Shareholders' equity:
Common stock at stated value:
Class A convertible — 305 and 305 shares outstanding	—		—
Class B — 1,235 and 1,266 shares outstanding	3		3
Capital in excess of stated value	12,074		11,484
Accumulated other comprehensive income (loss)	302		318
Retained earnings	2,152		3,476
Total shareholders' equity	14,531		15,281
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	38,294	$	40,321

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022
Cash provided (used) by operations:
Net income	$	4,039	$	4,607
Adjustments to reconcile net income to net cash provided (used) by operations:
Depreciation	516		538
Deferred income taxes	(216)		(234)
Stock-based compensation	556		467
Amortization, impairment and other	107		6
Net foreign currency adjustments	(197)		3
Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable	109		466
(Increase) decrease in inventories	(527)		(872)
(Increase) decrease in prepaid expenses, operating lease right-of-use assets and other current and non-current assets	(273)		(639)
Increase (decrease) in accounts payable, accrued liabilities, operating lease liabilities and other current and non-current liabilities	(526)		(305)
Cash provided (used) by operations	3,588		4,037
Cash provided (used) by investing activities:
Purchases of short-term investments	(4,844)		(9,229)
Maturities of short-term investments	2,470		5,152
Sales of short-term investments	3,149		2,921
Additions to property, plant and equipment	(700)		(516)
Other investing activities	62		(39)
Cash provided (used) by investing activities	137		(1,711)
Cash provided (used) by financing activities:
Increase (decrease) in notes payable	4		4
Proceeds from exercise of stock options and other stock issuances	413		959
Repurchase of common stock	(4,101)		(2,923)
Dividends — common and preferred	(1,488)		(1,356)
Other financing activities	(94)		(140)
Cash provided (used) by financing activities	(5,266)		(3,456)
Effect of exchange rate changes on cash and equivalents	(78)		(55)
Net increase (decrease) in cash and equivalents	(1,619)		(1,185)
Cash and equivalents, beginning of period	8,574		9,889
CASH AND EQUIVALENTS, END OF PERIOD	$	6,955	$	8,704
Supplemental disclosure of cash flow information:
Non-cash additions to property, plant and equipment	$	145	$	126
Dividends declared and not paid	527		488

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at November 30, 2022	305	$	—	1,245	$	3	$	11,851	$	559	$	2,859	$	15,272
Stock options exercised				3			153						153
Repurchase of Class B Common Stock				(13)			(99)				(1,420)		(1,519)
Dividends on common stock ($0.340 per share)											(527)		(527)
Issuance of shares to employees, net of shares withheld for employee taxes							(23)				—		(23)
Stock-based compensation							192						192
Net income											1,240		1,240
Other comprehensive income (loss)									(257)				(257)
Balance at February 28, 2023	305	$	—	1,235	$	3	$	12,074	$	302	$	2,152	$	14,531


	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at November 30, 2021	305	$	—	1,278	$	3	$	10,990	$	145	$	3,786	$	14,924
Stock options exercised				1			112						112
Repurchase of Class B Common Stock				(8)			(57)				(1,165)		(1,222)
Dividends on common stock ($0.305 per share)											(488)		(488)
Issuance of shares to employees, net of shares withheld for employee taxes							(20)				(8)		(28)
Stock-based compensation							161						161
Net income											1,396		1,396
Other comprehensive income (loss)									(46)				(46)
Balance at February 28, 2022	305	$	—	1,271	$	3	$	11,186	$	99	$	3,521	$	14,809


	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at May 31, 2022	305	$	—	1,266	$	3	$	11,484	$	318	$	3,476	$	15,281
Stock options exercised				6			302						302
Repurchase of Class B Common Stock				(39)			(288)				(3,829)		(4,117)
Dividends on common stock ($0.985 per share) and preferred stock ($0.10 per share)											(1,535)		(1,535)
Issuance of shares to employees, net of shares withheld for employee taxes				2			20				1		21
Stock-based compensation							556						556
Net income											4,039		4,039
Other comprehensive income (loss)									(16)				(16)
Balance at February 28, 2023	305	$	—	1,235	$	3	$	12,074	$	302	$	2,152	$	14,531

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	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at May 31, 2021	305	$	—	1,273	$	3	$	9,965	$	(380)	$	3,179	$	12,767
Stock options exercised				14			837						837
Repurchase of Class B Common Stock				(19)			(126)				(2,806)		(2,932)
Dividends on common stock ($0.885 per share) and preferred stock ($0.10 per share)											(1,406)		(1,406)
Issuance of shares to employees, net of shares withheld for employee taxes				3			43				(53)		(10)
Stock-based compensation							467						467
Net income											4,607		4,607
Other comprehensive income (loss)									479				479
Balance at February 28, 2022	305	$	—	1,271	$	3	$	11,186	$	99	$	3,521	$	14,809

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1	Summary of Significant Accounting Policies	8
NOTE 2	Inventories	8
NOTE 3	Accrued Liabilities	8
NOTE 4	Fair Value Measurements	9
NOTE 5	Short-term Borrowings and Credit Lines	10
NOTE 6	Income Taxes	11
NOTE 7	Stock-Based Compensation	11
NOTE 8	Earnings Per Share	12
NOTE 9	Risk Management and Derivatives	13
NOTE 10	Accumulated Other Comprehensive Income (Loss)	17
NOTE 11	Revenues	19
NOTE 12	Operating Segments	21
NOTE 13	Contingencies	23
NOTE 14	Acquisitions and Divestitures	23

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NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company” or “NIKE”) and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2022, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K for the fiscal year ended May 31, 2022. The results of operations for the three and nine months ended February 28, 2023, are not necessarily indicative of results to be expected for the entire fiscal year.

The uncertain state of the global economy or worsening macroeconomic conditions could affect the Company’s business, including, among other things, potential impacts of inflation and rising interest rates on consumer behavior, higher inventory levels in various markets, higher inventory obsolescence reserves, higher promotional activity, reduced demand for product, reduced orders from wholesale customers for products and order cancellations. There could also be new or prolonged COVID-19 related restrictions or disruptions. Any of these factors, among others, could have material adverse impacts on the Company’s revenue growth as well as overall profitability in future periods.

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances transparency surrounding the use of supplier finance programs. The new guidance requires qualitative and quantitative disclosure sufficient to enable users of the financial statements to understand the nature, activity during the period, changes from period to period and potential magnitude of such programs. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.


NOTE 2 — INVENTORIES

Inventory balances of $8,905 million and $8,420 million at February 28, 2023 and May 31, 2022, respectively, were substantially all finished goods.


NOTE 3 — ACCRUED LIABILITIES

Accrued liabilities included the following:


	FEBRUARY 28,		MAY 31,
(Dollars in millions)	2023		2022
Compensation and benefits, excluding taxes	$	1,445	$	1,297
Sales-related reserves	1,067		1,015
Dividends payable	531		485
Endorsement compensation	498		496
Allowance for expected loss on sale(1)	—		397
Other	2,053		2,530
TOTAL ACCRUED LIABILITIES	$	5,594	$	6,220

(1) Refer to Note 14 — Acquisitions and Divestitures for additional information.

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NOTE 4 — FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives, equity securities and available-for-sale debt securities. For additional information about the Company's fair value policies, refer to Note 1 — Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of February 28, 2023 and May 31, 2022, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:


	FEBRUARY 28, 2023
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	1,105	$	1,105	$	—
Level 1:
U.S. Treasury securities	3,185		1		3,184
Level 2:
Commercial paper and bonds	583		8		575
Money market funds	5,114		5,114		—
Time deposits	781		727		54
U.S. Agency securities	34		—		34
Total Level 2	6,512		5,849		663
TOTAL	$	10,802	$	6,955	$	3,847


	MAY 31, 2022
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	839	$	839	$	—
Level 1:
U.S. Treasury securities	3,801		8		3,793
Level 2:
Commercial paper and bonds	660		37		623
Money market funds	6,458		6,458		—
Time deposits	1,237		1,232		5
U.S. Agency securities	2		—		2
Total Level 2	8,357		7,727		630
TOTAL	$	12,997	$	8,574	$	4,423

As of February 28, 2023, the Company held $3,089 million of available-for-sale debt securities with maturity dates within one year and $758 million with maturity dates greater than one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The fair value of the Company's available-for-sale debt securities approximates their amortized cost.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $83 million and $22 million for the three months ended February 28, 2023 and 2022, respectively, and $196 million and $57 million for the nine months ended February 28, 2023 and 2022, respectively.

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The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:


	FEBRUARY 28, 2023
	DERIVATIVE ASSETS						DERIVATIVE LIABILITIES
(Dollars in millions)	ASSETS AT FAIR VALUE		OTHER CURRENT ASSETS		OTHER LONG-TERM ASSETS		LIABILITIES AT FAIR VALUE		ACCRUED LIABILITIES		OTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options(1)	$	651	$	551	$	100	$	176	$	112	$	64
Embedded derivatives	5		5		—		2		2		—
TOTAL	$	656	$	556	$	100	$	178	$	114	$	64

(1)If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $175 million as of February 28, 2023. As of that date, the Company received $100 million of cash collateral from counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of February 28, 2023.


	MAY 31, 2022
	DERIVATIVE ASSETS						DERIVATIVE LIABILITIES
(Dollars in millions)	ASSETS AT FAIR VALUE		OTHER CURRENT ASSETS		OTHER LONG-TERM ASSETS		LIABILITIES AT FAIR VALUE		ACCRUED LIABILITIES		OTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options(1)	$	875	$	669	$	206	$	76	$	65	$	11
Embedded derivatives	5		5		—		1		1		—
TOTAL	$	880	$	674	$	206	$	77	$	66	$	11

(1)If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $76 million as of May 31, 2022. As of that date, the Company received $486 million of cash collateral from counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of May 31, 2022

For additional information related to the Company's derivative financial instruments and credit risk, refer to Note 9 — Risk Management and Derivatives.

The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.

FINANCIAL ASSETS AND LIABILITIES NOT RECORDED AT FAIR VALUE

The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company's Long-term debt, including the current portion, was approximately $8,241 million at February 28, 2023 and $8,933 million at May 31, 2022.

For fair value information regarding Notes payable, refer to Note 5 — Short-term Borrowings and Credit Lines..


NOTE 5 — SHORT-TERM BORROWINGS AND CREDIT LINES

The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.

As of February 28, 2023 and May 31, 2022, the Company had no borrowings outstanding under its $3 billion commercial paper program.

On March 10, 2023, subsequent to the end of the third quarter of fiscal 2023, the Company entered into a 364-day committed credit facility agreement with a syndicate of banks, which provides for up to $1 billion of borrowings, with an option to increase borrowings up to $1.5 billion in total with lender approval. The facility matures on March 8, 2024, 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 11, 2022, which matured on March 10, 2023. Based on the Company's current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing Term Secured Overnight Financing Rate (Term SOFR) for the applicable interest period plus 0.60%. The facility fee is 0.02% of the total undrawn commitment. As of April 6, 2023, no amounts were outstanding under this committed credit facility.

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There have been no other changes to the credit lines reported in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2022.


NOTE 6 — INCOME TAXES

The effective tax rate was 18.5% and 12.7% for the nine months ended February 28, 2023 and 2022, respectively. The increase in the Company's effective tax rate was primarily due to a less favorable impact from stock-based compensation and a shift in the Company's earnings mix.

As of February 28, 2023, total gross unrecognized tax benefits, excluding related interest and penalties, were $941 million, $657 million of which would affect the Company's effective tax rate if recognized in future periods. The majority of the total gross unrecognized tax benefits are long-term in nature and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets. As of May 31, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $848 million. As of February 28, 2023 and May 31, 2022, accrued interest and penalties related to uncertain tax positions were $282 million and $248 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions. The Company is currently under audit by the U.S. IRS for fiscal years 2017 through 2019. The Company has closed all U.S. federal income tax matters through fiscal 2016, with the exception of certain transfer pricing adjustments.

Tax years after 2011 remain open in certain major foreign jurisdictions. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $30 million within the next 12 months. In January 2019, the European Commission opened a formal investigation to examine whether the Netherlands has breached State Aid rules when granting certain tax rulings to the Company. The Company believes the investigation is without merit. If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to prior periods, and the Company's income taxes related to prior periods in the Netherlands could increase.


NOTE 7 — STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 798 million previously unissued shares of Class B Common Stock in connection with equity awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights and stock awards, including restricted stock and restricted stock units. Restricted stock units include both time-vesting restricted stock units (RSUs) as well as performance-based restricted stock units (PSUs). In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount from the market price under employee stock purchase plans (ESPPs). Refer to Note 11 — Common Stock and Stock-Based Compensation of the Annual Report on Form 10-K for the fiscal year ended May 31, 2022 for additional information.

The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable:


	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		2023		2022
Stock options(1)	$	78	$	75	$	232	$	221
ESPPs	20		15		53		44
Restricted stock and restricted stock units(1)(2)	94		71		271		202
TOTAL STOCK-BASED COMPENSATION EXPENSE	$	192	$	161	$	556	$	467

(1)Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is primarily recorded for employees meeting certain retirement eligibility requirements.

(2)Restricted stock units include RSUs and PSUs.

The income tax benefit related to stock-based compensation expense was $22 million and $34 million for the three months ended February 28, 2023 and 2022, respectively, and $44 million and $307 million for the nine months ended February 28, 2023 and 2022, respectively, and reported within Income tax expense.

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STOCK OPTIONS

The weighted average fair value per share of stock options granted during the nine months ended February 28, 2023 and 2022, computed as of the grant date using the Black-Scholes pricing model, was $31.31 and $37.53, respectively. The weighted average assumptions used to estimate these fair values were as follows:


	NINE MONTHS ENDED FEBRUARY 28,
	2023		2022
Dividend yield	0.9	%	0.8	%
Expected volatility	27.1	%	24.9	%
Weighted average expected life (in years)	5.8		5.8
Risk-free interest rate	3.3	%	0.9	%

Expected volatilities are based on an analysis of the historical volatility of the Company's common stock, the implied volatility in market-traded options on the Company's common stock with a term greater than one year, as well as other factors. The weighted average expected life of stock options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the stock options.

As of February 28, 2023, the Company had $502 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.6 years.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The weighted average fair value per share of restricted stock and RSUs granted for the nine months ended February 28, 2023 and 2022, computed as of the grant date, was $110.27 and $158.94, respectively.

The weighted average fair value per share of PSUs granted for the nine months ended February 28, 2023 and 2022, computed as of the grant date, was $134.71 and $250.52, respectively.

As of February 28, 2023, the Company had $727 million of unrecognized compensation costs from restricted stock and restricted stock units, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.5 years.


NOTE 8 — EARNINGS PER SHARE

The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share exclude restricted stock, restricted stock units and options, including shares under ESPPs, to purchase an estimated additional 29.5 million and 9.3 million shares of common stock outstanding for the three months ended February 28, 2023 and 2022, respectively, and 31.8 million and 9.4 million shares of common stock outstanding for the nine months ended February 28, 2023 and 2022, respectively, because the awards were assumed to be anti-dilutive.


	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(In millions, except per share data)	2023		2022		2023		2022
Net income available to common stockholders	$	1,240	$	1,396	$	4,039	$	4,607
Determination of shares:
Weighted average common shares outstanding	1,543.8		1,579.0		1,556.7		1,581.1
Assumed conversion of dilutive stock options and awards	21.0		31.7		17.7		34.7
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	1,564.8		1,610.7		1,574.4		1,615.8
Earnings per common share:
Basic	$	0.80	$	0.88	$	2.59	$	2.91
Diluted	$	0.79	$	0.87	$	2.57	$	2.85

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NOTE 9 — RISK MANAGEMENT AND DERIVATIVES

The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. As of and for the nine months ended February 28, 2023, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K. For additional information about the Company's derivatives and hedging policies, refer to Note 1 — Summary of Significant Accounting Policies and Note 14 — Risk Management and Derivatives of the Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

The majority of derivatives outstanding as of February 28, 2023, are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, Chinese Yuan/U.S. Dollar, British Pound/Euro and Japanese Yen/U.S. Dollar currency pairs. All derivatives are recognized on the Unaudited Condensed Consolidated Balance Sheets at fair value and classified based on the instrument's maturity date.

The following tables present the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets:


	DERIVATIVE ASSETS
	BALANCE SHEET LOCATION	FEBRUARY 28,		MAY 31,
(Dollars in millions)		2023		2022
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options	Prepaid expenses and other current assets	$	530	$	639
Foreign exchange forwards and options	Deferred income taxes and other assets	100		206
Total derivatives formally designated as hedging instruments		630		845
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	Prepaid expenses and other current assets	21		30
Embedded derivatives	Prepaid expenses and other current assets	5		5


Total derivatives not designated as hedging instruments		26		35
TOTAL DERIVATIVE ASSETS		$	656	$	880

	DERIVATIVE LIABILITIES
	BALANCE SHEET LOCATION	FEBRUARY 28,		MAY 31,
(Dollars in millions)		2023		2022
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options	Accrued liabilities	$	93	$	37
Foreign exchange forwards and options	Deferred income taxes and other liabilities	64		11
Total derivatives formally designated as hedging instruments		157		48
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	Accrued liabilities	19		28
Embedded derivatives	Accrued liabilities	2		1


Total derivatives not designated as hedging instruments		21		29
TOTAL DERIVATIVE LIABILITIES		$	178	$	77

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The following tables present the amounts in the Unaudited Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:


	THREE MONTHS ENDED FEBRUARY 28,
	2023				2022
(Dollars in millions)	TOTAL		AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY		TOTAL		AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY
Revenues	$	12,390	$	14	$	10,871	$	(22)
Cost of sales	7,019		182		5,804		17
Demand creation expense	923		(1)		854		—
Other (income) expense, net	(58)		90		(94)		45
Interest expense (income), net	(7)		(2)		53		(2)


	NINE MONTHS ENDED FEBRUARY 28,
	2023				2022
(Dollars in millions)	TOTAL		AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY		TOTAL		AMOUNT OF GAIN (LOSS) ON CASH FLOW HEDGE ACTIVITY
Revenues	$	38,392	$	9	$	34,476	$	(63)
Cost of sales	21,695		464		18,500		(79)
Demand creation expense	2,968		(4)		2,789		1
Other (income) expense, net	(283)		297		(235)		56
Interest expense (income), net	22		(6)		165		(5)

The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income:


(Dollars in millions)	AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES(1)				AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME(1)
	THREE MONTHS ENDED FEBRUARY 28,				LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME	THREE MONTHS ENDED FEBRUARY 28,
	2023		2022			2023		2022
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options	$	30	$	(37)	Revenues	$	14	$	(22)
Foreign exchange forwards and options	(141)		4		Cost of sales	182		17
Foreign exchange forwards and options	1		—		Demand creation expense	(1)		—
Foreign exchange forwards and options	(65)		31		Other (income) expense, net	90		45
Interest rate swaps(2)	—		—		Interest expense (income), net	(2)		(2)
TOTAL DESIGNATED CASH FLOW HEDGES	$	(175)	$	(2)		$	283	$	38

(1)For the three months ended February 28, 2023 and 2022, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.

(2)Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.

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(Dollars in millions)	AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES(1)				AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME(1)
	NINE MONTHS ENDED FEBRUARY 28,				LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME	NINE MONTHS ENDED FEBRUARY 28,
	2023		2022			2023		2022
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options	$	52	$	(74)	Revenues	$	9	$	(63)
Foreign exchange forwards and options	245		522		Cost of sales	464		(79)
Foreign exchange forwards and options	(2)		(3)		Demand creation expense	(4)		1
Foreign exchange forwards and options	181		304		Other (income) expense, net	297		56
Interest rate swaps(2)	—		—		Interest expense (income), net	(6)		(5)
TOTAL DESIGNATED CASH FLOW HEDGES	$	476	$	749		$	760	$	(90)

(1)For the nine months ended February 28, 2023 and 2022, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.


	AMOUNT OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES								LOCATION OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES
	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		2023		2022


Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	$	(12)	$	(20)	$	32	$	12	Other (income) expense, net
Embedded derivatives	(14)		—		20		(9)		Other (income) expense, net

CASH FLOW HEDGES

All changes in fair value of derivatives designated as cash flow hedge instruments are recorded in Accumulated other comprehensive income (loss) until Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified in the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. When it is no longer probable the forecasted hedged transaction will occur in the initially identified time period, hedge accounting is discontinued and the Company accounts for the associated derivative as an undesignated instrument as discussed below. Additionally, the gains and losses associated with derivatives no longer designated as cash flow hedge instruments in Accumulated other comprehensive income (loss) are recognized immediately in Other (income) expense, net, if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two-month period thereafter. 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 the control or influence of the Company.

The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $19.5 billion as of February 28, 2023. Approximately $495 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of February 28, 2023, are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts currently outstanding mature. As of February 28, 2023, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 27 months.

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UNDESIGNATED DERIVATIVE INSTRUMENTS

The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets and/or embedded derivative contracts. These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, together with the remeasurement gain or loss from the hedged balance sheet position and/or embedded derivative contract. The total notional amount of outstanding undesignated derivative instruments was $4.7 billion as of February 28, 2023.

EMBEDDED DERIVATIVES

Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related contract and recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, through the date the foreign currency fluctuations cease to exist.

As of February 28, 2023, the total notional amount of embedded derivatives outstanding was approximately $460 million.

CREDIT RISK

The Company's bilateral credit-related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives per counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could trigger collateral requirements. As of February 28, 2023, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net asset position of approximately $475 million. Accordingly, the Company was not required to post cash collateral as a result of these contingent features. Further, $100 million of collateral was received on the Company's derivative asset balance as of February 28, 2023. The Company considers the impact of the risk of counterparty default to be immaterial.

For additional information related to the Company's derivative financial instruments and collateral, refer to Note 4 — Fair Value Measurements.

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NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in Accumulated other comprehensive income (loss), net of tax, were as follows:


(Dollars in millions)	FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1)		CASH FLOW HEDGES		NET INVESTMENT HEDGES(1)		OTHER		TOTAL
Balance at November 30, 2022	$	(392)	$	933	$	115	$	(97)	$	559
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications(2)	150		(179)		—		—		(29)
Reclassifications to net income of previously deferred (gains) losses(3)	3		(254)		—		23		(228)
Total other comprehensive income (loss)	153		(433)		—		23		(257)
Balance at February 28, 2023	$	(239)	$	500	$	115	$	(74)	$	302

(1)The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.

(2)Net of tax benefit (expense) of $0 million, $(4) million, $0 million, $1 million and $(3) million, respectively.

(3)Net of tax (benefit) expense of $0 million, $29 million, $0 million, $(9) million and $20 million, respectively.


(Dollars in millions)	FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1)		CASH FLOW HEDGES		NET INVESTMENT HEDGES(1)		OTHER		TOTAL
Balance at November 30, 2021	$	(281)	$	369	$	115	$	(58)	$	145
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications(2)	(6)		4		—		(7)		(9)
Reclassifications to net income of previously deferred (gains) losses(3)	—		(33)		—		(4)		(37)
Total other comprehensive income (loss)	(6)		(29)		—		(11)		(46)
Balance at February 28, 2022	$	(287)	$	340	$	115	$	(69)	$	99

(2)Net of tax benefit (expense) of $0 million, $6 million, $0 million, $2 million and $8 million, respectively.

(3)Net of tax (benefit) expense of $0 million, $5 million, $0 million, $1 million and $6 million, respectively.


(Dollars in millions)	FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1)		CASH FLOW HEDGES		NET INVESTMENT HEDGES(1)		OTHER		TOTAL
Balance at May 31, 2022	$	(520)	$	779	$	115	$	(56)	$	318
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications(2)	(77)		399		—		(27)		295
Reclassifications to net income of previously deferred (gains) losses(3)	358		(678)		—		9		(311)
Total other comprehensive income (loss)	281		(279)		—		(18)		(16)
Balance at February 28, 2023	$	(239)	$	500	$	115	$	(74)	$	302

(2)Net of tax benefit (expense) of $0 million, $(77) million, $0 million, $8 million and $(69) million, respectively.

(3)Net of tax (benefit) expense of $(16) million, $82 million, $0 million, $(3) million and $63 million, respectively.

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(Dollars in millions)	FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1)		CASH FLOW HEDGES		NET INVESTMENT HEDGES(1)		OTHER		TOTAL
Balance at May 31, 2021	$	2	$	(435)	$	115	$	(62)	$	(380)
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications(2)	(289)		689		—		7		407
Reclassifications to net income of previously deferred (gains) losses(3)	—		86		—		(14)		72
Total other comprehensive income (loss)	(289)		775		—		(7)		479
Balance at February 28, 2022	$	(287)	$	340	$	115	$	(69)	$	99

(2)Net of tax benefit (expense) of $0 million, $(60) million, $0 million, $(2) million and $(62) million, respectively.

(3)Net of tax (benefit) expense of $0 million, $(4) million, $0 million, $5 million and $1 million, respectively.

The following table summarizes the reclassifications from Accumulated other comprehensive income (loss) to the Unaudited Condensed Consolidated Statements of Income:


	AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME								LOCATION OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME
	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		2023		2022
Gains (losses) on foreign currency translation adjustment	$	(3)	$	—	$	(374)	$	—	Other (income) expense, net
Total before tax	(3)		—		(374)		—
Tax (expense) benefit	—		—		16		—
Gain (loss) net of tax	(3)		—		(358)		—
Gains (losses) on cash flow hedges:
Foreign exchange forwards and options	$	14	$	(22)	$	9	$	(63)	Revenues
Foreign exchange forwards and options	182		17		464		(79)		Cost of sales
Foreign exchange forwards and options	(1)		—		(4)		1		Demand creation expense
Foreign exchange forwards and options	90		45		297		56		Other (income) expense, net
Interest rate swaps	(2)		(2)		(6)		(5)		Interest expense (income), net
Total before tax	283		38		760		(90)
Tax (expense) benefit	(29)		(5)		(82)		4
Gain (loss) net of tax	254		33		678		(86)
Gains (losses) on other	(32)		5		(12)		19		Other (income) expense, net
Total before tax	(32)		5		(12)		19
Tax (expense) benefit	9		(1)		3		(5)
Gain (loss) net of tax	(23)		4		(9)		14
Total net gain (loss) reclassified for the period	$	228	$	37	$	311	$	(72)

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NOTE 11 — REVENUES

DISAGGREGATION OF REVENUES

The following tables present the Company's Revenues disaggregated by reportable operating segment, major product line and distribution channel:


	THREE MONTHS ENDED FEBRUARY 28, 2023
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	3,322	$	2,011	$	1,496	$	1,141	$	—	$	7,970	$	540	$	—	$	8,510
Apparel	1,419		1,094		461		407		—		3,381		29		—		3,410
Equipment	172		141		37		53		—		403		6		—		409
Other	—		—		—		—		12		12		37		12		61
TOTAL REVENUES	$	4,913	$	3,246	$	1,994	$	1,601	$	12	$	11,766	$	612	$	12	$	12,390
Revenues by:
Sales to Wholesale Customers	$	2,323	$	2,061	$	1,126	$	913	$	—	$	6,423	$	323	$	—	$	6,746
Sales through Direct to Consumer	2,590		1,185		868		688		—		5,331		252		—		5,583
Other	—		—		—		—		12		12		37		12		61
TOTAL REVENUES	$	4,913	$	3,246	$	1,994	$	1,601	$	12	$	11,766	$	612	$	12	$	12,390


	THREE MONTHS ENDED FEBRUARY 28, 2022
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	2,532	$	1,569	$	1,554	$	1,005	$	—	$	6,660	$	503	$	—	$	7,163
Apparel	1,207		1,083		548		394		—		3,232		29		—		3,261
Equipment	143		127		58		62		—		390		7		—		397
Other	—		—		—		—		41		41		28		(19)		50
TOTAL REVENUES	$	3,882	$	2,779	$	2,160	$	1,461	$	41	$	10,323	$	567	$	(19)	$	10,871
Revenues by:
Sales to Wholesale Customers	$	1,769	$	1,858	$	1,241	$	860	$	—	$	5,728	$	303	$	—	$	6,031
Sales through Direct to Consumer	2,113		921		919		601		—		4,554		236		—		4,790
Other	—		—		—		—		41		41		28		(19)		50
TOTAL REVENUES	$	3,882	$	2,779	$	2,160	$	1,461	$	41	$	10,323	$	567	$	(19)	$	10,871

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	NINE MONTHS ENDED FEBRUARY 28, 2023
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	11,090	$	6,086	$	4,099	$	3,313	$	—	$	24,588	$	1,633	$	—	$	26,221
Apparel	4,598		3,528		1,228		1,255		—		10,609		70		—		10,679
Equipment	565		454		111		167		—		1,297		21		—		1,318
Other	—		—		—		—		44		44		117		13		174
TOTAL REVENUES	$	16,253	$	10,068	$	5,438	$	4,735	$	44	$	36,538	$	1,841	$	13	$	38,392
Revenues by:
Sales to Wholesale Customers	$	8,533	$	6,506	$	2,862	$	2,792	$	—	$	20,693	$	971	$	—	$	21,664
Sales through Direct to Consumer	7,720		3,562		2,576		1,943		—		15,801		753		—		16,554
Other	—		—		—		—		44		44		117		13		174
TOTAL REVENUES	$	16,253	$	10,068	$	5,438	$	4,735	$	44	$	36,538	$	1,841	$	13	$	38,392


	NINE MONTHS ENDED FEBRUARY 28, 2022
(Dollars in millions)	NORTH AMERICA		EUROPE, MIDDLE EAST & AFRICA		GREATER CHINA		ASIA PACIFIC & LATIN AMERICA		GLOBAL BRAND DIVISIONS		TOTAL NIKE BRAND		CONVERSE		CORPORATE		TOTAL NIKE, INC.
Revenues by:
Footwear	$	8,648	$	5,358	$	4,238	$	2,914	$	—	$	21,158	$	1,555	$	—	$	22,713
Apparel	4,117		3,444		1,588		1,181		—		10,330		87		—		10,417
Equipment	473		426		160		178		—		1,237		21		—		1,258
Other	—		—		—		—		54		54		90		(56)		88
TOTAL REVENUES	$	13,238	$	9,228	$	5,986	$	4,273	$	54	$	32,779	$	1,753	$	(56)	$	34,476
Revenues by:
Sales to Wholesale Customers	$	6,774	$	6,194	$	3,251	$	2,571	$	—	$	18,790	$	975	$	—	$	19,765
Sales through Direct to Consumer	6,464		3,034		2,735		1,702		—		13,935		688		—		14,623
Other	—		—		—		—		54		54		90		(56)		88
TOTAL REVENUES	$	13,238	$	9,228	$	5,986	$	4,273	$	54	$	32,779	$	1,753	$	(56)	$	34,476

For the three and nine months ended February 28, 2023 and 2022, Global Brand Divisions revenues included NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. Converse Other revenues were primarily attributable to licensing businesses. Corporate revenues primarily consisted 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 the Company's central foreign exchange risk management program.

As of February 28, 2023 and May 31, 2022, the Company did not have any contract assets and had an immaterial amount of contract liabilities recorded in Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.

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NOTE 12 — OPERATING SEGMENTS

The Company's 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 Company's NIKE Direct operations are managed within each NIKE Brand geographic operating segment. Converse is also a reportable segment for the Company and operates in one industry: the design, marketing, licensing and selling of athletic lifestyle sneakers, apparel and accessories.

Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. Global Brand Divisions costs represent demand creation and operating overhead expense that include product creation and design expenses centrally managed for the NIKE Brand, as well as, costs associated with NIKE Direct global digital operations and enterprise technology.

Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company's headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.

The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes (EBIT), which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income.

As part of the Company's centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in the Company's geographic operating segments and to Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases in the entity's functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company's centrally managed foreign exchange risk management program and other conversion gains and losses.

Accounts receivable, net, Inventories and Property, plant and equipment, net for operating segments are regularly reviewed by management and are therefore provided below.

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	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		2023		2022
REVENUES
North America	$	4,913	$	3,882	$	16,253	$	13,238
Europe, Middle East & Africa	3,246		2,779		10,068		9,228
Greater China	1,994		2,160		5,438		5,986
Asia Pacific & Latin America	1,601		1,461		4,735		4,273
Global Brand Divisions	12		41		44		54
Total NIKE Brand	11,766		10,323		36,538		32,779
Converse	612		567		1,841		1,753
Corporate	12		(19)		13		(56)
TOTAL NIKE, INC. REVENUES	$	12,390	$	10,871	$	38,392	$	34,476
EARNINGS BEFORE INTEREST AND TAXES
North America	$	1,190	$	967	$	4,064	$	3,636
Europe, Middle East & Africa	785		713		2,750		2,394
Greater China	702		784		1,754		2,054
Asia Pacific & Latin America	485		478		1,470		1,347
Global Brand Divisions	(1,160)		(975)		(3,573)		(3,033)
Converse	164		168		526		504
Corporate	(696)		(412)		(2,014)		(1,460)
Interest expense (income), net	(7)		53		22		165
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,477	$	1,670	$	4,955	$	5,277


	FEBRUARY 28,		MAY 31,
(Dollars in millions)	2023		2022
ACCOUNTS RECEIVABLE, NET
North America	$	1,718	$	1,850
Europe, Middle East & Africa	1,392		1,351
Greater China	294		406
Asia Pacific & Latin America(1)	707		664
Global Brand Divisions	81		113
Total NIKE Brand	4,192		4,384
Converse	263		230
Corporate	58		53
TOTAL ACCOUNTS RECEIVABLE, NET	$	4,513	$	4,667
INVENTORIES
North America	$	4,054	$	4,098
Europe, Middle East & Africa	2,066		1,887
Greater China	1,060		1,044
Asia Pacific & Latin America(1)	957		686
Global Brand Divisions	219		197
Total NIKE Brand	8,356		7,912
Converse	343		279
Corporate	206		229
TOTAL INVENTORIES	$	8,905	$	8,420

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	FEBRUARY 28,		MAY 31,
(Dollars in millions)	2023		2022
PROPERTY, PLANT AND EQUIPMENT, NET
North America	$	733	$	639
Europe, Middle East & Africa	966		920
Greater China	293		303
Asia Pacific & Latin America(1)	272		274
Global Brand Divisions	802		789
Total NIKE Brand	3,066		2,925
Converse	39		49
Corporate	1,834		1,817
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET	$	4,939	$	4,791

(1)Excludes assets held-for-sale as of May 31, 2022. See Note 14 — Acquisitions and Divestitures for additional information.

NOTE 13 — CONTINGENCIES

In the ordinary course of business, the Company is subject to various legal proceedings, claims and government investigations relating to its business, products and actions of its employees and representatives, including contractual and employment relationships, product liability, antitrust, customs, tax, intellectual property and other matters. The outcome of these legal matters is inherently uncertain, and the Company cannot predict the eventual outcome of currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences relating to those matters. When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter. If one or more legal matters were to be resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial position, operating results and cash flows for that reporting period could be materially adversely affected. In the opinion of management, based on its current knowledge and after consultation with counsel, the Company does not believe any currently pending legal matters will have a material adverse impact on the Company's results of operations, financial position or cash flows, except as described below.

BELGIAN CUSTOMS CLAIM

The Company has received claims for certain years from the Belgian Customs Authorities for alleged underpaid duties related to products imported beginning in fiscal 2018. The Company disputes these claims and has engaged in the appellate process. At this time, the Company is unable to estimate the range of loss and cannot predict the final outcome as it could take several years to reach a resolution on this matter. If this matter is ultimately resolved against the Company, the amounts owed, including fines, penalties and other consequences relating to the matter, could have a material adverse effect on the Company's results of operations, financial position and cash flows.


NOTE 14 — ACQUISITIONS AND DIVESTITURES

During the fourth quarter of fiscal 2022, the Company entered into separate definitive agreements to sell its entities in Argentina and Uruguay, as well as its entity in Chile, to third-party distributors.

The sale of the Company’s entity in Chile to a third-party distributor was completed during the first quarter of fiscal 2023. The impacts from the transaction were not material to the Company’s Unaudited Condensed Consolidated Financial Statements.

The sale of the Company's entities in Argentina and Uruguay to a third-party distributor was completed during the second quarter of fiscal 2023 and the net loss on the sale of these entities totaled approximately $550 million. This loss included $389 million, recognized primarily in fiscal 2020, largely due to the anticipated release of the cumulative foreign currency translation losses. The remaining loss recognized in fiscal 2023 was due to the devaluation of local currency and cash equivalents included in the transferred assets. Upon completion of the sale, the foreign currency translation losses recorded in Accumulated other comprehensive income (loss) were reclassified to Net income within Other (income) expense, net, on the Unaudited Condensed Consolidated Statements of Comprehensive Income along with the allowance for previously recognized losses recorded in Accrued liabilities. The net loss was classified within Corporate.

The net cash proceeds received are reflected within Other investing activities on the Unaudited Condensed Consolidated Statements of Cash Flows.

The related assets and liabilities of these entities within the Company’s APLA operating segment were classified as held-for-sale on the Consolidated Balance Sheets within Prepaid expenses and other current assets and Accrued liabilities, respectively, until the transactions closed. As of May 31, 2022, held-for-sale assets were $182 million and held-for-sale liabilities were $58 million.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

NIKE designs, develops, markets and sells athletic footwear, apparel, equipment, accessories and services worldwide. We are the largest seller of athletic footwear and apparel in the world. We sell our products through 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 retail accounts and to a mix of independent distributors, licensees and sales representatives in virtually 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, we are focusing on creating the marketplace of the future through more premium, consistent and seamless consumer experiences, leading with digital and our owned stores, as well as select wholesale partners that share our marketplace vision. Over the last several years, as we have executed against the Consumer Direct Acceleration, we have grown our NIKE Direct revenues, on a reported basis, to be approximately 45% and 43% of total NIKE Brand revenues for the third quarter and first nine months of fiscal 2023, respectively. We have also reduced the number of wholesale accounts globally. Additionally, we have aligned our product creation and category organizations around a new consumer construct focused on Men’s, Women’s and Kids’ and continue to invest in data and analytics, demand sensing, insight gathering, inventory management and other areas to create an end-to-end technology foundation, which we expect 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.

CURRENT ECONOMIC CONDITIONS AND MARKET DYNAMICS

Revenues for the third quarter and first nine months of fiscal 2023 grew 14% and 11%, respectively, compared to the prior year, reflecting strong demand for our product, despite ongoing macroeconomic volatility and ongoing supply chain challenges.

In the first quarter of fiscal 2022, government mandated shutdowns in Vietnam and Indonesia due to COVID-19 impacted our contract manufacturers’ operations and our supply of available product. This, coupled with elevated inventory transit times due to port congestion, transportation delays and labor and container shortages, caused seasonal product to arrive later than planned. We expected these elevated inventory transit times to continue and as a result we purchased product for fiscal 2023 earlier than normal.

However, during the first quarter of fiscal 2023, inventory transit times improved ahead of plan resulting in seasonal product arriving early. This disruption in the flow of seasonal inventory led to elevated inventory levels at the end of the first quarter of fiscal 2023.

Starting in the first quarter of fiscal 2023, we took action to reduce excess inventory by decreasing inventory purchases and increasing promotional activity. These actions led to Inventories decreasing sequentially in the second and third quarters of fiscal 2023.

As inventory transit and product purchase timelines continue to converge towards pre-pandemic levels, we expect that the flow of seasonal product, and our inventory levels will normalize by the end of fiscal 2023.

During the first nine months of fiscal 2023, we experienced higher product input, freight and logistics costs primarily due to inflationary pressures. These costs, combined with higher promotional activity, contributed to gross margin contraction of 330 basis points and 280 basis points in the third quarter and first nine months of fiscal 2023, respectively. These impacts were partially offset by strategic pricing actions taken in prior quarters.

Fluctuations in currency exchange rates also create volatility in our reported results as we translate the balance sheets, operational results and cash flows of our subsidiaries into U.S. Dollars for consolidated reporting. During the third quarter of fiscal 2023, foreign currency headwinds increased significantly as the U.S. Dollar strengthened in relation to most foreign currencies, reducing reported Revenues by $549 million and $2.5 billion for the third quarter and first nine months of fiscal 2023, respectively.

We expect unfavorable changes in foreign currency exchange rates, net of hedges, will negatively impact our results of operations in the fourth quarter of fiscal 2023, which could result in continued gross margin contraction.

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Most of our geographies operated with little to no COVID-19 related disruptions during the third quarter of fiscal 2023. In Greater China, however, the shifting of the local government’s COVID-19 policies in December 2022 led to temporary store closures as well as lower physical traffic during the month. Since January 2023, nearly all stores in Greater China have remained open and are operating on normal hours with improved physical traffic.

Across our geographies and Converse, the operating environment remains dynamic, and we expect promotional activity to continue in the fourth quarter of fiscal 2023. In addition, we expect product costs to remain elevated due to higher input, freight and logistics costs, which could result in continued gross margin contraction.

We also continue to closely monitor macroeconomic conditions, including potential impacts inflation and rising interest rates could have on consumer behavior. While we believe our Consumer Direct Acceleration Strategy continues to drive our business toward our long-term financial goals, worsening macroeconomic conditions could affect our business, including, among other things, higher inventory levels in various markets, higher inventory obsolescence reserves, higher promotional activity, reduced demand for our products, reduced orders from our wholesale customers for our products and order cancellations. There could also be new or prolonged COVID-19 related restrictions or disruptions across our geographies. Any of these factors, among others, could have material adverse impacts on our revenue growth as well as overall profitability in future periods.

THIRD QUARTER OVERVIEW

For the third quarter of fiscal 2023, NIKE, Inc. Revenues increased 14% to $12.4 billion compared to the third quarter of fiscal 2022 and increased 19% on a currency-neutral basis. Net income was $1,240 million and diluted earnings per common share was $0.79 for the third quarter of fiscal 2023, compared to Net income of $1,396 million and diluted earnings per common share of $0.87 for the third quarter of fiscal 2022.

Income before income taxes decreased 12% compared to the third quarter of fiscal 2022 due to higher Selling and administrative expense and gross margin contraction, partially offset by higher revenues. NIKE Brand revenues, which represent over 90% of NIKE, Inc. Revenues, increased 14% compared to the third quarter of fiscal 2022. On a currency-neutral basis, NIKE Brand revenues increased 19%, driven by higher revenues across all geographies, led by increases in North America and Europe, Middle East & Africa (EMEA). Additionally, NIKE Brand currency-neutral revenues were higher across footwear and apparel, as well as across Men's, the Jordan Brand, Women's and Kids'. Revenues for Converse increased 8% and 12% compared to the third quarter of fiscal 2022, on a reported and currency-neutral basis, respectively, as revenue growth in North America, Western Europe and licensee markets was partially offset by declines in Asia.

Our effective tax rate was 16.0% for the third quarter of fiscal 2023 and substantially consistent compared to 16.4% for the third quarter of fiscal 2022.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for NIKE beginning June 1, 2023. Based on our current analysis of the provisions, we do not expect these tax law changes to have a material impact on our financial statements; however, we will continue to evaluate their impact as further information becomes available.

During the second quarter of fiscal 2023, we completed the sale of our entities in Argentina and Uruguay to a third party distributor. For more information see Note 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements. 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.

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USE OF NON-GAAP FINANCIAL MEASURES

Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures, including references to wholesale equivalent revenues, currency-neutral revenues, as well as Total NIKE Brand earnings before interest and taxes (EBIT), Total NIKE, Inc. EBIT and EBIT Margin, which should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Additionally, currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations. EBIT is calculated as Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income. EBIT Margin is calculated as EBIT divided by total NIKE, Inc. Revenues.

Management uses these non-GAAP financial 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. However, references to wholesale equivalent revenues, currency-neutral revenues, EBIT and EBIT margin 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 non-GAAP measures used by other companies.

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RESULTS OF OPERATIONS


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions, except per share data)	2023			2022			% CHANGE		2023			2022			% CHANGE
Revenues	$	12,390		$	10,871		14	%	$	38,392		$	34,476		11	%
Cost of sales	7,019			5,804			21	%	21,695			18,500			17	%
Gross profit	5,371			5,067			6	%	16,697			15,976			5	%
Gross margin	43.3		%	46.6		%			43.5		%	46.3		%
Demand creation expense	923			854			8	%	2,968			2,789			6	%
Operating overhead expense	3,036			2,584			17	%	9,035			7,980			13	%
Total selling and administrative expense	3,959			3,438			15	%	12,003			10,769			11	%
% of revenues	32.0		%	31.6		%			31.3		%	31.2		%
Interest expense (income), net	(7)			53			—		22			165			—
Other (income) expense, net	(58)			(94)			—		(283)			(235)			—
Income before income taxes	1,477			1,670			-12	%	4,955			5,277			-6	%
Income tax expense	237			274			-14	%	916			670			37	%
Effective tax rate	16.0		%	16.4		%			18.5		%	12.7		%
NET INCOME	$	1,240		$	1,396		-11	%	$	4,039		$	4,607		-12	%
Diluted earnings per common share	$	0.79		$	0.87		-9	%	$	2.57		$	2.85		-10	%

CONSOLIDATED OPERATING RESULTS

REVENUES


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES(1)		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES(1)
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear	$	7,970	$	6,660	20	%	25	%	$	24,588	$	21,158	16	%	24	%
Apparel	3,381		3,232		5	%	10	%	10,609		10,330		3	%	10	%
Equipment	403		390		3	%	8	%	1,297		1,237		5	%	12	%
Global Brand Divisions(2)	12		41		-71	%	-69	%	44		54		-19	%	-17	%
Total NIKE Brand Revenues	11,766		10,323		14	%	19	%	36,538		32,779		11	%	19	%
Converse	612		567		8	%	12	%	1,841		1,753		5	%	10	%
Corporate(3)	12		(19)		—		—		13		(56)		—		—
TOTAL NIKE, INC. REVENUES	$	12,390	$	10,871	14	%	19	%	$	38,392	$	34,476	11	%	19	%
Supplemental NIKE Brand Revenues Details:
NIKE Brand Revenues by:
Sales to Wholesale Customers	$	6,423	$	5,728	12	%	18	%	$	20,693	$	18,790	10	%	18	%
Sales through NIKE Direct	5,331		4,554		17	%	22	%	15,801		13,935		13	%	20	%
Global Brand Divisions(2)	12		41		-71	%	-69	%	44		54		-19	%	-17	%
TOTAL NIKE BRAND REVENUES	$	11,766	$	10,323	14	%	19	%	$	36,538	$	32,779	11	%	19	%

(1)The percent change excluding currency changes represents a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for further information.

(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.

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THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

On a currency-neutral basis, NIKE, Inc. Revenues increased 19% the third quarter of fiscal 2023, driven by higher revenues in both the NIKE Brand and Converse. Higher revenues in North America, EMEA, APLA and Converse contributed approximately 9, 7, 2 and 1 percentage points to NIKE, Inc. Revenues, respectively.

On a currency-neutral basis, NIKE Brand footwear revenues increased 25% in the third quarter of fiscal 2023, driven by higher revenues in Men's, the Jordan Brand and Women's. Unit sales of footwear increased 19%, while higher average selling price (ASP) per pair contributed approximately 6 percentage points of footwear revenue growth, primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, and growth in NIKE Direct. This was partially offset by lower NIKE Direct ASP.

Currency-neutral NIKE Brand apparel revenues for the third quarter of fiscal 2023 increased 10%, driven by higher revenues in Men's. Unit sales of apparel increased 5% and higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth, primarily due to higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

NIKE Brand wholesale revenues increased 12% and 18% compared to the third quarter of fiscal 2022, on a reported and currency-neutral basis, respectively. On a reported basis, NIKE Direct revenues represented approximately 45% of our total NIKE Brand revenues for the third quarter of fiscal 2023 compared to 44% for the third quarter of fiscal 2022. NIKE Brand Digital sales were $3.1 billion for the third quarter of fiscal 2023 compared to $2.7 billion for the third quarter of fiscal 2022. On a currency-neutral basis, NIKE Direct revenues increased 22%, primarily driven by NIKE Brand Digital sales growth of 24% and comparable store sales growth of 20%. Comparable store sales, which exclude 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 measure 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 measures used by other companies.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

On a currency-neutral basis, NIKE, Inc. Revenues increased 19% for the first nine months of fiscal 2023, driven by higher revenues in North America, EMEA, APLA and Converse, which contributed approximately 9, 7, 3 and 1 percentage points to NIKE, Inc. Revenues, respectively. Lower revenues in Greater China reduced NIKE, Inc. Revenues by approximately 1 percentage point.

On a currency-neutral basis, NIKE Brand footwear revenues increased 24%, driven by growth in Men's and the Jordan Brand. Unit sales of footwear increased 15%, while higher ASP per pair contributed approximately 9 percentage points of footwear revenue growth, primarily due to higher full-price ASP and growth in NIKE Direct.

Currency-neutral NIKE Brand apparel revenues increased 10%, driven by growth in Men's. Unit sales of apparel increased 7% and higher ASP per unit contributed approximately 3 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

NIKE Brand wholesale revenues increased 10% and 18% compared to the first nine months of fiscal 2022, on a reported and currency-neutral basis, respectively. On a reported basis, NIKE Direct revenues represented approximately 43% of our total NIKE Brand revenues for the first nine months of fiscal 2023 and the first nine months of fiscal 2022. NIKE Brand Digital sales were $9.4 billion for the first nine months of fiscal 2023 compared to $7.9 billion for the first nine months of fiscal 2022. On a currency-neutral basis, NIKE Direct revenues increased 20%, primarily driven by NIKE Brand Digital sales growth of 27% and comparable store sales growth of 11%.

GROSS MARGIN


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023			2022			% CHANGE		2023			2022			% CHANGE
Gross profit	$	5,371		$	5,067		6	%	$	16,697		$	15,976		5	%
Gross margin	43.3		%	46.6		%	(330) bps		43.5		%	46.3		%	(280) bps

For the third quarter of fiscal 2023, our consolidated gross margin was 330 basis points lower than the prior year and primarily reflected the following factors:

•Higher NIKE Brand product costs, on a wholesale equivalent basis, (decreasing gross margin approximately 360 basis points) primarily due to higher input costs and elevated inbound freight and logistics costs as well as product mix;

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•Lower margin in NIKE Direct, driven by higher promotional activity to liquidate inventory in the current period compared to lower promotional activity in the prior period resulting from lower available inventory supply (decreasing gross margin approximately 140 basis points);

•Unfavorable changes in net foreign currency exchange rates, including hedges (decreasing gross margin approximately 140 basis points);

•Lower off-price margin, on a wholesale equivalent basis (decreasing gross margin approximately 30 basis points); and

•Higher NIKE Brand full-price ASP, net of discounts, on a wholesale equivalent basis, (increasing gross margin approximately 370 basis points) due primarily to strategic pricing actions and product mix.

For the first nine months of fiscal 2023, our consolidated gross margin was 280 basis points lower than the prior year and primarily reflected the following factors:

•Unfavorable changes in net foreign currency exchange rates, including hedges (decreasing gross margin approximately 100 basis points); and

•Higher NIKE Brand full-price ASP, net of discounts, on a wholesale equivalent basis, (increasing gross margin approximately 320 basis points) due primarily to strategic pricing actions and product mix.

TOTAL SELLING AND ADMINISTRATIVE EXPENSE


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023			2022			% CHANGE		2023			2022			% CHANGE
Demand creation expense(1)	$	923		$	854		8	%	$	2,968		$	2,789		6	%
Operating overhead expense	3,036			2,584			17	%	9,035			7,980			13	%
Total selling and administrative expense	$	3,959		$	3,438		15	%	$	12,003		$	10,769		11	%
% of revenues	32.0		%	31.6		%	40 bps		31.3		%	31.2		%	10 bps

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

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

Demand creation expense increased 8% for the third quarter of fiscal 2023 primarily due to an increase in advertising and marketing expense. Changes in foreign currency exchange rates decreased Demand creation expense by approximately 3 percentage points.

Operating overhead expense increased 17% primarily due to higher wage-related expenses, higher strategic technology enterprise investments and NIKE Direct variable costs. Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 3 percentage points.

Foreign exchange rate fluctuations had a similar impact on the translation of our consolidated Revenues, resulting in an unfavorable impact of approximately 5 percentage points.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

Demand creation expense increased 6% for the first nine months of fiscal 2023 primarily due to higher advertising and marketing expense and higher sports marketing expense. Changes in foreign currency exchange rates decreased Demand creation expense by approximately 5 percentage points.

Operating overhead expense increased 13% primarily due to an increase in wage-related expenses, higher strategic technology enterprise investments and NIKE Direct variable costs. Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 4 percentage points.

Foreign exchange rate fluctuations had a similar impact on the translation of our consolidated Revenues, resulting in an unfavorable impact of approximately 8 percentage points.

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OTHER (INCOME) EXPENSE, NET


	THREE MONTHS ENDED FEBRUARY 28,				NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		2023		2022
Other (income) expense, net	$	(58)	$	(94)	$	(283)	$	(235)

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.

For the third quarter of fiscal 2023, Other (income) expense, net decreased from $94 million of other income, net to $58 million in the current year, largely due to net favorable settlements of legal and insurance matters in the prior year and favorable activity in the prior year related to our strategic distributor partnership transition within APLA, partially offset by a net favorable change in foreign currency conversion gains and losses, including hedges.

For the first nine months of fiscal 2023, Other (income) expense, net increased from $235 million of other income, net to $283 million in the current year, primarily due to a net favorable change in foreign currency conversion gains and losses, including hedges, and settlements of legal matters. This increase was partially offset by net unfavorable activity related to our strategic distributor partnership transition within APLA, including the loss recognized upon the completion of the sale of our entities in Argentina and Uruguay to a third-party distributor in the second quarter of fiscal 2023.

For more information related to our distributor partnership transition within APLA, see Note 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed 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 unfavorable impacts of approximately $147 million and $508 million on our Income before income taxes for the third quarter and first nine months of fiscal 2023, respectively.

INCOME TAXES


	THREE MONTHS ENDED FEBRUARY 28,					NINE MONTHS ENDED FEBRUARY 28,
	2023		2022		% CHANGE	2023		2022		% CHANGE
Effective tax rate	16.0	%	16.4	%	(40) bps	18.5	%	12.7	%	580 bps

Our effective tax rate was 16.0% for the third quarter of fiscal 2023 and substantially consistent compared to 16.4% for the third quarter of fiscal 2022.

Our effective tax rate was 18.5% for the first nine months of fiscal 2023, compared to 12.7% for the first nine months of fiscal 2022, primarily due to decreased benefits from stock-based compensation and a shift in our earnings mix.

Refer to Note 6 — Income Taxes within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

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OPERATING SEGMENTS

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.

Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel and equipment. The Company's reportable operating segments for the NIKE Brand are: North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA), and include results for the NIKE and Jordan brands. The Company's NIKE Direct operations are managed within each geographic operating segment. Converse is also a reportable operating segment for the Company and operates predominately in one industry: the design, marketing, licensing and selling of athletic lifestyle sneakers, apparel and accessories.

As part of our centrally managed foreign exchange risk management program, standard foreign currency exchange rates are assigned twice per year to each NIKE Brand entity in our geographic operating segments and Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases into the entity's functional currency. Differences between assigned standard foreign currency exchange rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from our centrally managed foreign exchange risk management program and other conversion gains and losses.

The breakdown of Revenues is as follows:


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES(1)		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES(1)
North America	$	4,913	$	3,882	27	%	27	%	$	16,253	$	13,238	23	%	23	%
Europe, Middle East & Africa	3,246		2,779		17	%	26	%	10,068		9,228		9	%	25	%
Greater China	1,994		2,160		-8	%	1	%	5,438		5,986		-9	%	-2	%
Asia Pacific & Latin America	1,601		1,461		10	%	15	%	4,735		4,273		11	%	22	%
Global Brand Divisions(2)	12		41		-71	%	-69	%	44		54		-19	%	-17	%
TOTAL NIKE BRAND	11,766		10,323		14	%	19	%	36,538		32,779		11	%	19	%
Converse	612		567		8	%	12	%	1,841		1,753		5	%	10	%
Corporate(3)	12		(19)		—		—		13		(56)		—		—
TOTAL NIKE, INC. REVENUES	$	12,390	$	10,871	14	%	19	%	$	38,392	$	34,476	11	%	19	%

(1) The percent change excluding currency changes represents a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" for further information.

(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.

The primary financial measure used by the Company to evaluate performance of individual operating segments is EBIT, which represents Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income. As discussed in Note 12 — Operating Segments in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments.

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The breakdown of earnings before interest and taxes is as follows:


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023			2022			% CHANGE		2023			2022			% CHANGE
North America	$	1,190		$	967		23	%	$	4,064		$	3,636		12	%
Europe, Middle East & Africa	785			713			10	%	2,750			2,394			15	%
Greater China	702			784			-10	%	1,754			2,054			-15	%
Asia Pacific & Latin America	485			478			1	%	1,470			1,347			9	%
Global Brand Divisions	(1,160)			(975)			-19	%	(3,573)			(3,033)			-18	%
TOTAL NIKE BRAND(1)	2,002			1,967			2	%	6,465			6,398			1	%
Converse	164			168			-2	%	526			504			4	%
Corporate	(696)			(412)			-69	%	(2,014)			(1,460)			-38	%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES(1)	1,470			1,723			-15	%	4,977			5,442			-9	%
EBIT margin(1)	11.9		%	15.8		%			13.0		%	15.8		%
Interest expense (income), net	(7)			53			—		22			165			—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,477		$	1,670		-12	%	$	4,955		$	5,277		-6	%

(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 further information.

NORTH AMERICA


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	3,322	$	2,532	31	%	31	%	$	11,090	$	8,648	28	%	28	%
Apparel	1,419		1,207		18	%	18	%	4,598		4,117		12	%	12	%
Equipment	172		143		20	%	21	%	565		473		19	%	20	%
TOTAL REVENUES	$	4,913	$	3,882	27	%	27	%	$	16,253	$	13,238	23	%	23	%
Revenues by:
Sales to Wholesale Customers	$	2,323	$	1,769	31	%	32	%	$	8,533	$	6,774	26	%	26	%
Sales through NIKE Direct	2,590		2,113		23	%	23	%	7,720		6,464		19	%	20	%
TOTAL REVENUES	$	4,913	$	3,882	27	%	27	%	$	16,253	$	13,238	23	%	23	%
EARNINGS BEFORE INTEREST AND TAXES	$	1,190	$	967	23	%			$	4,064	$	3,636	12	%

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

On a currency-neutral basis, North America revenues for the third quarter of fiscal 2023 increased 27%, due primarily to higher revenues in Men's and the Jordan Brand. NIKE Direct revenues increased 23%, primarily driven by strong digital sales growth of 25%, comparable store sales growth of 17% and the addition of new stores.

Currency-neutral footwear revenues increased 31%, primarily driven by higher revenues in the Jordan Brand and Men's. Unit sales of footwear increased 26%, 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 growth in NIKE Direct, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

Currency-neutral apparel revenues increased 18%, primarily driven by higher revenues in Men's. Unit sales of apparel increased 20%, while lower ASP per unit reduced apparel revenues by approximately 2 percentage points. Lower ASP was primarily due to lower NIKE Direct ASP, reflecting higher promotional activity, and a lower mix of full-price sales. This activity was partially offset by higher ASP in both full and off-price.

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Reported EBIT increased 23% primarily due to higher revenues, partially offset by higher selling and administrative expense and gross margin contraction. Gross margin decreased approximately 200 basis points largely driven by lower margin in NIKE Direct in part due to higher promotional activity, higher product costs reflecting higher input costs and inbound freight and logistics costs, including supply chain network costs, and a lower mix of full-price sales. This was partially offset by higher full-price ASP, net of discounts, driven by strategic pricing actions and product mix. Selling and administrative expense increased due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily due to higher wage-related expenses and NIKE Direct variable costs, in part due to new store additions. The increase in demand creation expense was primarily due to an increase in digital marketing.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

On a currency-neutral basis, North America revenues for the first nine months of fiscal 2023 increased 23%, due primarily to higher revenues in Men's and the Jordan Brand. NIKE Direct revenues increased 20%, primarily driven by strong digital sales growth of 25%, comparable store sales growth of 9% and the addition of new stores.

Currency-neutral footwear revenues increased 28%, largely driven by higher revenues in Men's and the Jordan Brand. Unit sales of footwear increased 23%, 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 growth in NIKE Direct, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

Currency-neutral apparel revenues increased 12%, driven primarily by higher revenues in Men's. Unit sales of apparel increased 12%, while ASP per unit remained flat, as lower NIKE Direct ASP, reflecting higher promotional activity, was offset by higher full-price ASP and growth in NIKE Direct.

Reported EBIT increased 12% primarily due to higher revenues, partially offset by gross margin contraction and higher selling and administrative expense. Gross margin decreased approximately 340 basis points primarily due to higher product costs, reflecting higher input costs and inbound freight and logistics costs, lower margins in NIKE Direct due to higher promotional activity and a lower mix of full-price sales. This was partially offset by higher full-price ASP, net of discounts, largely due to product mix and strategic pricing actions. Selling and administrative expense increased due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily as a result of higher wage-related costs and NIKE Direct variable costs. The increase in demand creation expense reflected higher sports marketing expenses and an increase in digital marketing.

EUROPE, MIDDLE EAST & AFRICA


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	2,011	$	1,569	28	%	39	%	$	6,086	$	5,358	14	%	30	%
Apparel	1,094		1,083		1	%	10	%	3,528		3,444		2	%	18	%
Equipment	141		127		11	%	20	%	454		426		7	%	22	%
TOTAL REVENUES	$	3,246	$	2,779	17	%	26	%	$	10,068	$	9,228	9	%	25	%
Revenues by:
Sales to Wholesale Customers	$	2,061	$	1,858	11	%	20	%	$	6,506	$	6,194	5	%	21	%
Sales through NIKE Direct	1,185		921		29	%	39	%	3,562		3,034		17	%	34	%
TOTAL REVENUES	$	3,246	$	2,779	17	%	26	%	$	10,068	$	9,228	9	%	25	%
EARNINGS BEFORE INTEREST AND TAXES	$	785	$	713	10	%			$	2,750	$	2,394	15	%

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

On a currency-neutral basis, EMEA revenues for the third quarter of fiscal 2023 increased 26%, primarily driven by growth in Men's. NIKE Direct revenues increased 39%, driven by strong digital sales growth of 43% and comparable store sales growth of 36%.

Currency-neutral footwear revenues increased 39%, driven by higher revenues in Men's and Women's. Unit sales of footwear increased 24%, while higher ASP per pair contributed approximately 15 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, growth in NIKE Direct and higher NIKE Direct ASP.

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Currency-neutral apparel revenues increased 10% due primarily to higher revenues in Men's. Unit sales of apparel decreased 2%, while higher ASP per unit contributed approximately 12 percentage points of apparel revenue growth, primarily due to growth in NIKE Direct and higher full-price ASP, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

Reported EBIT increased 10% primarily due to higher revenues, partially offset by gross margin contraction and higher selling and administrative expenses. Gross margin decreased approximately 250 basis points primarily due to higher product costs reflecting higher input costs and inbound freight and logistics costs as well as product mix and unfavorable changes in standard foreign currency exchange rates. This activity was partially offset by higher full-price ASP, net of discounts, in part due to strategic pricing actions and product mix. Selling and administrative expense increased due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily due to wage-related expenses and other administrative costs, partially offset by favorable changes in foreign currency exchange rates. Higher demand creation expense was driven by higher advertising and marketing expense, partially offset by favorable changes in foreign currency exchange rates.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

On a currency-neutral basis, EMEA revenues for the first nine months of fiscal 2023 increased 25%, due primarily to higher revenues in Men’s. NIKE Direct revenues increased 34% primarily due to strong digital sales growth of 51% and comparable store sales growth of 18%.

Currency-neutral footwear revenues increased 30%, driven by higher revenues led by Men's, the Jordan Brand and Women's. Unit sales of footwear increased 13%, while higher ASP per pair contributed approximately 17 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price and NIKE Direct ASPs, as well as growth in NIKE Direct.

Currency-neutral apparel revenues increased 18% due primarily to higher revenues in Men's. Unit sales of apparel increased 5%, while higher ASP per unit contributed approximately 13 percentage points of apparel revenue growth, primarily due to higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

Reported EBIT increased 15% due to higher revenues and gross margin expansion, partially offset by higher selling and administrative expense. Gross margin increased approximately 30 basis points primarily due to higher full-price ASP, net of discounts, in part due to strategic pricing actions and product mix. This activity was partially offset by higher product costs reflecting higher input costs, inbound freight and logistics costs as well as product mix. Selling and administrative expense increased due to higher demand creation and operating overhead expense. Higher demand creation expense was primarily due to higher advertising and marketing expense, partially offset by favorable changes in foreign currency exchange rates. Operating overhead expense increased primarily due to other administrative costs and higher wage-related expenses, partially offset by favorable changes in foreign currency exchange rates.

GREATER CHINA


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	1,496	$	1,554	-4	%	5	%	$	4,099	$	4,238	-3	%	4	%
Apparel	461		548		-16	%	-8	%	1,228		1,588		-23	%	-17	%
Equipment	37		58		-36	%	-31	%	111		160		-31	%	-26	%
TOTAL REVENUES	$	1,994	$	2,160	-8	%	1	%	$	5,438	$	5,986	-9	%	-2	%
Revenues by:
Sales to Wholesale Customers	$	1,126	$	1,241	-9	%	-1	%	$	2,862	$	3,251	-12	%	-5	%
Sales through NIKE Direct	868		919		-6	%	3	%	2,576		2,735		-6	%	2	%
TOTAL REVENUES	$	1,994	$	2,160	-8	%	1	%	$	5,438	$	5,986	-9	%	-2	%
EARNINGS BEFORE INTEREST AND TAXES	$	702	$	784	-10	%			$	1,754	$	2,054	-15	%

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

On a currency-neutral basis, Greater China revenues for the third quarter of fiscal 2023 increased 1%. The increase in revenues was primarily due to higher revenues in Men's, the Jordan Brand and Kid's, largely offset by lower revenues in Women's. NIKE Direct revenues increased 3% due to comparable store sales growth of 9%, in part due to improved physical traffic, and growth in non-comparable store sales, partially offset by digital sales declines of 11%.

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Currency-neutral footwear revenues increased 5%, driven primarily by higher revenues in Men's. Unit sales of footwear increased 6%, while lower ASP per unit reduced footwear revenues by approximately 1 percentage point.

Currency-neutral apparel revenues decreased 8%, due primarily to lower revenues in Men's and Women's. Unit sales of apparel decreased 16%, partially offset by approximately 8 percentage points of growth due to higher ASP per unit. Higher ASP was primarily due to higher full-price, NIKE Direct and off-price ASPs as well as a higher mix of full-price sales.

Reported EBIT decreased 10% as lower revenues and gross margin contraction were partially offset by lower selling and administrative expense. Gross margin decreased approximately 80 basis points, primarily due to higher product costs reflecting higher input costs and product mix. This activity was partially offset by favorable changes in standard foreign currency exchange rates and higher full-price ASP, net of discounts, in part due to product mix. Selling and administrative expense decreased due to lower demand creation and operating overhead expense. The decrease in demand creation expense was primarily due to lower retail brand presentation expense, favorable changes in foreign currency exchange rates and lower digital marketing, partially offset by higher advertising and marketing expense. Operating overhead expense decreased primarily due to favorable changes in foreign currency exchange rates, partially offset by higher wage-related expense and other administrative costs.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

On a currency-neutral basis, Greater China revenues for the first nine months of fiscal 2023 decreased 2%, reflecting impacts from COVID-19 related disruptions. The decrease in revenues was primarily due to lower revenues in Men’s and Women's, largely offset by higher revenues in the Jordan Brand. NIKE Direct revenues increased 2% due to growth in non-comparable store sales and a 1% increase in comparable store sales, partially offset by a decline in digital sales of 1%.

Currency-neutral footwear revenues increased 4%, driven primarily by higher revenues in the Jordan Brand. Unit sales of footwear increased 3%, while higher ASP per pair contributed approximately 1 percentage point of footwear revenue growth, primarily due to higher NIKE Direct ASP and a higher mix of full-price sales, partially offset by a lower mix of NIKE Direct sales.

Currency-neutral apparel revenues decreased 17%, due primarily to lower revenues in Men's and Women's. Unit sales of apparel decreased 16%, while lower ASP per unit reduced apparel revenues by approximately 1 percentage point, primarily due to lower NIKE Direct and off-price ASPs, partially offset by higher full-price ASP and growth in NIKE Direct.

Reported EBIT decreased 15% as lower revenues and gross margin contraction more than offset lower selling and administrative expense. Gross margin decreased approximately 80 basis points, primarily due to higher product costs reflecting product mix and higher input costs. This activity was partially offset by favorable changes in standard foreign currency exchange rates and higher full-price ASP, net of discounts, in part due to product mix. Selling and administrative expense decreased due to lower demand creation expense, partially offset by higher operating overhead expense. The decrease in demand creation expense was primarily due to lower retail brand presentation costs, lower digital marketing and favorable changes in foreign currency exchange rates, partially offset by higher advertising and marketing expense. Operating overhead expense increased due to higher wage-related expenses and other administrative costs, partially offset by favorable changes in foreign currency exchange rates.

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ASIA PACIFIC & LATIN AMERICA


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	1,141	$	1,005	14	%	20	%	$	3,313	$	2,914	14	%	24	%
Apparel	407		394		3	%	9	%	1,255		1,181		6	%	18	%
Equipment	53		62		-15	%	-12	%	167		178		-6	%	3	%
TOTAL REVENUES	$	1,601	$	1,461	10	%	15	%	$	4,735	$	4,273	11	%	22	%
Revenues by:
Sales to Wholesale Customers	$	913	$	860	6	%	11	%	$	2,792	$	2,571	9	%	18	%
Sales through NIKE Direct	688		601		14	%	22	%	1,943		1,702		14	%	27	%
TOTAL REVENUES	$	1,601	$	1,461	10	%	15	%	$	4,735	$	4,273	11	%	22	%
EARNINGS BEFORE INTEREST AND TAXES	$	485	$	478	1	%			$	1,470	$	1,347	9	%

As discussed previously, our NIKE Brand business in Brazil transitioned to a distributor operating model during fiscal 2021. 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 from 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 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

On a currency-neutral basis, APLA revenues increased 15% for the third quarter of fiscal 2023 driven by higher revenues across nearly all territories, led by Southeast Asia & India and Japan. This increase was partially offset by a decline in our CASA territory. Within our CASA territory, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model reduced APLA revenue growth by approximately 8 percentage points. Revenues increased primarily due to growth in Men's, the Jordan Brand and Women's. NIKE Direct revenues increased 22%, primarily due to digital sales growth of 23% and comparable store sales growth of 36% in part due to improved physical retail traffic, partially offset by stores included in the sale of our Chile, Argentina and Uruguay entities.

Currency-neutral footwear revenues increased 20%, due primarily to higher revenues in Men's, the Jordan Brand and Women's. Unit sales of footwear increased 14%, while higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth. Higher ASP per pair was driven by higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

Currency-neutral apparel revenues increased 9%, due primarily to higher revenues in Men's. Unit sales of apparel decreased 1%, while higher ASP per unit contributed approximately 10 percentage points of apparel revenue growth, driven by higher full-price and off-price ASPs and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 1% for the third quarter of fiscal 2023, as higher revenues more than offset higher selling and administrative expense and gross margin contraction. Gross margin decreased approximately 190 basis points due to higher product costs reflecting product mix and higher input costs and unfavorable changes in standard foreign currency exchange rates. This was partially offset by higher full-price ASP, net of discounts, in part due to product mix and strategic pricing actions. Selling and administrative expense increased due to higher demand creation and operating overhead expense. The increase in demand creation expense was primarily due to higher advertising and marketing expense and an increase in digital marketing. Operating overhead expense increased largely due to higher wage-related costs and NIKE Direct variable costs, partially offset by favorable changes in foreign currency exchange rates.

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FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

On a currency-neutral basis, APLA revenues increased 22% for the first nine months of fiscal 2023 driven by higher revenues across nearly all territories, led by Southeast Asia & India, Korea and Japan. This increase was partially offset by a decline in our CASA territory. Within our CASA territory, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model reduced APLA revenue growth by approximately 5 percentage points. Revenues increased primarily due to higher revenues in Men’s, Women's and the Jordan Brand. NIKE Direct revenues increased 27%, primarily due to digital sales growth of 29% and comparable store sales growth of 31%, in part due to improved physical retail traffic.

Currency-neutral footwear revenues increased 24%, due primarily to higher revenues in Men's, Women's and the Jordan Brand. Unit sales of footwear increased 17%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth. Higher ASP per pair was driven by higher full-price ASP and growth in NIKE Direct.

Currency-neutral apparel revenues increased 18%, due primarily to higher revenues in Men's. Unit sales of apparel increased 13%, while higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth, driven by higher full-price and off-price ASPs, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 9% for the third quarter of fiscal 2023 as a result of higher revenues, partially offset by higher selling and administrative expense and gross margin contraction. Gross margin decreased approximately 100 basis points primarily due to higher product costs, reflecting product mix, increased inbound freight and logistics costs and input costs, partially offset by higher full-price ASP, net of discounts, in part due to product mix and strategic pricing actions. Selling and administrative expense increased due to higher operating overhead and demand creation expense. The increase in operating overhead expense was primarily due to higher wage-related expenses and NIKE Direct variable costs, partially offset by favorable changes in foreign currency exchange rates. Demand creation expense increased primarily due to increases in advertising and marketing expense and higher sports marketing expense, partially offset by favorable changes in foreign currency exchange rates.

GLOBAL BRAND DIVISIONS


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues	$	12	$	41	-71	%	-69	%	$	44	$	54	-19	%	-17	%
Earnings (Loss) Before Interest and Taxes	$	(1,160)	$	(975)	-19	%			$	(3,573)	$	(3,033)	-18	%

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.

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 19% for the third quarter of fiscal 2023 driven primarily by higher operating overhead and demand creation expense. Higher operating overhead expense was primarily due to an increase in wage-related costs and strategic technology enterprise investments. Higher demand creation expense was primarily due to an increase in digital marketing and higher advertising and marketing expense.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 18% for the first nine months of fiscal 2023 driven by higher operating overhead and higher demand creation expense. The increase in operating overhead expense was primarily due to higher wage-related costs and strategic technology enterprise investments. The increase in demand creation expense reflected higher sports marketing expenses and an increase in digital marketing.

CONVERSE


	THREE MONTHS ENDED FEBRUARY 28,								NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES		2023		2022		% CHANGE		% CHANGE EXCLUDING CURRENCY CHANGES
Revenues by:
Footwear	$	540	$	503	7	%	11	%	$	1,633	$	1,555	5	%	11	%
Apparel	29		29		0	%	7	%	70		87		-20	%	-13	%
Equipment	6		7		-14	%	-2	%	21		21		0	%	5	%
Other(1)	37		28		32	%	29	%	117		90		30	%	29	%
TOTAL REVENUES	$	612	$	567	8	%	12	%	$	1,841	$	1,753	5	%	10	%
Revenues by:
Sales to Wholesale Customers	$	323	$	303	7	%	12	%	$	971	$	975	0	%	7	%
Sales through Direct to Consumer	252		236		7	%	10	%	753		688		9	%	13	%
Other(1)	37		28		32	%	29	%	117		90		30	%	29	%
TOTAL REVENUES	$	612	$	567	8	%	12	%	$	1,841	$	1,753	5	%	10	%
EARNINGS BEFORE INTEREST AND TAXES	$	164	$	168	-2	%			$	526	$	504	4	%

(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.

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

On a currency-neutral basis, Converse revenues increased 12% for the third quarter of fiscal 2023 as revenue growth in North America, Western Europe, and licensee markets was partially offset by declines in Asia. Direct to consumer revenues increased 10%, driven by strong digital sales growth in North America. Combined unit sales within the wholesale and direct to consumer channels increased 4%, primarily driven by growth in North America, while ASP increased 7%, driven by strategic pricing actions.

Reported EBIT decreased 2%, driven by higher selling and administrative expense and gross margin contraction, partially offset by higher revenues. Gross margin decreased approximately 150 basis points, driven by lower margins in direct to consumer, in part reflecting increased promotional activity, higher product costs and unfavorable changes in standard foreign currency exchange rates, partially offset by higher ASP, net of discounts, and lower other costs. Selling and administrative expense increased due to higher operating overhead and demand creation expense. Operating overhead expense increased as a result of higher wage-related expenses and professional services costs. Demand creation expense increased as a result of increased advertising and marketing expense.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

On a currency-neutral basis, Converse revenues increased 10% for the first nine months of fiscal 2023 as revenue growth in North America, Western Europe, and licensee markets was partially offset by declines in Asia. Direct to consumer revenues increased 13%, driven by strong digital sales growth in North America. Combined unit sales within the wholesale and direct to consumer channels increased 1%, primarily driven by growth in North America, while ASP increased 8%, driven by growth in direct to consumer and strategic pricing actions.

Reported EBIT increased 4%, driven by higher revenues and gross margin expansion, partially offset by higher selling and administrative expense. Gross margin increased approximately 120 basis points driven by higher ASP, net of discounts, lower other costs, and growth in licensee revenues, partially offset by higher product costs. Selling and administrative expense increased due to higher operating overhead and demand creation expense. Operating overhead expense increased as a result of higher wage-related expenses, higher professional services costs and lower bad debt recoveries. Demand creation expense increased due to higher advertising and marketing expense, partially offset by lower retail brand presentation costs.

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CORPORATE


	THREE MONTHS ENDED FEBRUARY 28,						NINE MONTHS ENDED FEBRUARY 28,
(Dollars in millions)	2023		2022		% CHANGE		2023		2022		% CHANGE
Revenues	$	12	$	(19)	—		$	13	$	(56)	—
Earnings (Loss) Before Interest and Taxes	$	(696)	$	(412)	-69	%	$	(2,014)	$	(1,460)	-38	%

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.

THIRD QUARTER OF FISCAL 2023 COMPARED TO THIRD QUARTER OF FISCAL 2022

Corporate's loss before interest and taxes increased $284 million for the third quarter of fiscal 2023, primarily due to the following:

•an unfavorable change of $164 million primarily related to increased wage-related expenses, reported as a component of consolidated Operating overhead expense;

•an unfavorable change of $77 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 margin;

•an unfavorable change of $44 million related to net favorable settlements of legal and insurance matters in the prior year as well as favorable activity in the prior year related to our strategic distributor partnership transition within APLA; these results are reported as a component of consolidated Other (income) expense, net; and

•a favorable change in net foreign currency gains and losses of $13 million related to the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, reported as a component of consolidated Other (income) expense, net.

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE MONTHS OF FISCAL 2022

Corporate's loss before interest and taxes increased $554 million for the first nine months of fiscal 2023, primarily due to the following:

•an unfavorable change of $366 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 margin;

•an unfavorable change of $247 million primarily related to increased wage and other professional service expenses, reported as a component of consolidated Operating overhead expense;

•an unfavorable change of $150 million primarily due to our strategic distributor partnership transition within APLA, including the loss recognized upon completion of the sale of our entities in Argentina and Uruguay to a third-party distributor in the second quarter of fiscal 2023, partially offset by settlements of legal matters, reported as a component of consolidated Other (income) expense, net; and

•a favorable change in net foreign currency gains and losses of $221 million related to the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, reported as a component of consolidated Other (income) expense, net.

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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. 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 Unaudited Condensed 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. As of and for the three and nine months ended February 28, 2023, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K.

Refer to Note 4 — Fair Value Measurements and Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end. For additional information about our Foreign Currency Exposures and Hedging Practices refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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 — Product purchases denominated in currencies other than the functional currency of the transacting entity and factory input costs from the foreign currency adjustments program with certain factories.

•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 monetary 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 results of operations.

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, except for hedges of the embedded derivative components of the product cost exposures and other contractual agreements.

Certain currency forward contracts used to manage the foreign exchange exposure of non-functional currency denominated monetary assets and liabilities subject to remeasurement and embedded derivative contracts are not formally designated as hedging instruments and are recognized in Other (income) expense, net.

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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. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $549 million and $2.5 billion for the three and nine months ended February 28, 2023, respectively, and a detriment of approximately $280 million and a benefit of $165 million for the three and nine months ended February 28, 2022, respectively. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $160 million and $729 million for the three and nine months ended February 28, 2023, respectively, and a detriment of approximately $84 million and a benefit of $45 million for the three and nine months ended February 28, 2022, respectively.

Management generally identifies hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%. Management has concluded our Turkey subsidiary within our EMEA operating segment is operating in a hyper-inflationary markets. As a result, beginning in the first quarter of fiscal 2023, the functional currency of our Turkey subsidiary, changed from the local currency to the U.S. Dollar. As of and for the three and nine months ended February 28, 2023, this change did not have a material impact on our results of operations or financial condition, and we do not anticipate it will have a material impact in future periods based on current rates.

Prior to the completion of the sale of our Argentina entity within our APLA operating segment during the second quarter of fiscal 2023, Management concluded this subsidiary was operating in a hyper-inflationary market. As a result, beginning in the second quarter of fiscal 2019, the functional currency of our Argentina subsidiary changed from the local currency to the U.S. Dollar. As of and for the three and nine months ended February 28, 2023, this change did not have a material impact on our results of operations or financial condition.

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 $147 million and $508 million on our Income before income taxes for the three and nine months ended February 28, 2023.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $3,588 million for the first nine months of fiscal 2023, compared to $4,037 million for the first nine months of fiscal 2022. Net income, adjusted for non-cash items, generated $4,805 million of operating cash inflow for the first nine months of fiscal 2023, compared to $5,387 million for the first nine months of fiscal 2022. The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $1,217 million for the first nine months of fiscal 2023 compared to a decrease of $1,350 million for the first nine months of fiscal 2022. For the first nine months of fiscal 2023, the net change in working capital compared to the prior year was relatively flat and impacted by unfavorable changes in Accounts payable and Accounts receivable, offset by favorable impacts from Inventories. These changes were, in part, due to reduced inventory purchases in the current period as we reduce our excess inventory and higher wholesale revenues, which carry a higher level of days sales outstanding. Further impacting these changes was a lower available supply of inventory in the prior year due to supply chain constraints.

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Cash provided (used) by investing activities was an inflow of $137 million for the first nine months of fiscal 2023, compared to an outflow of $1,711 million for the first nine months of fiscal 2022, primarily driven by the net change in short-term investments. For the first nine months of fiscal 2023, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash inflow of $775 million compared to a cash outflow of $1,156 million for the first nine months of fiscal 2022.

Cash provided (used) by financing activities was an outflow of $5,266 million for the first nine months of fiscal 2023 compared to $3,456 million for the first nine months of fiscal 2022. The increased outflow in the first nine months of fiscal 2023 was driven by higher share repurchases of $4,101 million for the first nine months of fiscal 2023 compared to $2,923 million in the first nine months of fiscal 2022, as well as lower proceeds from stock option exercises, which resulted in a cash inflow of $413 million in the first nine months of fiscal 2023 compared to $959 million in the first nine months of fiscal 2022.

During the first nine months of fiscal 2023, we repurchased a total of 38.4 million shares of NIKE's Class B Common Stock for $4.1 billion (an average price of $107.16 per share). In August 2022, we terminated the previous four-year, $15 billion share repurchase program approved by the Board of Directors in June 2018. Under this program, we repurchased 6.5 million shares for a total approximate cost of $710.0 million (an average price of $109.85 per share) during the first quarter of fiscal 2023 and 83.8 million shares for a total approximate cost of $9.4 billion (an average price of $111.82 per share) during the term of the program. Upon termination of the four-year, $15 billion program, we began purchasing shares under the new four-year, $18 billion share repurchase plan authorized by the Board of Directors in June 2022. As of February 28, 2023, we had repurchased 32.0 million shares at a cost of approximately $3.4 billion (an average price of $106.61 per share) under this new program. We continue to expect funding of share repurchases will come from operating cash flows and excess cash. 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.

As of February 28, 2023, our committed credit facilities were unchanged from the information previously reported in our Form 10-K for the fiscal year ended May 31, 2022. We currently have long-term debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively. Any changes to these ratings could result in interest rate and facility fee changes. As of February 28, 2023, we were in full compliance with the covenants under our facilities and believe it is unlikely we will fail to meet any of the covenants in the foreseeable future. As of February 28, 2023 and May 31, 2022, no amounts were outstanding under our committed credit facilities.

On March 10, 2023, subsequent to the end of the third quarter of fiscal 2023, 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 8, 2024, with an option to extend the maturity date by 364 days. This facility replaces the prior $1 billion 364-day credit facility agreement entered into on March 11, 2022, which matured on March 10, 2023. Refer to Note 5 — Short-term Borrowings and Credit Lines for additional information.

Liquidity is also provided by our $3 billion commercial paper program. As of and for the three months ended February 28, 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. We currently have short-term debt ratings of A1+ and P1 from Standard and Poor's Corporation and Moody's Investor Services, respectively.

To date, in fiscal 2023, we have not experienced difficulty accessing the capital or bank 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 February 28, 2023, we had Cash and equivalents and Short-term investments totaling $10.8 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 February 28, 2023, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 104 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.

There have been no significant changes to the material cash requirements reported in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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OFF-BALANCE SHEET ARRANGEMENTS

As of February 28, 2023, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources.

NEW ACCOUNTING PRONOUNCEMENTS

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

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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.

We believe the assumptions and judgments involved in the accounting estimates described in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting estimates. Actual results could differ from these estimates. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the information previously reported under Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the "Exchange Act") reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We carry out a variety of ongoing procedures, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of February 28, 2023.

We are continuing several transformation initiatives to centralize and simplify our business processes and systems. These are long-term initiatives, which we believe will enhance our internal control over financial reporting due to increased automation and further integration of related processes. We will continue to monitor our internal control over financial reporting for effectiveness throughout these transformation initiatives.

There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND ANALYST REPORTS

Certain written and oral statements, other than purely historic information, including estimates, projections, statements relating to NIKE’s business plans, objectives and expected operating or financial results and the assumptions upon which those statements are based, made or incorporated by reference from time to time by NIKE or its representatives in this report, other reports, filings with the SEC, press releases, conferences or otherwise, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result” or words or phrases of similar meaning. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by NIKE with the SEC, including reports filed on Forms 8-K, 10-Q and 10-K, and include, among others, the following: health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic; international, national and local political, civil, economic and market conditions; the size and growth of the overall athletic or leisure footwear, apparel and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic or leisure footwear, apparel and equipment for consumers and endorsers; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products and sports; seasonal and geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products and the various market factors described above; our ability to execute on our sustainability strategy and achieve our sustainability-related goals and targets, including sustainable product offerings; difficulties in implementing, operating and maintaining NIKE’s increasingly complex information technology systems and controls, including, without limitation, the systems related to demand and supply planning and inventory control; interruptions in data and information technology systems; consumer data security; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance orders may not be indicative of future revenues due to changes in shipment timing, the changing mix of orders with shorter lead times, and discounts, order cancellations and returns; the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE’s products; increases in the cost of materials, labor and energy used to manufacture products; new product development and introduction; the ability to secure and protect trademarks, patents and other intellectual property; product performance and quality; customer service; adverse publicity and an inability to maintain NIKE's reputation and brand image, including without limitation, through social media or in connection with brand damaging events; the loss of significant customers or suppliers; dependence on distributors and licensees; business disruptions; increased costs of freight and transportation to meet delivery deadlines; increases in borrowing costs due to any decline in NIKE’s debt ratings; changes in business strategy or development plans; general risks associated with doing business outside of the United States, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, sanctions, political and economic instability, conflicts and terrorism; the potential impact of new and existing laws, regulations or policy, including, without limitation, tariffs, import/export, trade, wage and hour or labor and immigration regulations or policies; changes in government regulations; the impact of, including business and legal developments relating to, climate change, extreme weather conditions and natural disasters; litigation, regulatory proceedings, sanctions or any other claims asserted against NIKE; the ability to attract and retain qualified employees, and any negative public perception with respect to key personnel or our corporate culture, values or purpose; the effects of NIKE’s decision to invest in or divest of businesses or capabilities; and other factors referenced or incorporated by reference in this report and other reports.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Note 13 — Contingencies within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, which is incorporated by reference herein.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In June 2022, the Board of Directors approved a four-year, $18 billion share repurchase program. As of February 28, 2023, the Company had repurchased 32.0 million shares at an average price of $106.61 per share for a total approximate cost of $3.4 billion under the program.

All share repurchases were made under NIKE's publicly announced program, and there are no other programs under which the Company repurchases shares. The following table presents a summary of share repurchases made during the quarter ended February 28, 2023:


PERIOD	TOTAL NUMBER OF SHARES PURCHASED	AVERAGE PRICE PAID PER SHARE		APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLAN OR PROGRAM (IN MILLIONS)
December 1 - December 31, 2022	6,993,677	$	111.27	$	15,334
January 1 - January 31, 2023	3,040,909	$	125.65	$	14,952
February 1 - February 28, 2023	2,902,915	$	123.50	$	14,594
	12,937,501	$	117.39

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ITEM 6. EXHIBITS

(a) EXHIBITS:



3.			Exhibits:
3.1			Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2015).
3.2			Fifth Restated Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed June 19, 2020).
4.1			Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2			Fifth Restated Bylaws, as amended (see Exhibit 3.2).
10.1			Credit Agreement dated as of March 10, 2023, among NIKE, Inc., Bank of America, N.A., as Administrative Agent, and the other Banks named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 13, 2023).
31.1			Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1†			Section 1350 Certificate of Chief Executive Officer.
32.2†			Section 1350 Certificate of Chief Financial Officer.
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File - formatted in Inline XBRL and included in Exhibit 101

† Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


NIKE, INC. an Oregon Corporation
By:						/s/ MATTHEW FRIEND Matthew Friend Chief Financial Officer and Authorized Officer
Date:						April 6, 2023