What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-01-06 compared with 2021-10-05 · 298 added, 178 removed, 333 unchanged (59% of the section changed)

8 unchanged sentences

During fiscal 2021, we substantially completed a series of leadership and operating model changes to streamline and speed up strategic execution of the Consumer Direct Acceleration.

During the first quarter of fiscal 2022 and the first quarter of fiscal 2021, the Company recognized an immaterial amount of related employee termination costs and, to a lesser extent, stock-based compensation expense .

For the three and six months ended November 30, 2021 , we recognized an immaterial amount of related employee termination costs and, to a lesser extent, stock-based compensation expense .

During the three months ended November 30, 2020, we recognized employee termination costs of $107 million and $30 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $67 million.

For the six months ended November 30, 2020, we recognized employee termination costs of $145 million and $30 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $71 million.

For all periods presented these costs were classified within Corporate.

Additionally, the related stock-based compensation expense recorded within Operating overhead expense and Cost of sales was $30 million and $4 million, respectively, for the three months ended November 30, 2020, and $39 million and $4 million, respectively, for the six months ended November 30, 2 020.

For more information, see Note 13 — Restructuring within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

COVID-19 UPDATE

The COVID-19 pandemic continues to create volatility in our business results and operations globally, causing us to transform the way we operate in order to better serve our consumers.

During the first quarter of fiscal 2022, we continued to experience strong consumer demand with Revenues growing 16% and gross margin expanding 170 basis points compared to the prior year.

However, during the first quarter of fiscal 2022, the majority of NIKE Brand and Converse contract manufacturers in Vietnam and Indonesia were subject to government mandated shutdowns due to COVID-19.

These closures have, and are expected to continue to, significantly impact our previously planned inventory production for our upcoming holiday and spring seasons.

As a result of these closures, we have lost approximately ten weeks of production.

Although the timing remains uncertain and is subject to factors outside of our control, re-opening plans continue to be approved for factories in Vietnam and we anticipate most factories will re-open in October.

Currently, factories in Indonesia are open and operational.

Once factories re-open we expect it will take several months for them to return to full production.

Our second quarter and first six months of fiscal 2022 Revenues grew 1% and 8%, respectively, as we continued to manage the ongoing impacts of supply chain challenges across each of our geographies and Converse.

During the first quarter of fiscal 2022, the majority of NIKE Brand and Converse contract manufacturers in Vietnam and Indonesia were subject to government mandated shutdowns due to COVID-19.

These closures have significantly impacted, and are expected to continue to significantly impact, our previously planned inventory production.

As a result of these closures, we have lost approximately three months of production, impacting available product supply for this fiscal year.

All impacted factories began re-opening in October and are currently operational.

We expect it will take several months from re-opening for the factories to return to pre-closure production volumes, and there could be further impacts, including additional closures or employee absences, as a result of the emergence and spread of COVID-19 variants, as well as other factors outside of our control that could continue to cause further disruption to our planned inventory production.

For fiscal 2021, 51% of NIKE Brand footwear and 30% of NIKE Brand apparel was manufactured in Vietnam, and 24% of NIKE Brand footwear and less than 12% of NIKE Brand apparel was manufactured in Indonesia.

Additionally, the extended inventory transit times we experienced in fiscal 2021, due primarily to port congestion, transportation delays as well as labor and container shortages, worsened during the first quarter of fiscal 2022, negatively impacting our product availability, most prominently in our wholesale channel.

We also experienced higher transportation and logistics costs as a result of this dynamic environment, which negatively impacted gross margin expansion in the first quarter of fiscal 2022.

We expect the combination of factory closures and elevated transit times will continue to impact product availability leading to inventory shortages and will negatively impact revenue growth for the remainder of the fiscal year.

In addition, we expect transportation and logistics costs will continue to be elevated as we navigate these supply chain constraints throughout the fiscal year.

We expect all our geographies and Converse will continue to be impacted by these factors throughout fiscal 2022 with countries in Asia expected to be more significantly impacted in the second quarter of fiscal 2022 and others expected to experience a greater impact in the second half of fiscal 2022 due to higher levels of in-transit inventory at the end of the first quarter of fiscal 2022.

In addition, our product availability was also impacted by extended inventory transit times in the second quarter and first six months of fiscal 2022, due primarily to port congestion, transportation delays as well as labor and container shortages.

Our product availability was impacted most significantly in our wholesale channel.

We also experienced higher transportation, logistics and fulfillment costs as a result of this dynamic environment, which partially offset gross margin expansion in the second quarter and first six months of fiscal 2022.

The combined impact of factory closures and extended inventory transit times disproportionately impacted our geographies during the second quarter of fiscal 2022.

North America and EMEA, located further away from our sourcing base with longer transit times, entered the second quarter with elevated levels of inventory available to meet consumer demand as revenues grew 12% and 6% on a currency-neutral basis, respectively.

By contrast, Greater China and APLA, located closer to our sourcing base

with shorter transit times, entered the second quarter with a lower supply of available inventory, negatively impacting revenues during the second quarter of fiscal 2022 with revenues declining by 24% and 6% on a currency-neutral basis, respectively.

We expect the combination of factory closures and elevated transit times will continue to impact product availability, leading to inventory supply significantly lagging consumer demand for the remainder of the fiscal year.

In addition, we expect transportation, logistics and fulfillment costs will continue to increase as we navigate these supply chain constraints.

We also expect product costs to increase in the second half of fiscal 2022 due to higher input costs.

To mitigate the impact across our business, our teams are continuing to leverage our operational playbook and taking actions where we can, including shifting production capacity to other countries, strategic use of air freight and employing a seasonless approach to products.

Despite these short-term dynamics, our Consumer Direct Acceleration strategy continues to drive our business towards our long-term fiscal 2025 financial goals shared in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

Our NIKE Direct business has continued its momentum in the first quarter, fueling our growth as we continue to navigate through the pandemic by leveraging our digital platforms with our store footprint to connect directly with the consumer.

NIKE Brand Digital revenues grew 25% on a currency-neutral basis for the first quarter of fiscal 2022, even with improved physical traffic levels in most of our geographies compared to the prior year.

During the quarter, we experienced an increase in comparable store sales in

North America, EMEA and APLA primarily due to improved physical retail traffic, partially offset by a decline in comparable store sales in Greater China, in part due to ongoing marketplace dynamics and a COVID-19 resurgence during the first quarter of fiscal 2022.

As of October 1, 2021, approximately 99% of our owned stores were open with some operating on reduced hours.

Our NIKE Direct business has continued its momentum in the second quarter, fueling our growth as we continue to navigate through the pandemic by leveraging our digital platforms with our store footprint to connect directly with our consumers.

Despite continued inventory constraints and supply chain challenges, NIKE Direct grew 8% and 16% on a currency-neutral basis, for the second quarter and first six months of fiscal 2022, respectively.

NIKE Brand Digital revenues grew 11% and 17% on a currency-neutral basis for the second quarter and first six months of fiscal 2022, respectively.

During the second quarter of fiscal 2022, we experienced an increase in comparable store sales in North America and EMEA, partially offset by declines in Greater China and APLA due to supply chain challenges as well as ongoing marketplace dynamics and a COVID-19 resurgence in Greater China.

As of January 3, 2022, approximately 98% of our owned stores were open with some operating on reduced hours.

During the quarter, we continued to invest in our digital transformation and brand campaigns as the world continues its return to sport.

1 unchanged sentence

We continue to monitor the ongoing and dynamic impacts of COVID-19, as well as guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations.

There may be developments outside our control that require us to adjust our operating plan, such as our assumption on the pace of re-opening and return to full production of factories in Vietnam and the planned shift of production capacity to other countries following factory closures in Vietnam and Indonesia.

Such developments and other potential impacts of COVID-19, such as new or prolonged factory closures, higher inventory levels or inventory shortages in various markets, other adverse impacts on the global supply chain, revised payment terms with certain of our wholesale customers, higher sales-related reserves , factory cancellation costs and a volatile effective tax rate driven by changes in the mix of earnings across our jurisdicti ons, among other factors, could have material adverse impacts on our revenue growth as well as our overall profitability in future periods.

FIRST QUARTER OVERVIEW

For the first quarter of fiscal 2022, NIKE, Inc.

Revenues increased 16% to $12.2 billion compared to the first quarter of fiscal 2021.

On a currency-neutral basis, Revenues increased 12%.

Net income was $1,874 million and diluted earnings per common share was $1.16 for the first quarter of fiscal 2022, compared to Net income of $1,518 million and diluted earnings per common share of $0.95 for the first quarter of fiscal 2021.

Income before income taxes increased 23% compared to the first quarter of fiscal 2021, due to higher revenues and gross margin expansion, partially offset by higher selling and administrative expense.

There have been and may continue to be developments outside of our control, including new COVID-19 variants, that require us to make adjustments to our operating plan, such as store operating hours and the timeline to return to normal production volumes in factories impacted by COVID-19.

Such developments and other potential impacts of COVID-19, such as new or prolonged factory closures, higher inventory levels or inventory shortages in various markets, other adverse impacts on the global supply chain, revised payment terms with certain of our wholesale customers, higher sales-related reserves, factory cancellation costs and a volatile effective tax rate driven by changes in the mix of earnings across our jurisdictions, among other factors, could have material adverse impacts on our revenue growth as well as our overall profitability in future periods.

As a result of these circumstances, COVID-19 related disruptions are making it more challenging to compare our performance, including our revenue growth and overall profitability, across quarters and fiscal years, and we expect the operating environment will remain volatile as COVID-19 variants continue to cause disruptions to our operations.

SECOND QUARTER OVERVIEW

For the second quarter of fiscal 2022, NIKE, Inc.

Revenues increased 1% to $11.4 billion compared to the second quarter of fiscal 2021 and were flat on a currency-neutral basis.

Net income was $1,337 million and diluted earnings per common share was $0.83 for the second quarter of fiscal 2022, compared to Net income of $1,251 million and diluted earnings per common share of $0.78 for the second quarter of fiscal 2021.

Income before income taxes increased 3% compared to the second quarter of fiscal 2021, due to gross margin expansion and higher revenues, partially offset by higher selling and administrative expense.

The NIKE Brand, which represents over 90% of NIKE, Inc.

Revenues, increased 16% compared to the first quarter of fiscal 2021.

On a currency-neutral basis, NIKE Brand revenues increased 12%, primarily driven by higher revenues in North America, APLA and EMEA.

Additionally, NIKE Brand currency-neutral revenues were higher across footwear and apparel, as well as Men's, Women's, the Jordan Brand and Kids'.

Revenues for Converse increased 12% and 7% compared to the first quarter of fiscal 2021, on a reported and currency-neutral basis, respectively, led by performance in Direct to consumer in both North America and Western Europe.

Our effective tax rate was 11.0% for the first quarter of fiscal 2022, compared to 11.5% for the first quarter of fiscal 2021, primarily due to a more favorable impact from stock-based compensation and discrete items, such as the recognition of a reserve in the first quarter of fiscal 2021 related to Altera Corp.

Commissioner , partially offset by a change in the proportion of earnings taxed in the U.S.

Revenues, increased 1% compared to the second quarter of fiscal 2021.

On a currency-neutral basis, NIKE Brand revenues were flat, as higher revenues in North America and EMEA were offset by declines in Greater China and APLA.

Additionally, NIKE Brand currency-neutral revenue growth in apparel was offset by a decline in footwear primarily due to lower available inventory supply resulting from COVID-19 related factory closures and extended inventory transit times.

Revenues for Converse increased 17% and 16% compared to the second quarter of fiscal 2021, on a reported and currency-neutral basis, respectively, led by performance in Direct to consumer in both Western Europe and North America.

Our effective tax rate was 10.9% for the second quarter of fiscal 2022, compared to 14.1% for the second quarter of fiscal 2021, primarily due to a change in our earnings mix, partially offset by a less favorable impact from stock-based compensation.

Consumer protection and data privacy laws have been coming into effect across the world, including recently introduced laws that became effective during the second quarter of fiscal 2022 in China, that provide for the comprehensive regulation of data and personal data processing activities across all industries and operations such as collecting, utilizing, processing, sharing and transferring data and personal information in and out of China.

Uncertainty regarding the interpretation and application of these laws in practice may impact us and could impair our ability to execute on our operating plan and have adverse effects on our business and results of operations.

Further, any non-compliance could subject us to, among other things, fines, legal proceedings, regulatory orders or damage to our reputation.

During fiscal 2021, the transaction with Grupo SBF S.A.

16 unchanged sentences

RESULTS OF OPERATIONS

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions, except per share data) 2021 2020 % CHANGE

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions, except per share data) 2021 2020 % CHANGE 2021 2020 % CHANGE

Revenues $ 11,357 $ 11,243 1 % $ 23,605 $ 21,837 8 %

14 unchanged sentences

CONSOLIDATED OPERATING RESULTS

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1)

NIKE Brand Revenues by:

7 unchanged sentences

Corporate (3)

(16) 26 — — (37) 39 — —

TOTAL NIKE, INC.

11 unchanged sentences

(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.

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

On a currency-neutral basis, NIKE, Inc.

Revenues increased 12% for the first quarter of fiscal 2022, driven by higher revenues in both the NIKE Brand and Converse.

Higher revenues in North America, APLA, EMEA and Converse contributed approximately 6, 3, 2 and 1 percentage points to NIKE, Inc.

Revenues, respectively.

On a currency-neutral basis, NIKE Brand footwear revenues increased 10% in the first quarter of fiscal 2022, driven by higher revenue s in the Jordan Brand, Women's, Men's and Kids'.

Unit sale s of footwear increased 5%, while higher average selling price (ASP) per pair contributed approximately 5 percentage points of footwear revenue growth, primarily due to higher NIKE Direct ASP, on a wholesale equivalent basis, as well as the favorable impact of growth in our NIKE Direct business.

Currency-neutral NIKE Brand apparel revenues, for the first quarter of fiscal 2022, increased 16%, driven by higher revenues in Men's, Women's and the Jordan Brand.

Uni t sales of apparel increased 8% and higher ASP per unit contributed approximately 8 percentage points of apparel revenue growth.

Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs.

On a reported basis, NIKE Direct revenues represented approximately 40% of our total NIKE Brand revenues for the first quarter of fiscal 2022 compared to 36% for the first quarter of fiscal 2021.

Digital commerce sales were $2.5 billion for the first quarter of fiscal 2022 compared to $1.9 billion for the first quarter of fiscal 2021.

On a currency-neutral basis, NIKE Direct revenues increased 25%, driven by digital commerce sales growth of 25%, comparable store sales growth of 22%, in part due to improved physical retail traffic, and the addition of new stores.

Revenues were flat for the second quarter of fiscal 2022, as higher revenues in North America, EMEA and Converse were offset by lower revenues in Greater China and APLA.

Higher revenues in North America, EMEA and Converse contributed approximately 4, 1 and 1 percentage points to NIKE, Inc.

Revenues, respectively, while lower revenues in Greater China and APLA reduced NIKE, Inc.

Revenues by approximately 5 and 1 percentage points, respectively.

On a currency-neutral basis, NIKE Brand footwear revenues decreased 1% in the second quarter of fiscal 2022, driven primarily by lower revenues in Men's.

Unit sales of footwear decreased 7%, while higher average selling price (ASP) per pair contributed approximately 6 percentage points of footwear revenue growth, primarily due to higher NIKE Direct ASP, as well as a higher mix of full-price sales, partially offset by lower full-price ASP, on a wholesale equivalent basis.

Currency-neutral NIKE Brand apparel revenues, for the second quarter of fiscal 2022, increased 1%, driven primarily by growth in NIKE Direct, partially offset by declines in our wholesale business.

Unit sales of apparel decreased 6%, and higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth.

Higher ASP per unit was primarily due to higher NIKE Direct ASP, a higher mix of full-price sales and higher full-price ASP, primarily due to lower discounts, as well as higher off-price ASP.

On a reported basis, NIKE Direct revenues represented approximately 43% of our total NIKE Brand revenues for the second quarter of fiscal 2022 compared to 40% for the second quarter of fiscal 2021.

Digital commerce sales were $2.7 billion for the second quarter of fiscal 2022 compared to $2.4 billion for the second quarter of fiscal 2021.

On a currency-neutral basis, NIKE Direct revenues increased 8%, driven by digital commerce sales growth of 11%, comparable store sales growth of 3%, in part due to improved physical retail traffic in some of our geographies, and the addition of new stores.

Comparable store sales, which exclude digital commerce sales, comprises revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met:

3 unchanged sentences

Management considers this metric when making financial and operating decisions.

The method of calculating comparable

store sales varies across the retail industry.

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.

THREE MONTHS ENDED AUGUST 31,

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

On a currency-neutral basis, NIKE, Inc.

Revenues increased 6% for the first six months of fiscal 2022, driven by higher revenues in North America, EMEA, APLA and Converse, partially offset by lower revenues in Greater China.

Higher revenues in North America, EMEA, APLA and Converse contributed approximately 5, 2, 1 and 1 percentage points to NIKE, Inc.

Revenues, respectively, while lower revenues in Greater China reduced NIKE, Inc.

Revenues by approximately 3 percentage points.

On a currency-neutral basis, NIKE Brand footwear revenues increased 5%, driven primarily by growth in NIKE Direct.

Unit sales of footwear decreased 1%, while higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth, primarily due to higher NIKE Direct ASP, as well as a higher mix of full-price sales, partially offset by lower full-price ASP.

Currency-neutral NIKE Brand apparel revenues increased 8%, driven by growth in Men's.

Unit sales of apparel increased 1% and higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth.

Higher ASP per unit was primarily due to higher NIKE Direct and full-price ASPs, as well as a higher mix of full-price sales.

On a reported basis, NIKE Direct revenues represented approximately 42% of our total NIKE Brand revenues for the first six months of fiscal 2022 compared to 38% for the first six months of fiscal 2021.

Digital commerce sales were $5.2 billion for the first six months of fiscal 2022 compared to $4.4 billion for the first six months of fiscal 2021.

On a currency-neutral basis, NIKE Direct revenues increased 16%, driven by digital commerce sales growth of 17%, comparable store sales growth of 12%, in part due to improved physical retail traffic, and the addition of new stores.

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE

2021 2020 % CHANGE 2021 2020 % CHANGE

Gross profit $ 5,213 $ 4,847 8 % $ 10,909 $ 9,588 14 %

Gross margin 46.5 % 44.8 % 170 bps

For the first quarter of fiscal 2022, our consolidated gross margin was 170 basis points higher than the prior year period and primarily reflected the following factors:

• Higher margin in our NIKE Direct business, as we experienced higher promotional activity in the prior year due to COVID-19 (increasing gross margin approximately 160 basis points);

Gross margin 45.9 % 43.1 % 280 bps 46.2 % 43.9 % 230 bps

For the second quarter of fiscal 2022, our consolidated gross margin was 280 basis points higher than the prior year period and primarily reflected the following factors:

• Higher margin in our NIKE Direct business, primarily driven by low promotional activity in the current period reflecting limited available for sale inventory due to supply chain constraints compared to higher promotional activity in the prior year as we managed the impacts from COVID-19 (increasing gross margin approximately 170 basis points);

• Higher mix of full-price sales, on a wholesale equivalent basis, (increasing gross margin approximately 110 basis points);

• Lower other costs, in part due to higher restructuring-related costs related to our organizational realignment in the prior year, among other factors, (increasing gross margin approximately 50 basis points);

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

• Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due to increased freight costs (decreasing gross margin approximately 120 basis points);

• Lower other costs, in part due to the release of factory cancellation cost accruals occurring in the prior year, which was more than offset by lower storage costs and reduced inventory obsolescence in the first quarter of fiscal 2022, among other things, (increasing gross margin approximately 50 basis points).

• Lower NIKE Brand full-price product margins, on a wholesale equivalent basis.

Specifically, higher product costs (decreasing gross margin approximately 60 basis points) largely due to increased freight and logistics costs as well as lower full-price ASP, net of discounts, (decreasing gross margin approximately 40 basis points) primarily due to a lower mix of Greater China sales.

For the first six months of fiscal 2022, our consolidated gross margin was 230 basis points higher than the prior year period and primarily reflected the following factors:

• Higher mix of full-price sales, on a wholesale equivalent basis, (increasing gross margin approximately 90 basis points);

• Lower other costs, in part due to higher restructuring-related costs related to our organizational realignment in the prior year, (increasing gross margin approximately 40 basis points);

• Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due to increased freight and logistics costs (decreasing gross margin approximately 80 basis points).

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE

2021 2020 % CHANGE 2021 2020 % CHANGE

Demand creation expense (1)

2 unchanged sentences

Total selling and administrative expense $ 3,759 $ 3,267 15 % $ 7,331 $ 6,242 17 %

% of revenues 29.2 % 28.1 % 110 bps

% of revenues 33.1 % 29.1 % 400 bps 31.1 % 28.6 % 250 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.

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

Demand creation expense increased 36% for the first quarter of fiscal 2022 primarily due to higher spend against brand campaigns as we experienced marketplace closures in the prior year due to COVID-19, as well as continued investments in digital marketing to support heightened digital demand.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

Demand creation expense increased 40% for the second quarter of fiscal 2022 primarily due to higher advertising and marketing spend against brand campaigns as we experienced marketplace closures in the prior year due to COVID-19, as well as continued investments in digital marketing to support heightened digital demand.

Changes in foreign currency exchange rates increased Demand creation expense by approximately 1 percentage point.

Operating overhead expense increased 8% primarily due to higher strategic technology investments and an increase in wage-related expenses.

Changes in foreign currency exchange rates had an insignificant impact on Operating overhead expense.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

Demand creation expense increased 38% for the first six months of fiscal 2022 primarily due to higher advertising and marketing spend against brand campaigns as we experienced marketplace closures in the prior year due to COVID-19, as well as continued investments in digital marketing to support heightened digital demand.

Changes in foreign currency exchange rates increased Demand creation expense by approximately 2 percentage points.

Operating overhead expense increased 15% primarily due to an increase in wage-related expenses, higher strategic technology investments and NIKE Direct variable costs.

Changes in foreign currency exchange rates increased Operating overhead expense by approximately 2 percentage points.

Operating overhead expense increased 12% primarily due to an increase in wage-related expenses and higher strategic technology investments.

Changes in foreign currency exchange rates increased Operating overhead expense by approximately 1 percentage point.

OTHER (INCOME) EXPENSE, NET

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 2021 2020

Other (income) expense, net $ (102) $ 54 $ (141) $ 40

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 first quarter of fiscal 2022, Other (income) expense, net was relatively flat compared to the prior year.

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 favorable impacts of approximately $104 million on our Income before income taxes for the first quarter of fiscal 2022.

THREE MONTHS ENDED AUGUST 31,

2021 2020 % CHANGE

Effective tax rate 11.0 % 11.5 % (50) bps

Commissioner , partially offset by a change in the proportion of earnings taxed in the U.S.

For the second quarter of fiscal 2022, Other (income) expense, net changed from $54 million of other expense to $102 million of other income in the current year, primarily due to a favorable change in foreign currency conversion gains and losses, including hedges, as well as incremental charges, in the prior year, related to our planned, strategic distributor partnership transition within APLA.

For the first six months of fiscal 2022, Other (income) expense, net changed from $40 million of other expense to $141 million of other income in the current year, primarily due to incremental charges, in the prior year, related to our planned, strategic distributor partnership transition within APLA, coupled with a net favorable change in foreign currency conversion gains and losses, including hedges.

For more information related to our distributor partnership transition within APLA, see Note 12 — 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 favorable impacts of approximately $63 million and $167 million on our Income before income taxes for the second quarter and first six months of fiscal 2022, respectively.

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

2021 2020 % CHANGE 2021 2020 % CHANGE

Effective tax rate 10.9 % 14.1 % (320) bps 11.0 % 12.7 % (170) bps

Our effective tax rate was 11.0% for the first six months of fiscal 2022, compared to 12.7% for the first six months of fiscal 2021, primarily due to a more favorable impact from stock-based compensation and discrete items, such as the recognition of a reserve in the first quarter of fiscal 2021 related to Altera Corp.

Commissioner , partially offset by a change in our earnings mix.

Refer to Note 5 — Income Taxes within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

17 unchanged sentences

The breakdown of Revenues is as follows:

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1)

North America $ 4,477 $ 4,006 12 % 12 % $ 9,356 $ 8,231 14 % 13 %

7 unchanged sentences

Corporate (3)

(16) 26 — — (37) 39 — —

TOTAL NIKE, INC.

7 unchanged sentences

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

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE

2021 2020 % CHANGE 2021 2020 % CHANGE

North America $ 1,235 $ 1,023 21 % $ 2,669 $ 2,325 15 %

19 unchanged sentences

NORTH AMERICA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 2,852 $ 2,512 14 % 13 % $ 6,116 $ 5,469 12 % 12 %

11 unchanged sentences

Additionally, over the last three years we have significantly reduced the number of undifferentiated wholesale accounts.

During fiscal 2021 and the first quarter of fiscal 2022, we took further steps towards account and channel consolidation by reprioritizing product allocation to benefit NIKE Direct and our differentiated strategic wholesale customers.

We expect over the next two fiscal years, we will more aggressively accelerate these changes as we work to reprofile the shape of the marketplace and recapture wholesale revenue declines over time.

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

On a currency-neutral basis, North America revenues for the first quarter of fiscal 2022 increased 15%, due primarily to higher revenues in Women's, Men's, the Jordan Brand and Kids'.

During fiscal 2021 and the first six months of fiscal 2022, we took further steps towards account and channel consolidation by reprioritizing product allocation to benefit NIKE Direct and our differentiated strategic wholesale customers.

We expect we will continue to aggressively accelerate these changes over the next several fiscal years as we work to reprofile the shape of the marketplace and recapture wholesale revenue declines over time.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

On a currency-neutral basis, North America revenues for the second quarter of fiscal 2022 increased 12%, due primarily to higher revenues in Women's and the Jordan Brand, partially offset by a decline in Men's.

NIKE Direct revenues increased 30%, driven by strong digital sales growth of 40%, comparable store sales growth of 16%, in part due to improved physical retail traffic, and the addition of new stores.

Footwear revenues increased 10% on a currency-neutral basis, largely driven by significant growth in digital.

Unit sales of footwear increased 4%, while higher ASP per pair contributed approximately 6 percentage points.

Higher ASP per pair was primarily due to the favorable impact of growth in our NIKE Direct business, as well as higher NIKE Direct ASPs, partially offset by lower full-price ASP.

On a currency-neutral basis, apparel revenues increased 27%, driven prim arily by higher revenues in Men's and Women's.

U nit sales of apparel increased 13%, while higher ASP per unit contributed approximately 14 percentage points.

The increase in ASP per unit was primarily driven by higher full-price and NIKE Direct ASPs, as well as the favorable impact of growth in our NIKE Direct business.

Footwear revenues increased 13% on a currency-neutral basis, largely driven by higher revenues in Women's, partially offset by a decline in Men's.

Unit sales of footwear increased 7%, while higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business and a higher mix of full-price sales, partially offset by lower full-price ASP.

On a currency-neutral basis, apparel revenues increased 8%, driven primarily by growth in NIKE Direct.

Unit sales of apparel decreased 5%, while higher ASP per unit contributed approximately 13 percentage points of apparel revenue growth.

The increase in ASP per unit was primarily driven by higher NIKE Direct ASP, as well as higher full-price ASP, primarily due to lower discounts, and a higher mix of full-price sales.

Reported EBIT increased 21% as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 60 basis points primarily due to the favorable impact of growth in our NIKE Direct business, as well as higher margins in NIKE Direct and a higher mix of full-price sales.

This activity was partially offset by higher product costs as favorable impacts from product mix were more than offset by increased freight charges, as well as lower full-price ASP, net of discounts primarily due to shifts in product mix compared to the prior year.

Gross margin increased approximately 280 basis points primarily due to higher margins and the favorable impact of growth in our NIKE Direct business, as well as a higher mix of full-price sales and higher full-price ASP, net of discounts.

This activity was partially offset by higher product costs primarily due to increased freight and logistics costs.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Demand creation expense increased primarily as a result of higher advertising and marketing expense, as well as digital marketing investments and sports marketing costs.

Demand creation expense increased primarily as a result of higher advertising and marketing expense as well as digital marketing investments, partially offset by lower sports marketing costs.

The increase in operating overhead expense reflected higher wage-related costs as well as an increase in strategic technology investments.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

On a currency-neutral basis, North America revenues for the first six months of fiscal 2022 increased 13%, due primarily to higher revenues in Women's.

NIKE Direct revenues increased 38%, driven by strong digital sales growth of 41%, comparable store sales growth of 31%, in part due to improved physical retail traffic, and the addition of new stores.

Footwear revenues increased 12% on a currency-neutral basis, largely driven by higher revenues in Women's and the Jordan Brand, partially offset by a decline in Men's.

Unit sales of footwear increased 5%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business and a higher mix of full-prices sales, partially offset by lower full-price ASP.

On a currency-neutral basis, apparel revenues increased 16%, driven primarily by higher revenues in Men's.

Unit sales of apparel increased 4%, while higher ASP per unit contributed approximately 12 percentage points of apparel revenue growth.

The increase in ASP per unit was primarily driven by higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business and higher full-price ASP, as well as a higher mix of full-price sales.

Reported EBIT increased 15% as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 170 basis points primarily due to higher margins and the favorable impact of growth in our NIKE Direct business, as well as a higher mix of full-price sales.

This activity was partially offset by higher product costs primarily due to increased freight and logistics costs.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Demand creation expense increased primarily as a result of higher advertising and marketing expense, as well as higher digital marketing investments.

The increase in operating overhead expense reflected higher wage-related costs as well as an increase in NIKE Direct strategic technology investments.

EUROPE, MIDDLE EAST & AFRICA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 1,806 $ 1,731 4 % 4 % $ 3,789 $ 3,533 7 % 4 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 806 $ 660 22 % $ 1,681 $ 1,352 24 %

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

On a currency-neutral basis, EMEA revenues for the first quarter of fiscal 2022 increased 8%, due primarily to higher revenues in Men’s, Women’s and the Jordan Brand.

NIKE Direct revenues increased 10% primarily due to comparable store sales growth of 16%, in part due to improved physical retail traffic, the addition of new stores and digital sales growth of 2%.

Currency-neutral footwear revenues increased 4%, driven primarily by higher revenues in the Jordan Brand and Men's, partially offset by a decline in Women's.

Unit sales of footwear increased 2%, while higher ASP per pair contributed approximately 2 percentage points.

Higher ASP per pair was primarily due to lower off-price ASP, which was more than offset by higher full-price and NIKE Direct ASPs.

Currency-neutral apparel revenues increased 13% due primarily to higher revenues in Men's and Women's.

Unit sales of apparel increased 7%, while higher ASP per unit contributed approximately 6 percentage points, primarily due to higher full-price and NIKE Direct ASPs.

Reported EBIT increased 26% due to higher revenues, gross margin expansion and lower selling and administrative expense as a percent of revenues.

Gross margin increased approximately 260 basis points primarily due to higher NIKE Direct margins, favorable changes in standard foreign currency exchange rates and a higher mix of full-price sales, partially offset by higher product costs primarily due to increased freight charges.

Selling and administrative expense increased due to higher operating overhead and demand creation expense.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

On a currency-neutral basis, EMEA revenues for the second quarter of fiscal 2022 increased 6%, driven by growth in our wholesale business and NIKE Direct.

NIKE Direct revenues increased 6% primarily due to comparable store sales growth of 14%, in part due to improved physical retail traffic, and the addition of new stores, partially offset by a decline in digital sales of 1%.

Currency-neutral footwear revenues increased 4%, driven by growth in wholesale and NIKE Direct.

Unit sales of footwear decreased 4%, while higher ASP per pair contributed approximately 8 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct and full-price ASPs, as well as a higher mix of full-price sales.

Currency-neutral apparel revenues increased 8% due primarily to higher revenues in Men's.

Unit sales of apparel increased 3%, while higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth, primarily due to higher NIKE Direct ASP, a higher mix of full-price sales and higher full-price ASP.

Reported EBIT increased 22% as gross margin expansion and higher revenues more than offset higher selling and administrative expense.

Gross margin increased approximately 670 basis points primarily due to higher NIKE Direct margins, favorable changes in standard foreign currency exchange rates, a higher mix of full-price sales and lower other costs.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Higher demand creation expense was driven by higher advertising and marketing expenses as well as higher sports marketing costs.

Higher operating overhead expense was primarily due to higher wage-related expenses.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

On a currency-neutral basis, EMEA revenues for the first six months of fiscal 2022 increased 7%, due primarily to higher revenues in Men’s.

NIKE Direct revenues increased 8% primarily due to comparable store sales growth of 15%, in part due to improved physical retail traffic, and the addition of new stores, while digital sales was relatively flat compared to prior year.

Currency-neutral footwear revenues increased 4%, driven by growth in NIKE Direct and our wholesale business.

Unit sales of footwear decreased 1%, while higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct and full-price ASPs, as well as a higher mix of full-price sales.

Currency-neutral apparel revenues increased 11% due primarily to higher revenues in Men's.

Unit sales of apparel increased 5%, while higher ASP per unit contributed approximately 6 percentage points of apparel revenue growth, primarily due to higher full-price and NIKE Direct ASPs, as well as a higher mix of full-price sales.

Reported EBIT increased 24% as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 460 basis points primarily due to higher NIKE Direct margins, favorable changes in standard foreign currency exchange rates and a higher mix of full-price sales, partially offset by higher product costs primarily due to increased freight and logistics costs.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Higher demand creation expense was driven by higher advertising and marketing expenses.

Higher operating overhead expense was primarily due to higher wage-related expenses.

GREATER CHINA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 1,235 $ 1,567 -21 % -25 % $ 2,684 $ 2,818 -5 % -11 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 569 $ 891 -36 % $ 1,270 $ 1,579 -20 %

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

On a currency-neutral basis, Greater China revenues for the first quarter of fiscal 2022 increased 1%, reflecting impacts from a COVID-19 resurgence and ongoing marketplace dynamics.

The increase in revenues was primarily due to higher revenues in the Jordan Brand and Men’s, partially offset by declines in Women's and Kids'.

NIKE Direct revenues decreased 3% due to comparable store sales declines of 6% in part due to reduced physical retail traffic, as well as digital sales declines of 6%, partially offset by the addition of new stores.

Currency-neutral footwear revenues increased 6% for the first quarter of fiscal 2022, driven primarily by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 5%, while higher ASP per pair contributed approximately 1 percentage point of footwear revenue growth, driven by higher full-price ASP.

Currency-neutral apparel revenues decreased 9% for the first quarter of fiscal 2022 due primarily to lower revenues in Women's.

Unit sales of apparel decreased 4%, while lower ASP per unit reduced apparel revenues by approximately 5 percentage points, primarily due to lower NIKE Direct ASP.

Reported EBIT increased 2% as higher revenues more than offset gross margin contraction and higher selling and administrative expense.

Gross margin decreased approximately 150 basis points reflecting higher product costs and lower off-price margin, which more than offset higher full-price ASP, net of discounts.

Selling and administrative expense increased due to higher operating overhead and demand creation expense.

Growth in operating overhead expense was primarily driven by higher wage-related and other administrative costs.

Demand creation expense increased primarily due to higher advertising and marketing expense.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

On a currency-neutral basis, Greater China revenues for the second quarter of fiscal 2022 decreased 24%, reflecting impacts from lack of available inventory supply and product launch timing due to factory closures and mandated store closures due to COVID-19, as well as ongoing marketplace dynamics.

The decrease in revenues was primarily due to lower revenues in Men’s and Women's.

NIKE Direct revenues decreased 21% due to digital sales declines of 27%, comparable store sales declines of 18%, in part due to reduced physical retail traffic and mandated store closures due to COVID-19, partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 25%, driven primarily by lower revenues in Men's.

Unit sales of footwear decreased 20%, while lower ASP per pair reduced footwear revenues by approximately 5 percentage points, driven by lower NIKE Direct and full-price ASPs.

Currency-neutral apparel revenues decreased 21%, due primarily to lower revenues in Men's and Women's.

Unit sales of apparel decreased 17%, while lower ASP per unit reduced apparel revenues by approximately 4 percentage points, primarily due to lower NIKE Direct ASP, as well as lower full-price ASPs, primarily due to higher discounts.

Reported EBIT decreased 36% due to lower revenues, gross margin contraction and higher selling and administrative expense.

Gross margin decreased approximately 310 basis points reflecting lower full-price ASP, net of discounts, lower NIKE Direct margins, higher other costs and a lower mix of full-price sales, partially offset by lower product costs.

Higher other costs were primarily due to higher inventory obsolescence and the unfavorable rate impact of fixed supply chain costs on a lower volume of shipments.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Growth in demand creation expense was primarily due to higher advertising and marketing costs as well as higher digital marketing investments.

Operating overhead expense increased largely due to higher wage-related costs, partially offset by lower administrative costs.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

On a currency-neutral basis, Greater China revenues for the first six months of fiscal 2022 decreased 13%, reflecting impacts from lack of available inventory supply and product launch timing due to factory closures, mandated store closures due to COVID-19 and ongoing marketplace dynamics.

The decrease in revenues was primarily due to lower revenues in the Men’s and Women's.

NIKE Direct revenues decreased 13% due to digital sales declines of 19%, comparable store sales declines of 12%, in part due to reduced physical retail traffic, partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 11%, driven primarily by lower revenues in Men's.

Unit sales of footwear decreased 8%, while lower ASP per pair reduced footwear revenues by approximately 3 percentage points, driven by lower NIKE Direct and full-price ASPs, primarily due to higher discounts.

Currency-neutral apparel revenues decreased 16%, due primarily to lower revenues in Women's.

Unit sales of apparel decreased 10%, while lower ASP per unit reduced apparel revenues by approximately 6 percentage points, primarily due to lower NIKE Direct and full-price ASPs, primarily due to higher discounts.

Reported EBIT decreased 20% due to lower revenues, gross margin contraction and higher selling and administrative expense.

Gross margin decreased approximately 220 basis points reflecting lower full-price ASP, primarily due to higher discounts, higher other costs and lower NIKE Direct margins, partially offset by lower product costs.

Higher other costs was primarily due to higher inventory obsolescence.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Growth in demand creation expense was primarily due to higher advertising and marketing costs as well as digital marketing investments.

Operating overhead expense increased largely due to higher wage-related costs.

ASIA PACIFIC & LATIN AMERICA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions) 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 887 $ 991 -10 % -8 % $ 1,909 $ 1,749 9 % 9 %

9 unchanged sentences

For more information see Note 12 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

On a currency-neutral basis, APLA revenues increased 31% for the first quarter of fiscal 2022.

Territory revenue growth was led by a 144% increase in SOCO (which comprises Argentina, Chile and Uruguay), a 24% increase in Japan, a 86% increase in Mexico and a 26% increase in Korea.

Revenues increased primarily due to higher revenues in Men’s and Women’s.

NIKE Direct revenues increased 36%, primarily due to digital sales growth of 62% and comparable store sales growth of 18%, in part due to improved physical retail traffic.

Currency-neutral footwear revenues increased 33% for the first quarter of fiscal 2022 due primarily to higher revenues in Men's and Women's.

Unit sales of footwear increased 19%, while higher ASP per pair contributed approximately 14 percentage points.

Higher ASP per pair was driven by higher NIKE Direct ASP as well as higher full-price ASPs, due to lower discounts, and a higher mix of full-price sales.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

On a currency-neutral basis, APLA revenues decreased 6% for the second quarter of fiscal 2022.

The decline was due to lower revenues across nearly all territories, led by a decline of 67% due to our business model shift in Brazil to a distributor model in fiscal 2021, partially offset by higher revenues in SOCO (which comprises Argentina, Chile and Uruguay), which increased 33%.

Revenues decreased primarily due to lower revenues in Men’s.

NIKE Direct revenues increased 6%, primarily due to digital sales growth of 25%, partially offset by store closures and comparable store sales contraction of 1%, in part due to reduced physical retail traffic.

Currency-neutral footwear revenues decreased 8%, due primarily to lower revenues in Men's.

Unit sales of footwear decreased 25%, while higher ASP per pair contributed approximately 17 percentage points of footwear revenue growth.

Higher ASP per pair was driven by higher NIKE Direct, full-price and off-price ASPs, as well as a higher mix of full-price sales.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Currency-neutral apparel revenues increased 26% for the first quarter of fiscal 2022 due primarily to higher revenues in Men's and Women's.

Unit sales of apparel increased 12%, and higher ASP per unit contributed approximately 14 percentage points, driven by higher full-price ASP, reflecting lower discounts, and higher NIKE Direct ASP partially offset by a lower mix of NIKE Direct sales.

Currency-neutral apparel revenues decreased 5%, due primarily to lower revenues in Men's and Women's.

Unit sales of apparel decreased 20%, while higher ASP per unit contributed approximately 15 percentage points of apparel revenue growth, driven by higher NIKE Direct, full-price and off-price ASPs, as well as a higher mix of full-price sales.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Reported EBIT increased 72% for the first quarter of fiscal 2022 due to higher revenues, gross margin expansion and lower selling and administrative expense as a percent of revenues.

Gross margin increased approximately 560 basis points primarily due to lower other costs, higher NIKE Direct margins, higher full-price ASP, primarily due to lower discounts, and a higher mix of full-price sales.

Reported EBIT decreased 8% for the second quarter of fiscal 2022, as lower revenues and higher selling and administrative expenses more than offset gross margin expansion.

Gross margin increased approximately 460 basis points primarily due to lower product costs, higher margins and the favorable impact of growth in our NIKE Direct business, higher full-price ASP, primarily reflecting lower discounts, and a higher mix of full-price sales.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Higher demand creation expense was primarily due to higher digital marketing investments to support heightened digital demand.

The increase in operating overhead expense was primarily due to an increase in NIKE Direct strategic technology investments and lower bad debt recoveries.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

On a currency-neutral basis, APLA revenues increased 10% for the first six months of fiscal 2022.

Territory revenue growth was led by a 72% increase in SOCO, an 11% increase in Japan and a 23% increase in Mexico, partially offset by a decline of 56% due to our business model shift in Brazil to a distributor model in fiscal 2021.

Revenues increased primarily due to higher revenues in Men’s.

NIKE Direct revenues increased 19%, primarily due to digital sales growth of 41% and comparable store sales growth of 7%, partially offset by store closures.

Currency-neutral footwear revenues increased 9%, due primarily to higher revenues in Kids' and the Jordan Brand, partially offset by declines in Men's.

Unit sales of footwear decreased 6%, while higher ASP per pair contributed approximately 15 percentage points of footwear revenue growth.

Higher ASP per pair was driven by higher NIKE Direct ASP as well as higher full-price ASPs, primarily due to lower discounts, higher off-price ASP and a higher mix of full-price sales.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Currency-neutral apparel revenues increased 8%, due primarily to higher revenues in Men's.

Unit sales of apparel decreased 6%, while higher ASP per unit contributed approximately 14 percentage points of apparel revenue growth, driven by higher full-price ASP, reflecting lower discounts, higher NIKE Direct ASP, as well as higher off-price ASP and a higher mix of full-price sales.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Reported EBIT increased 23% for the first six months of fiscal 2022, as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 510 basis points primarily due to higher margins and the favorable impact of growth in our NIKE Direct business, lower other costs, higher full-price ASP, primarily due to lower discounts as well as lower product costs and a higher mix of full-price sales.

The decrease in other costs was primarily due to the favorable rate impact of fixed supply chain costs on a higher volume of wholesale shipments, as well as lower inventory obsolescence.

1 unchanged sentence

Higher demand creation expense was primarily due to higher digital marketing investments to support heightened digital demand.

The increase in operating overhead expense was primarily due to an increase in NIKE Direct strategic technology investments, as well as higher wage-related expenses.

The increase in operating overhead expense was primarily due to an increase in NIKE Direct strategic technology investments, and lower bad debt recoveries.

GLOBAL BRAND DIVISIONS

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Revenues $ 6 $ 8 -25 % -5 % $ 13 $ 12 8 % 13 %

2 unchanged sentences

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

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

Global Brand Divisions' loss before interest and taxes increased 16% for the first quarter of fiscal 2022 driven by higher operating overhead and higher demand creation expense.

Higher operating overhead expense was primarily due to an increase in strategic technology investments.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

Global Brand Divisions' loss before interest and taxes increased 27% for the second quarter of fiscal 2022 driven by higher operating overhead and higher demand creation expense.

Higher operating overhead expense was primarily due to an increase in strategic technology investments and higher wage-related costs.

Higher demand creation expense was primarily due to higher sports marketing costs as well as higher advertising and marketing expense.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

Global Brand Divisions' loss before interest and taxes increased 21% for the first six months of fiscal 2022 driven by higher operating overhead and higher demand creation expense.

Higher operating overhead expense was primarily due to an increase in strategic technology investments and wage-related costs.

Higher demand creation expense was primarily due to higher advertising and marketing expense.

THREE MONTHS ENDED AUGUST 31,

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2021 2020 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 485 $ 416 17 % 16 % $ 1,052 $ 929 13 % 11 %

10 unchanged sentences

We do not own the Converse trademarks in Japan and accordingly do not earn revenues in Japan.

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

On a currency-neutral basis, Converse revenues increased 7% for the first quarter of fiscal 2022 driven by revenue growth in North America and licensee markets, partially offset by declines in Asia and Western Europe.

Wholesale revenues decreased 6%, in part due to supply chain constraints, while Direct to consumer revenues increased 32%, as strong direct to consumer sales growth across North America and Western Europe more than offset declines in Asia.

Combined unit sales within the wholesale and direct to consumer channels decreased 8%, while ASP increased 14%, primarily due to higher full-price ASP, due to lower discounts and growth in direct to consumer.

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

On a currency-neutral basis, Converse revenues increased 16% for the second quarter of fiscal 2022 driven by revenue growth in Western Europe and North America, partially offset by declines in Asia.

Wholesale revenues increased 17%, while direct to consumer revenues increased 12%, driven primarily by growth in North America and Western Europe, partially offset by declines in Asia.

Combined unit sales within the wholesale and direct to consumer channels increased 5% and ASP increased 9%, primarily due to higher full-price ASP, driven by lower discounts and growth in direct to consumer.

Reported EBIT increased 52%, driven by higher revenues and gross margin expansion partially offset by higher selling and administrative expense.

Gross margin increased approximately 340 basis points as higher product costs due to increased duty and freight charges were more than offset by higher margins in our direct to consumer business, lower other costs and growth in licensee revenues.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Demand creation expense increased primarily due to higher advertising and marketing expense.

Operating overhead expense increased primarily due to higher administrative expenses.

THREE MONTHS ENDED AUGUST 31,

Gross margin increased approximately 250 basis points primarily due to higher margins in our direct to consumer business and a higher mix of full price sales, partially offset by higher product costs primarily due to increased freight charges.

Selling and administrative expense increased primarily due to higher demand creation expense driven by higher advertising and marketing expense.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

On a currency-neutral basis, Converse revenues increased 11% for the first six months of fiscal 2022 driven by revenue growth in North America and Western Europe, partially offset by declines in Asia.

Wholesale revenues increased 3%, while direct to consumer revenues increased 21%, driven by growth in North America and Western Europe, partially offset by declines in Asia.

Combined unit sales within the wholesale and direct to consumer channels decreased 2%, while ASP increased 12%, primarily due to higher full-price ASP, driven by lower discounts and growth in direct to consumer.

Reported EBIT increased 32%, driven by higher revenues and gross margin expansion partially offset by higher selling and administrative expense.

Gross margin increased approximately 290 basis points primarily due to higher margins in our direct to consumer business, growth in licensee revenues and lower other costs, partially offset by higher product costs due to increased freight and duty charges.

Selling and administrative expense increased primarily due to higher demand creation expense driven by higher advertising and marketing expense.

THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30,

(Dollars in millions)

2021 2020 % CHANGE

2021 2020 % CHANGE 2021 2020 % CHANGE

Revenues $ (16) $ 26 — $ (37) $ 39 —

9 unchanged sentences

and certain other foreign currency derivative instruments.

FIRST QUARTER OF FISCAL 2022 COMPARED TO FIRST QUARTER OF FISCAL 2021

Corporate's loss before interest and taxes increased $48 million for the first quarter of fiscal 2022, primarily due to the following:

• an unfavorable change of $33 million, primarily due to higher operating overhead expense driven by higher wage-related costs;

• an unfavorable 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;

SECOND QUARTER OF FISCAL 2022 COMPARED TO SECOND QUARTER OF FISCAL 2021

Corporate's loss before interest and taxes decreased $215 million for the second quarter of fiscal 2022, primarily due to the following:

• a favorable change of $198 million, primarily due to higher restructuring-related costs related to our organizational realignment in the prior year;

• a favorable change in net foreign currency gains and losses of $51 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;

• an unfavorable change of $34 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.

FIRST SIX MONTHS OF FISCAL 2022 COMPARED TO FIRST SIX MONTHS OF FISCAL 2021

Corporate's loss before interest and taxes decreased $167 million for the first six months of fiscal 2022, primarily due to the following:

• a favorable change of $165 million, primarily due to higher restructuring-related costs related to our organizational realignment, as well as charges related to our planned, strategic distributor partnership transition within APLA, both of which occurred in the prior year;

• a favorable change in net foreign currency gains and losses of $38 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;

• an unfavorable change of $36 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.

FOREIGN CURRENCY EXPOSURES AND HEDGING PRACTICES

2 unchanged sentences

Our foreign exchange risk management program is intended to lessen both the positive and negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows.

We manage global foreign exchange risk centrally on a portfolio basis to address those risks material to NIKE, Inc.

We manage 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.

2 unchanged sentences

We do not hold or issue derivative instruments for trading or speculative purposes.

As of and for the three months ended August 31, 2021, 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.

As of and for the three and six months ended November 30, 2021, 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 8 — 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.

22 unchanged sentences

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 benefit of approximately $382 million for the three months ended August 31, 2021 and a detriment of approximately $111 million for the three months ended August 31, 2020.

The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a benefit of approximately $117 million for the three months ended August 31, 2021 and a detriment of approximately $29 million for the three months ended August 31, 2020.

The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a benefit of approximately $63 million and $445 million for the three and six months ended November 30, 2021, respectively, and a benefit of approximately $184 million and $73 million for the three and six months ended November 30, 2020, respectively.

The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a benefit of approximately $12 million and $129 million for the three and six months ended November 30, 2021, respectively, and a benefit of approximately $63 million and $34 million for the three and six months ended November 30, 2020, respectively.

Management generally identifies hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%.

1 unchanged sentence

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.

As of and for the three months ended August 31, 2021, 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.

As of and for the three and six months ended November 30, 2021, 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.

MANAGING TRANSLATIONAL EXPOSURES

11 unchanged sentences

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 a favorable impact of approximately $104 million on our Income before income taxes for the three months ended August 31, 2021.

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 a favorable impact of approximately $63 million and $167 million on our Income before income taxes for the three and six months ended November 30, 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $1,111 million for the first three months of fiscal 2022, compared to $882 million for the first three months of fiscal 2021.

Net income, adjusted for non-cash items, generated $2,076 million of operating cash inflow for the first three months of fiscal 2022, compared to $1,606 million for the first three months of fiscal 2021.

The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $965 million for the first three months of fiscal 2022 compared to a decrease of $724 million for the first three months of fiscal 2021.

The net change in working capital compared to the prior year was driven by changes in Accounts payable and Inventories for the first three months of fiscal 2022, in part due to supply chain constraints which caused higher levels of in-transit inventory.

This activity was partially offset by a $1,026 million change in Accounts receivable, primarily due to the timing of marketplace recovery from store closures and resumption of wholesale shipments in the prior year due to COVID-19.

Cash provided (used) by investing activities was an inflow of $501 million for the first three months of fiscal 2022, compared to an outflow of $889 million for the first three months of fiscal 2021, primarily driven by the net change in short-term investments.

For the first three months of fiscal 2022, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash inflow of $583 million compared to a cash outflow of $715 million for the first three months of fiscal 2021.

Cash provided (used) by financing activities was an outflow of $743 million for the first three months of fiscal 2022 compared to $248 million for the first three months of fiscal 2021.

The increased outflow in the first three months of fiscal 2022 was driven by our resumption of the share repurchase program in the fourth quarter of fiscal 2021, resulting in $752 million share repurchases for the first three months of fiscal 2022 compared to no share repurchases in the first three months of fiscal 2021.

During the first three months of fiscal 2022, we repurchased 4.8 million shares of NIKE's Class B Common Stock for $742.3 million (an average price of $155.30 per share) under the four-year, $15 billion share repurchase program approved by the Board of Directors in June 2018.

As of August 31, 2021, we had repurchased 54.8 million shares at a cost of approximately $5.4 billion (an average price of $98.74 per share) under this program.

Cash provided (used) by operations was an inflow of $3,868 million for the first six months of fiscal 2022, compared to $3,355 million for the first six months of fiscal 2021.

Net income, adjusted for non-cash items, generated $3,704 million of operating cash inflow for the first six months of fiscal 2022, compared to $3,283 million for the first six months of fiscal 2021.

The net change in working capital and other assets and liabilities resulted in an increase to Cash provided (used) by operations of $164 million for the first six months of fiscal 2022 compared to an increase of $72 million for the first six months of fiscal 2021.

The net change in working capital compared to the prior year was primarily driven by favorable impacts to Cash provided (used) by operations from Accounts receivable of $1,464 million, partially offset by unfavorable impacts from Inventories of $1,053 million for the first six months of fiscal 2022, in part due to supply chain constraints which caused a lower supply of available inventory to meet consumer demand during the first six months of fiscal 2022.

Cash provided (used) by investing activities was an outflow of $1,105 million for the first six months of fiscal 2022, compared to $2,877 million for the first six months of fiscal 2021, primarily driven by the net change in short-term investments.

For the first six months of fiscal 2022, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash outflow of $776 million compared to a cash outflow of $2,789 million for the first six months of fiscal 2021.

Cash provided (used) by financing activities was an outflow of $1,846 million for the first six months of fiscal 2022 compared to $292 million for the first six months of fiscal 2021.

The increased outflow in the first six months of fiscal 2022 was driven by our resumption of the share repurchase program in the fourth quarter of fiscal 2021, resulting in $1,723 million of share repurchases for the first six months of fiscal 2022 compared to no share repurchases in the first six months of fiscal 2021.

During the first six months of fiscal 2022, we repurchased 10.8 million shares of NIKE's Class B Common Stock for $1.7 billion (an average price of $158.45 per share) under the four-year, $15 billion share repurchase program approved by the Board of Directors in June 2018.

As of November 30, 2021, we had repurchased 60.8 million shares at a cost of approximately $6.4 billion (an average price of $104.89 per share) under this program.

We continue to expect funding of share repurchases will come from operating cash flows and excess cash.

4 unchanged sentences

The Shelf expires on July 23, 2022.

As of August 31, 2021, our committed credit facilities were unchanged from the information previously reported on Form 10-K for the fiscal year ended May 31, 2021.

As of November 30, 2021, our committed credit facilities were unchanged from the information previously reported on Form 10-K for the fiscal year ended May 31, 2021.

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 August 31, 2021, 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 August 31, 2021 and May 31, 2021, no amounts were outstanding under our committed credit facilities.

As of November 30, 2021, 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 November 30, 2021 and May 31, 2021, no amounts were outstanding under our committed credit facilities.

Liquidity was also provided by our $3 billion commercial paper program.

As of and for the three months ended August 31, 2021, we did not have any borrowings outstanding under our $3 billion program.

We may continue to issue commercial paper or other debt securities depending on general corporate needs.

As of and for the three months ended November 30, 2021, we did not have any borrowings outstanding under our $3 billion program.

We may continue to 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.

1 unchanged sentence

however, future volatility in the capital markets may increase costs associated with issuing commercial paper or other debt instruments or affect our ability to access those markets.

As of August 31, 2021, we had cash, cash equivalents and short-term investments totaling $13.7 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

As of November 30, 2021, we had cash, cash equivalents and short-term investments totaling $15.1 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

government sponsored enterprise obligations, U.S.

2 unchanged sentences

All of our investments are investment grade to minimize our credit risk.

While individual securities have varying durations, as of August 31, 2021, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 55 days.

While individual securities have varying durations, as of November 30, 2021, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 62 days.

We believe that existing cash, cash 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.

4 unchanged sentences

OFF-BALANCE SHEET ARRANGEMENTS

As of August 31, 2021, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

As of November 30, 2021, 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.

CONTRACTUAL OBLIGATIONS

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis