What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-01-05 compared with 2022-10-06 · 294 added, 177 removed, 322 unchanged (59% of the section changed)

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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 business to be approximately 42% of total NIKE Brand revenues for the first quarter of fiscal 2023, and we have reduced the number of wholesale accounts globally.

Over the last several years, as we have executed against the Consumer Direct Acceleration, we have grown our NIKE Direct revenues to be approximately 43% and 42% of total NIKE Brand revenues for the second quarter and first six months of fiscal 2023, respectively, and we have 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.

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Ongoing supply chain challenges, macroeconomic conditions and the COVID-19 pandemic continue to create volatility in our business results and operations globally.

Despite these challenges, our first quarter Revenues increased 4% and 10% on a reported and currency-neutral basis, respectively, led by North America, EMEA and APLA, partially offset by declines in Greater China due to COVID-19 disruptions.

However, gross margin decreased by 220 basis points in the first quarter of fiscal 2023 with elevated freight and logistics costs and higher promotional activity, among other items, contributing to this decrease.

During fiscal 2022, we experienced elevated inventory transit times due to port congestion, transportation delays, and labor and container shortages which caused seasonally late product to arrive in the first quarter of fiscal 2023.

As a result, we planned our fiscal 2023 product purchases based on elevated inventory transit times continuing.

However, during the first quarter of fiscal 2023, inventory transit times improved ahead of plan, particularly in North America, resulting in challenges managing the timing of seasonal inventory flow.

This disruption in the flow of product caused inventories in North America to grow to $4.7 billion, an increase of 15% compared to the fourth quarter of fiscal 2022.

At the same time, there is increased promotional activity across the retail industry.

We increased promotional activity in the first quarter of fiscal 2023, primarily in North America, and expect to increase promotional activity in the second quarter of fiscal 2023, to sell excess inventory and create capacity in the marketplace for new seasonally relevant product.

Most of our geographies are currently operating with little to no COVID-19 related restrictions, but revenues in Greater China for the first quarter of fiscal 2023 were impacted by lower retail traffic as a result of COVID-19 related disruptions.

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 first 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 $823 million.

We expect unfavorable changes in foreign currency exchange rates, net of hedges, will have a material negative impact on reported Revenues and Income before income taxes for the second quarter of fiscal 2023.

Additionally, we expect the continued combination of elevated freight and logistics costs and increased promotional activity will have a negative impact on gross margin for the second quarter of fiscal 2023.

Our second quarter and first six months of fiscal 2023 Revenues increased 17% and 10%, respectively, due to strong demand for our product and more product available to meet this demand compared to the prior fiscal year, which was impacted by temporary factory closures due to COVID-19 and extended inventory transit times.

During the first quarter of fiscal 2023, inventory transit times rapidly improved compared to fiscal 2022, and seasonal inventory that was ordered based on the extended transit times, arrived earlier than planned leading to elevated levels of inventory at the end of the first quarter of fiscal 2023.

During the second quarter of fiscal 2023 we made progress on normalizing our inventory levels , as Inventories decreased 3% compared to the first quarter of fiscal 2023 as a result of strong demand for our product across our wholesale and direct to consumer channels, and increased promotional activity, specifically in apparel in North America.

The marketplace remains promotional, and gross margin for the second quarter and first six months of fiscal 2023 was negatively impacted by high levels of promotional activity to sell excess inventory and create capacity in the marketplace for new seasonally relevant product.

We have also adjusted our inventory purchases for the remainder of fiscal 2023 as we continue to prioritize reducing excess inventory in the marketplace across our geographies.

Additionally, gross margin continues to be negatively impacted by unfavorable fluctuations in net foreign currency exchange rates, elevated freight and logistics costs as well as higher product input costs, including materials and labor.

Strategic pricing increases partially offset the negative impacts on gross margin for the second quarter and first six months of fiscal 2023 which decreased 300 basis points and 260 basis points, respectively.

Most of our geographies are currently operating with little to no COVID-19 related disruptions.

In Greater China however, we continue to experience a higher level of store closures and reduced traffic in our retail stores due to COVID-19 related disruptions.

During the second quarter of fiscal 2023, we managed through a higher number of temporary store closures in Greater China primarily due to local government restrictions.

Although these restrictions were lifted In December 2022, we expect the operating environment will remain volatile which could continue to cause disruptions to our operations.

We expect net unfavorable changes in foreign currency exchange rates, including hedges, will have a material negative impact on reported Revenues, gross margin and Income before income taxes for the remainder of fiscal 2023.

Additionally, we expect the continued combination of elevated freight and logistics costs, increased product input costs and increased promotional activity, partially offset by strategic pricing increases, will have a negative impact on gross margin for the remainder of the fiscal year.

We also continue to closely monitor macroeconomic conditions, including consumer behavior and the potential impacts inflation could have on consumer demand for our product.

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 COVID-19 related restrictions or disruptions across our geographies.

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.

FIRST QUARTER OVERVIEW

For the first quarter of fiscal 2023, NIKE, Inc.

Revenues increased 4% to $12.7 billion compared to the first quarter of fiscal 2022 and increased 10% on a currency-neutral basis.

Net income was $1,468 million and diluted earnings per common share was $0.93 for the first quarter of fiscal 2023, compared to Net income of $1,874 million and diluted earnings per common share of $1.16 for the first quarter of fiscal 2022.

Income before income taxes decreased 13% compared to the first quarter of fiscal 2022, due to higher Selling and administrative expense and gross margin contraction, partially offset by higher Revenues.

SECOND QUARTER OVERVIEW

For the second quarter of fiscal 2023, NIKE, Inc.

Revenues increased 17% to $13.3 billion compared to the second quarter of fiscal 2022 and increased 27% on a currency-neutral basis.

Net income was $1,331 million and diluted earnings per common share was $0.85 for the second quarter of fiscal 2023, compared to Net income of $1,337 million and diluted earnings per common share of $0.83 for the second quarter of fiscal 2022.

Income before income taxes increased 10% compared to the second quarter of fiscal 2022 due to higher revenues, partially offset by gross margin contraction and higher Selling and administrative expense.

NIKE Brand revenues, which represent over 90% of NIKE, Inc.

Revenues, increased 4% compared to the first quarter of fiscal 2022.

On a currency-neutral basis, NIKE Brand revenues increased 10%, driven by higher revenues in North America, EMEA and APLA, partially offset by declines in Greater China.

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

Revenues for Converse increased 2% and 8% compared to the first quarter of fiscal 2022, on a reported and currency-neutral basis, respectively, led by strong performance in North America and Western Europe, partially offset by declines in Asia.

Our effective tax rate was 19.7% for the first quarter of fiscal 2023, compared to 11.0% for the first quarter of fiscal 2022, primarily due to decreased benefits from stock-based compensation.

Revenues, increased 18% compared to the second quarter of fiscal 2022.

On a currency-neutral basis, NIKE Brand revenues increased 28%, driven by higher revenues across all geographies, led by increases in North America and EMEA.

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

Revenues for Converse increased 5% and 12% compared to the second quarter of fiscal 2022, on a reported and currency-neutral basis, respectively, led by strong performance in North America, licensee markets and Western Europe, partially offset by declines in Asia.

Our effective tax rate was 19.3% for the second quarter of fiscal 2023, compared to 10.9% for the second quarter of fiscal 2022, due to decreased benefits from stock-based compensation and a shift in our earnings mix.

On August 16, 2022, the U.S.

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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, and a one percent excise tax on net repurchases of stock after December 31, 2022.

We are continuing to evaluate the Inflation Reduction Act and its requirements, as well as the application to our business.

During the first quarter of fiscal 2023, we completed the sale of our entity in Chile to a third party distributor and the impacts of completing this transaction were not material to the Unaudited Condensed Consolidated Financial Statements.

Subsequent to the end of the first quarter we completed the sale of our entities in Argentina and Uruguay to a third party distributor.

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 13 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

As we shift from a wholesale and direct to consumer operating model within these countries, we expect consolidated NIKE, Inc.

Now that we have completed the shift from a wholesale and direct to consumer operating model within our Central and South America (CASA) territory to a distributor model, we expect consolidated NIKE, Inc.

and APLA revenue growth will be reduced due to different commercial terms.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions, except per share data) 2022 2021 % CHANGE

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

(Dollars in millions, except per share data) 2022 2021 % CHANGE 2022 2021 % CHANGE

Revenues $ 13,315 $ 11,357 17 % $ 26,002 $ 23,605 10 %

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CONSOLIDATED OPERATING RESULTS

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(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1)

NIKE Brand Revenues by:

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Corporate (3)

5 (16) — — 1 (37) — —

TOTAL NIKE, INC.

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(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 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

On a currency-neutral basis, NIKE, Inc.

Revenues increased 10% for the first quarter of fiscal 2023, driven by growth in North America, EMEA and APLA, partially offset by lower revenues in Greater China.

Revenues increased 27% for the second quarter of fiscal 2023, driven by higher revenues in both the NIKE Brand and Converse.

Higher revenues in North America, EMEA and APLA contributed approximately 12, 9 and 4 percentage points to NIKE, Inc.

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

Revenues by approximately 2 percentage points.

On a currency-neutral basis, NIKE Brand footwear revenues increased 12% in the first quarter of fiscal 2023, driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 3%, while higher average selling price (ASP) per pair contributed approximately 9 percentage points of footwear revenue growth, primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, the favorable impact of growth in our NIKE Direct business and higher NIKE Direct ASP.

Currency-neutral NIKE Brand apparel revenues, for the first quarter of fiscal 2023, increased 7%, driven primarily by growth in Men's.

Unit sales of apparel increased 5%, and higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth, primarily due to higher full-price ASP, net of discounts, partially offset by lower NIKE Direct ASP.

On a reported basis, NIKE Direct revenues represented approximately 42% of our total NIKE Brand revenues for the first quarter of fiscal 2023 compared to 40% for the first quarter of fiscal 2022.

NIKE Brand Digital sales were $2.9 billion for the first quarter of fiscal 2023 compared to $2.5 billion for the first quarter of fiscal 2022.

On a currency-neutral basis, NIKE Direct revenues increased 14%, driven by NIKE Brand Digital sales growth of 23%, comparable store sales growth of 4%, in part due to improved physical retail traffic, and the addition of new stores.

Revenues, with Greater China and Converse each contributing approximately 1 percentage point of growth.

On a currency-neutral basis, NIKE Brand footwear revenues increased 36% in the second quarter of fiscal 2023, driven by higher revenues in Men's, the Jordan Brand and Women's.

Unit sales of footwear increased 28%, while higher average selling price (ASP) per pair contributed approximately 8 percentage points of footwear revenue growth, primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis.

Currency-neutral NIKE Brand apparel revenues, for the second quarter of fiscal 2023, increased 14%, driven primarily by growth in Men's.

Unit sales of apparel increased 10%, and higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth, primarily due to higher full-price ASP.

NIKE Brand wholesale revenues increased 19% and 30% compared to the second quarter of fiscal 2022, on a reported and currency-neutral basis, respectively, primarily due to increased product availability to meet demand.

On a reported basis, NIKE Direct revenues represented approximately 43% of our total NIKE Brand revenues for both the second quarter of fiscal 2023 and the second quarter of fiscal 2022.

NIKE Brand Digital sales were $3.4 billion for the second quarter of fiscal 2023 compared to $2.7 billion for the second quarter of fiscal 2022.

On a currency-neutral basis, NIKE Direct revenues increased 25%, driven by NIKE Brand Digital sales growth of 34%, comparable store sales growth of 11% and the addition of new stores.

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:

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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 2023 COMPARED TO FIRST SIX MONTHS OF FISCAL 2022

On a currency-neutral basis, NIKE, Inc.

Revenues increased 18% for the first six months of fiscal 2023, driven by higher revenues in North America, EMEA and APLA, partially offset by lower revenues in Greater China.

Higher revenues in North America, EMEA and APLA contributed approximately 9, 7 and 3 percentage points to NIKE, Inc.

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

Revenues by approximately 1 percentage point.

On a currency-neutral basis, NIKE Brand footwear revenues increased 23%, driven by growth in Men's and the Jordan Brand.

Unit sales of footwear increased 14%, while higher ASP per pair contributed approximately 9 percentage points of footwear revenue growth, primarily due to higher full-price ASP, as well as the favorable impact of growth in our NIKE Direct business and higher NIKE Direct ASP.

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, partially offset by lower NIKE Direct ASP.

NIKE Brand wholesale revenues increased 9% and 18% compared to the first six months of fiscal 2022, on a reported and currency-neutral basis, respectively, primarily due to increased product availability to meet demand.

On a reported basis, NIKE Direct revenues represented approximately 42% of our total NIKE Brand revenues for the first six months of fiscal 2023 and the first six months of fiscal 2022.

NIKE Brand Digital sales were $6.3 billion for the first six months of fiscal 2023 compared to $5.2 billion for the first six months of fiscal 2022.

On a currency-neutral basis, NIKE Direct revenues increased 19%, driven by NIKE Brand Digital sales growth of 29%, comparable store sales growth of 7%, and the addition of new stores.

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

(Dollars in millions)

2022 2021 % CHANGE

2022 2021 % CHANGE 2022 2021 % CHANGE

Gross profit $ 5,711 $ 5,213 10 % $ 11,326 $ 10,909 4 %

Gross margin 44.3 % 46.5 % (220) bps

For the first quarter of fiscal 2023, our consolidated gross margin was 220 basis points lower than the prior year and primarily reflected the following factors:

• Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due to elevated freight and logistics costs and product mix (decreasing gross margin approximately 190 basis points);

• Higher other costs, in part due to higher inventory obsolescence in North America and EMEA, among other factors (decreasing gross margin approximately 100 basis points);

• Lower margin in our NIKE Direct business, primarily driven by higher promotional activity in North America (decreasing gross margin approximately 90 basis points);

Gross margin 42.9 % 45.9 % (300) bps 43.6 % 46.2 % (260) bps

For the second quarter of fiscal 2023, our consolidated gross margin was 300 basis points lower than the prior year and primarily reflected the following factors:

• Lower margin in our NIKE Direct business, driven by higher promotional activity in the current period, largely in North America to liquidate excess inventory (decreasing margin approximately 160 basis points);

• Unfavorable changes in net foreign currency exchange rates, including hedges, (decreasing gross margin approximately 90 basis points);

• Higher full-price ASP, net of discounts, on a wholesale equivalent basis (increasing gross margin approximately 200 basis points), reflecting strategic pricing increases and product mix.

• Lower NIKE Brand full-price product margins, on a wholesale equivalent basis, (decreasing gross margin approximately 20 basis points) reflecting:

◦ Higher NIKE Brand product costs, (decreasing margin approximately 430 basis points) primarily due to product mix, elevated inbound freight and logistics costs, and product input costs such as materials and labor;

◦ Higher full-price ASP, net of discounts, (increasing gross margin approximately 410 basis points) due primarily to product mix and strategic pricing actions.

For the first six months of fiscal 2023, our consolidated gross margin was 260 basis points lower than the prior year period and primarily reflected the following factors:

• Unfavorable changes in net foreign currency exchange rates, including hedges, (decreasing gross margin approximately 80 basis points);

• Higher other costs (decreasing gross margin approximately 60 basis points);

• NIKE Brand full-price product margins, on a wholesale equivalent basis, were flat, reflecting:

◦ Higher full-price ASP, net of discounts, (increasing gross margin approximately 320 basis points) due primarily to strategic pricing actions and product mix;

◦ Higher NIKE Brand product costs, (decreasing margin approximately 320 basis points) primarily due to product mix, elevated inbound freight and logistics costs, and product input costs.

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

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(Dollars in millions)

2022 2021 % CHANGE

2022 2021 % CHANGE 2022 2021 % CHANGE

Demand creation expense (1)

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Total selling and administrative expense $ 4,124 $ 3,759 10 % $ 8,044 $ 7,331 10 %

% of revenues 30.9 % 29.2 % 170 bps

% of revenues 31.0 % 33.1 % (210) bps 30.9 % 31.1 % (20) 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 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

Demand creation expense increased 3% for the first quarter of fiscal 2023 primarily due to normalization of spend against sports marketing and brand campaign investments.

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

Demand creation expense increased 8% for the second quarter of fiscal 2023 primarily due to an increase in advertising and marketing expenses.

Changes in foreign currency exchange rates decreased Demand creation expense by approximately 7 percentage points.

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

Operating overhead expense increased 10% primarily due to higher wage-related expenses, higher strategic technology investments and higher NIKE Direct costs.

Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 5 percentage points.

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

Demand creation expense increased 6% for the first six months of fiscal 2023 primarily due to higher advertising and marketing expenses.

Changes in foreign currency exchange rates decreased Demand creation expense by approximately 6 percentage points.

Operating overhead expense increased 11% primarily due to an increase in wage-related expenses, higher strategic technology investments and higher NIKE Direct costs.

Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 4 percentage points.

OTHER (INCOME) EXPENSE, NET

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(Dollars in millions)

2022 2021 2022 2021

Other (income) expense, net $ (79) $ (102) $ (225) $ (141)

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 2023, Other (income) expense, net increased from $39 million of other income to $146 million in the current year, primarily due to a favorable change in foreign currency conversion gains and losses, including hedges, as well as settlements of legal matters, partially offset by net favorable activity in the prior year related to our strategic distributor partnership transition within APLA.

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 $234 million on our Income before income taxes for the first quarter of fiscal 2023.

THREE MONTHS ENDED AUGUST 31,

2022 2021 % CHANGE

Effective tax rate 19.7 % 11.0 % 870 bps

Our effective tax rate was 19.7% for the first quarter of fiscal 2023, compared to 11.0% for the first quarter of fiscal 2022, primarily due to decreased benefits from stock-based compensation.

For the second quarter of fiscal 2023, Other (income) expense, net decreased from $102 million of other income to $79 million in the current year, largely due to the loss recognized upon the completion of the sale of our entities in Argentina and Uruguay to a third-party distributor, partially offset by a favorable change in foreign currency conversion gains and losses, including hedges.

For the first six months of fiscal 2023, Other (income) expense, net increased from $141 million of other income to $225 million in the current year, primarily due to a favorable change in foreign currency conversion gains and losses, including hedges, and settlements of legal matters, partially offset by the loss recognized upon the completion of the sale of our entities in Argentina and Uruguay to a third-party distributor and favorable activity in the prior year related to our strategic distributor partnership transition within APLA.

For more information related to our distributor partnership transition within APLA, see Note 13 — 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 $174 million and $361 million on our Income before income taxes for the second quarter and first six months of fiscal 2023, respectively.

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

2022 2021 % CHANGE 2022 2021 % CHANGE

Effective tax rate 19.3 % 10.9 % 840 bps 19.5 % 11.0 % 850 bps

Our effective tax rate was 19.3% for the second quarter of fiscal 2023, compared to 10.9% for the second quarter of fiscal 2022, primarily due to decreased benefits from stock-based compensation and a shift in our earnings mix.

Our effective tax rate was 19.5% for the first six months of fiscal 2023, compared to 11.0% for the first six months of fiscal 2022, primarily due to decreased benefits from stock-based compensation and a shift in our earnings mix.

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

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The breakdown of Revenues is as follows:

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(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1)

North America $ 5,830 $ 4,477 30 % 31 % $ 11,340 $ 9,356 21 % 21 %

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Corporate (3)

5 (16) — — 1 (37) — —

TOTAL NIKE, INC.

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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)

2022 2021 % CHANGE

2022 2021 % CHANGE 2022 2021 % CHANGE

North America $ 1,497 $ 1,235 21 % $ 2,874 $ 2,669 8 %

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NORTH AMERICA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

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

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 3,963 $ 2,852 39 % 39 % $ 7,768 $ 6,116 27 % 27 %

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EARNINGS BEFORE INTEREST AND TAXES $ 1,497 $ 1,235 21 % $ 2,874 $ 2,669 8 %

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, North America revenues for the first quarter of fiscal 2023 increased 13%, due primarily to higher revenues in Men's and the Jordan Brand.

NIKE Direct revenues increased 13%, driven by strong digital sales growth of 19%, comparable store sales growth of 4%, in part due to improved physical retail traffic, and the addition of new stores.

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

On a currency-neutral basis, North America revenues for the second quarter of fiscal 2023 increased 31%, due primarily to higher revenues in Men's.

NIKE Direct revenues increased 23%, driven by strong digital sales growth of 31%, comparable store sales growth of 9% and the addition of new stores.

Footwear revenues increased 39% on a currency-neutral basis, driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 10%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth, primarily due to higher full-price ASP.

Unit sales of footwear increased 37%, while higher ASP per pair contributed approximately 2 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher full-price ASP, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity, and a lower mix of full-price sales.

On a currency-neutral basis, apparel revenues increased 14%, driven by higher revenues in Men's.

Unit sales of apparel increased 5%, while ASP per unit remained flat, as higher full-price ASP was offset by lower NIKE Direct ASP, primarily due to higher promotional activity.

Reported EBIT decreased 4% primarily due to gross margin contraction, offset by higher revenues and lower selling and administrative expense as a percent of revenues.

Gross margin decreased approximately 460 basis points largely driven by higher product costs, primarily due to increased freight and logistics costs as well as product mix, lower margin in our NIKE Direct business driven by higher promotional activity, an increase in other costs reflecting higher inventory obsolescence and a lower mix of full-price sales.

This activity was partially offset by higher full-price ASP, net of discounts, due to product mix and strategic pricing increases.

Selling and administrative expense increased due to higher operating overhead expense, slightly offset by lower demand creation expense.

Operating overhead expense increased primarily as a result of an increase in wage-related expenses, lower bad debt recoveries and increased NIKE Direct costs.

The decrease in demand creation expense reflected lower advertising and marketing expense for brand events and our retail operations, partially offset by higher sports marketing expense.

Unit sales of apparel increased 15%, while lower ASP per unit reduced apparel revenues by approximately 1 percentage point.

Lower ASP was primarily due to lower NIKE Direct ASP, reflecting higher promotional activity, and a lower mix of full-price sales, partially offset by higher full-price ASP.

Reported EBIT increased 21% primarily due to higher revenues, partially offset by gross margin contraction and higher selling and administrative expense.

Gross margin decreased approximately 320 basis points largely driven by lower margin in our NIKE Direct business due to higher promotional activity, higher product costs reflecting input costs and inbound freight and logistics 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 an increase in wage-related expenses and increased NIKE Direct costs.

The increase in demand creation expense reflected higher sports marketing expenses and an increase in digital marketing investments.

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

On a currency-neutral basis, North America revenues for the first six months of fiscal 2023 increased 21%, due primarily to higher revenues in Men's and the Jordan Brand.

NIKE Direct revenues increased 18%, driven by strong digital sales growth of 25%, comparable store sales growth of 6% and the addition of new stores.

Footwear revenues increased 27% on a currency-neutral basis, largely driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 22%, 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, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

On a currency-neutral basis, apparel revenues increased 10%, driven primarily by higher revenues in Men's.

Unit sales of apparel increased 10%, while ASP per unit remained flat, as higher full-price ASP was offset by lower NIKE Direct ASP, reflecting higher promotional activity.

Reported EBIT increased 8% primarily due to higher revenues, partially offset by gross margin contraction and higher selling and administrative expense.

Gross margin decreased approximately 390 basis points primarily due to higher product costs, reflecting higher input costs and increased inbound freight and logistics costs, lower margins in our NIKE Direct business due to higher promotional activity, a lower mix of full-price sales and higher other costs, in part due to inventory obsolescence.

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, lower bad debt recoveries and increased NIKE Direct costs.

The increase in demand creation expense reflected higher sports marketing expenses and an increase in digital marketing investments, partially offset by lower advertising and marketing expense.

EUROPE, MIDDLE EAST & AFRICA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

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

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 2,063 $ 1,806 14 % 37 % $ 4,075 $ 3,789 8 % 27 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 990 $ 806 23 % $ 1,965 $ 1,681 17 %

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, EMEA revenues for the first quarter of fiscal 2023 increased 17%, primarily driven by growth in Men's and the Jordan Brand.

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

On a currency-neutral basis, EMEA revenues for the second quarter of fiscal 2023 increased 33%, primarily driven by growth in Men's.

NIKE Direct revenues increased 44%, driven by strong digital sales growth of 62% and comparable store sales growth of 24%, partially offset by store closures.

Currency-neutral footwear revenues increased 18%, driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear remained flat, while higher ASP per pair contributed approximately 18 percentage points of footwear revenue growth.

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

Currency-neutral footwear revenues increased 37%, driven by higher revenues in Men's, the Jordan Brand and Women's.

Unit sales of footwear increased 18%, while higher ASP per pair contributed approximately 19 percentage points of footwear revenue growth.

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

Currency-neutral apparel revenues increased 28% due primarily to higher revenues in Men's.

Unit sales of apparel increased 7%, while higher ASP per unit contributed approximately 8 percentage points of apparel revenue growth, primarily due to higher full-price ASP, partially offset by a lower mix of NIKE Direct sales and lower NIKE Direct ASP.

Reported EBIT increased 11% as gross margin expansion and higher revenues more than offset higher selling and administrative expense.

Gross margin increased approximately 380 basis points primarily due to higher full-price ASP, net of discounts, reflecting strategic pricing increases, as well as higher margin and the favorable impact of growth in our NIKE Direct business, a higher mix of full-price sales, higher off-price margin and favorable changes in standard foreign currency exchange rates.

This activity was partially offset by higher product costs and higher other costs, particularly higher inventory obsolescence.

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

Higher demand creation expense was primarily due to increases in advertising and marketing expense as well as sports marketing expense.

Higher operating overhead expense was driven by lower bad debt recoveries and an increase in strategic technology investments, offset by lower wage-related expense.

Unit sales of apparel increased 11%, while higher ASP per unit contributed approximately 17 percentage points of apparel revenue growth, primarily due to higher full-price ASP.

Reported EBIT increased 23% primarily due to higher revenues and lower selling and administrative expenses, partially offset by gross margin contraction.

Gross margin decreased approximately 70 basis points primarily due to higher product costs reflecting input costs and increased inbound freight and logistics costs, higher other costs including inventory obsolescence, lower margins in our NIKE Direct business reflecting higher promotional activity and lower mix of full-price sales.

This activity was partially offset by higher full-price ASP, net of discounts, in part due to strategic pricing actions, and higher off-price margin.

Selling and administrative expense decreased due to lower demand creation and operating overhead expense.

Lower demand creation expense was driven by favorable changes in foreign currency exchange rates and lower sports marketing expenses, partially offset by higher advertising and marketing expenses.

Operating overhead expense decreased primarily due to favorable changes in foreign currency exchange rates, partially offset by increased wage-related expenses, increased travel and related expense and lower bad debt recoveries.

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

On a currency-neutral basis, EMEA revenues for the first six months of fiscal 2023 increased 25%, due primarily to higher revenues in Men’s.

NIKE Direct revenues increased 32% primarily due to strong digital sales growth of 55% as well as comparable store sales growth of 12%, partially offset by store closures.

Currency-neutral footwear revenues increased 27%, driven by higher revenues led by Men's and the Jordan Brand.

Unit sales of footwear increased 9%, while higher ASP per pair contributed approximately 18 percentage points of footwear revenue growth.

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

Currency-neutral apparel revenues increased 22% due primarily to higher revenues in Men's.

Unit sales of apparel increased 9%, while higher ASP per unit contributed approximately 13 percentage points of apparel revenue growth, primarily due to higher full-price ASP, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 17% due to higher revenues and gross margin expansion as well as lower selling and administrative expense.

Gross margin increased approximately 160 basis points primarily due to higher full-price ASP, net of discounts, in part due to strategic pricing actions and higher off-price margin.

This activity was partially offset by higher product costs reflecting increased inbound freight and logistics costs and higher other costs including inventory obsolescence.

Selling and administrative expense decreased due to lower operating overhead expense, partially offset by higher demand creation expense.

Higher demand creation expense was primarily due to higher advertising and marketing expense, partially offset by favorable changes in foreign currency exchange rates.

GREATER CHINA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

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

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 1,370 $ 1,235 11 % 21 % $ 2,603 $ 2,684 -3 % 4 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 511 $ 569 -10 % $ 1,052 $ 1,270 -17 %

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, Greater China revenues for the first quarter of fiscal 2023 decreased 13%, reflecting impacts from COVID-19 related disruptions.

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

On a currency-neutral basis, Greater China revenues for the second quarter of fiscal 2023 increased 6%.The increase in revenues was primarily due to higher revenues in the Jordan Brand.

NIKE Direct revenues increased 4% due to digital sales growth of 9% and the addition of new stores, partially offset by comparable store sales declines of 4%, in part due to reduced physical traffic as a result of COVID-19 related disruptions.

Currency-neutral footwear revenues increased 21%, driven primarily by higher revenues in the Jordan Brand and Men's.

Unit sales of footwear increased 15%, while higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth, driven by higher full-price and NIKE Direct ASPs, as well as a higher mix of full-price sales.

Currency-neutral apparel revenues decreased 24%, due primarily to lower revenues in Men's and the Jordan Brand.

Unit sales of apparel decreased 28%, while higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth, primarily due to higher full-price ASP and a higher mix of full-price sales, partially offset by lower NIKE Direct and off-price ASPs.

Reported EBIT decreased 10% as lower revenues and gross margin contraction more than offset lower selling and administrative expense.

Gross margin decreased approximately 110 basis points, primarily due to higher product costs reflecting product mix and higher input costs, lower margins in our NIKE Direct business, partially offset by higher full-price ASP, net of discounts, favorable changes in standard foreign currency exchange rates and a higher mix of full-price sales.

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 investments in 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 expenses and other administrative costs.

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

On a currency-neutral basis, Greater China revenues for the first six months of fiscal 2023 decreased 4%, reflecting impacts from COVID-19 related disruptions.

The decrease in revenues was primarily due to lower revenues in Men’s and Women's, partially offset by growth in the Jordan Brand.

NIKE Direct revenues decreased 2% due to digital sales declines of 5%, comparable store sales declines of 3%, in part due to reduced physical retail traffic as a result of COVID-19 related disruptions, partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 11%, driven primarily by lower revenues in Men's and Women's, partially offset by growth in the Jordan Brand.

Unit sales of footwear decreased 10%, while lower ASP per pair reduced footwear revenues by approximately 1 percentage point, driven by lower full-price and off-price ASPs, partially offset by higher NIKE Direct ASP.

Currency-neutral apparel revenues decreased 18%, due primarily to lower revenues in Men's and Women's.

Unit sales of apparel decreased 7%, while lower ASP per unit reduced apparel revenues by approximately 11 percentage points, primarily due to lower off-price, full-price and NIKE Direct ASPs.

Reported EBIT decreased 23% due to lower revenues, gross margin contraction and higher selling and administrative expense as a percent of revenues.

Gross margin decreased approximately 20 basis points reflecting lower NIKE Direct margin and full-price ASP, net of discounts.

This activity was partially offset by lower other costs, primarily due to lower warehousing and freight charges and lower inventory obsolescence, as well as favorable changes in standard foreign currency exchange rates.

Selling and administrative expense decreased due to lower demand creation, offset by higher operating overhead expense.

The decrease in demand creation expense was primarily due to lower retail brand presentation expense as well as lower investments in digital marketing, partially offset by higher advertising and marketing expense.

Operating overhead expense increased largely due to higher wage-related costs and higher NIKE Direct strategic technology investments.

NIKE Direct revenues increased 1% due to the addition of new stores and a 3% increase in digital sales.

This increase was partially offset by comparable store sales declines of 4% in part due to lower physical retail traffic as a result of COVID-19 related disruptions.

Currency-neutral footwear revenues increased 4%, driven primarily by higher revenues in the Jordan Brand.

Unit sales of footwear increased 1%, while higher ASP per pair contributed approximately 3 percentage points of footwear revenue growth, primarily due to higher NIKE Direct and full-price ASPs and a higher mix of full-price sales, partially offset by lower off-price ASP.

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

Unit sales of apparel decreased 16%, while lower ASP per unit reduced apparel revenues by approximately 5 percentage points, primarily due to lower NIKE Direct and off-price ASPs.

Reported EBIT decreased 17% due to lower revenues and gross margin contraction, partially offset by 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 and lower margins in our NIKE Direct business.

This activity was partially offset by higher full-price ASP, net of discounts and favorable changes in standard foreign currency exchange rates.

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 investments in digital marketing and favorable changes in foreign currency exchange rates, partially offset by higher advertising and marketing expense.

Operating overhead expense increased largely due to higher wage-related expenses and other administrative costs, partially offset by favorable changes in foreign currency exchange rates.

ASIA PACIFIC & LATIN AMERICA

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

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

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 1,108 $ 887 25 % 40 % $ 2,172 $ 1,909 14 % 27 %

7 unchanged sentences

As discussed previously, our NIKE Brand business in Brazil transitioned to a distributor operating model during fiscal 2021.

During the first quarter of fiscal 2023, we completed the sale of our entity in Chile to a third-party distributor and the impacts from closing this transaction are included within Corporate and are not reflected in the APLA operating segment results.

Subsequent to the end of the first quarter of fiscal 2023, we completed the sale of our Argentina and Uruguay entities to a third party distributor.

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, and the impacts from closing these transactions are included within Corporate and are not reflected in the APLA operating segment results.

This completes the transition of our NIKE Brand businesses in these markets to a distributor operating model.

Our Central and South America (CASA) marketplace now reflects a full distributor operating model.

Our CASA marketplace now reflects a full distributor operating model.

For more information see Note 13 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, APLA revenues increased 16% for the first quarter of fiscal 2023.

The increase was due to higher revenues across nearly all territories, led by Southeast Asia & India and Korea, which increased 64% and 23%, respectively.

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

On a currency-neutral basis, APLA revenues increased 34% for the second quarter of fiscal 2023.

The increase was due to higher revenues across nearly all territories, led by Japan, Korea and Southeast Asia & India, which increased 42%, 37% and 61%, respectively.

The transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model reduced APLA revenue growth by approximately 7 percentage points.

Revenues increased primarily due to growth in Men's, Women's and the Jordan Brand.

NIKE Direct revenues increased 30%, primarily due to digital sales growth of 35% and comparable store sales growth of 33% 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 40%, due primarily to higher revenues in Men's, Women's and the Jordan Brand.

Unit sales of footwear increased 38%, while higher ASP per pair contributed approximately 2 percentage points of footwear revenue growth.

Higher ASP per pair was largely driven by higher full-price ASP.

Currency-neutral apparel revenues increased 24%, due primarily to higher revenues in Men's, Women's and the Jordan Brand.

Unit sales of apparel increased 22%, while higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth, driven by higher full-price ASP, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 25% for the second quarter of fiscal 2023, as higher revenues and lower selling and administrative expense more than offset gross margin contraction.

Gross margin decreased approximately 190 basis points due to higher product costs reflecting increased inbound freight and logistics costs.

This was partially offset by higher full-price ASP, net of discounts, in part due to strategic pricing actions, lower other costs including warehousing and favorable changes in standard foreign currency exchange rates.

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 favorable changes in foreign currency exchange rates and lower investments in digital marketing, partially offset by higher advertising and marketing expense.

Operating overhead expense increased largely due to higher wage-related costs and higher professional services expenses, partially offset by favorable changes in foreign currency exchange rates.

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

On a currency-neutral basis, APLA revenues increased 25% for the first six months of fiscal 2023.

The increase was due to higher revenues across nearly all territories, led by Korea, Southeast Asia & India, Japan and Pacific, which increased 30%, 63%, 18% and 39%, respectively.

Additionally, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model reduced APLA growth by approximately 4 percentage points.

Revenues increased primarily due to higher revenues in Men’s, Women's and the Jordan Brand.

NIKE Direct revenues increased 30%, primarily due to digital sales growth of 32%, comparable store sales growth of 28%, in part due to improved physical retail traffic, and the addition of new stores.

Currency-neutral footwear revenues increased 15%, due primarily to higher revenues in Women's and the Jordan Brand.

Currency-neutral footwear revenues increased 27%, due primarily to higher revenues in Men's, Women's and the Jordan Brand.

Unit sales of footwear increased 18%, while higher ASP per pair contributed approximately 9 percentage points of footwear revenue growth.

Higher ASP per pair was driven by the favorable impact of growth in our NIKE Direct business as well as higher full-price ASP.

Higher ASPs, in part, reflect inflationary conditions in Argentina.

Currency-neutral apparel revenues increased 19%, due primarily to higher revenues in Men's and Women's.

Unit sales of apparel increased 18%, while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth, driven by higher off-price ASP.

Higher ASPs, in part, reflect inflationary conditions in Argentina.

Reported EBIT increased 4% for the first quarter of fiscal 2023, as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 90 basis points due to higher full-price ASP, net of discounts, the favorable impact of growth and higher margin in our NIKE Direct business, higher off-price margin, and favorable changes in standard foreign currency exchange rates.

This activity was partially offset by higher other costs, primarily higher warehousing and freight, as well as higher product costs.

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

Higher operating overhead expense was primarily due to an increase in professional services costs, as well as higher wage-related expenses.

The increase in demand creation expense was primarily due to normalization of sports marketing spend.

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

Currency-neutral apparel revenues increased 22%, due primarily to higher revenues in Men's.

Unit sales of apparel increased 20%, while higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth, driven by higher full-price ASP, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 13% for the first six months of fiscal 2023 as a result of higher revenues, partially offset higher selling and administrative expense as well as gross margin contraction.

Gross margin decreased approximately 50 basis points primarily due to higher product costs, reflecting inbound freight and logistics costs, partially offset by higher full-price ASP, net of discounts, in part due to strategic pricing actions, and favorable changes in standard foreign currency exchange rates.

Selling and administrative expense increased due to higher operating overhead expense, partially offset by lower demand creation expense.

The increase in operating overhead expense was primarily due to higher wage-related expenses and professional services costs, partially offset by favorable changes in foreign currency exchange rates.

Demand creation expense decreased primarily due to favorable changes in foreign currency exchange rates and lower investments in digital marketing, partially offset by higher sports marketing expenses.

GLOBAL BRAND DIVISIONS

THREE MONTHS ENDED AUGUST 31,

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

(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Revenues $ 18 $ 6 200 % 200 % $ 32 $ 13 146 % 149 %

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 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 20% for the first quarter of fiscal 2023 driven primarily by higher operating overhead expense while demand creation expense remained flat.

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

THREE MONTHS ENDED AUGUST 31,

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 14% for the second 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.

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

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

Global Brand Divisions' loss before interest and taxes increased 17% for the first six 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 investments.

The increase in demand creation expense reflected higher sports marketing expenses and an increase in digital marketing investments.

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

(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 517 $ 485 7 % 14 % $ 1,093 $ 1,052 4 % 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 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, Converse revenues increased 8% for the first quarter of fiscal 2023 as revenue growth in North America and Western Europe was partially offset by declines in Asia.

Direct to consumer revenues increased 17%, driven by strong digital demand in North America.

Combined unit sales within the wholesale and direct to consumer channels decreased 5%, while ASP increased 12%, driven by growth in direct to consumer.

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

On a currency-neutral basis, Converse revenues increased 12% for the second quarter of fiscal 2023 as revenue growth in North America, licensee markets and Western Europe was partially offset by declines in Asia.

Direct to consumer revenues increased 14%, driven by strong digital sales growth in North America.

Combined unit sales within the wholesale and direct to consumer channels increased 6%, primarily driven by growth in North America wholesale, while ASP increased 5%, driven by growth in direct to consumer.

Reported EBIT increased 16%, driven by gross margin expansion and higher revenues, partially offset by higher selling and administrative expense.

Gross margin increased approximately 220 basis points as higher ASP, net of discounts, and higher margin in direct to consumer were partially offset by higher product and other costs, primarily due to increased freight costs.

Selling and administrative expense increased due to higher operating overhead expense, partially offset by a decrease in demand creation expense.

Operating overhead expense increased as a result of higher professional services costs, lower bad debt recoveries and an increase in wage-related expenses.

THREE MONTHS ENDED AUGUST 31,

Gross margin increased approximately 300 basis points, driven by higher margins in direct to consumer, lower product and 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 as a result of increased marketing and advertising costs.

Operating overhead expense increased as a result of higher wage-related expenses.

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

On a currency-neutral basis, Converse revenues increased 10% for the first six 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 15%, driven by strong digital sales growth in North America.

Combined unit sales within the wholesale and direct to consumer channels were flat, while ASP increased 9%, driven by growth in direct to consumer.

Reported EBIT increased 8%, driven by gross margin expansion and higher revenues, partially offset by higher selling and administrative expense.

Gross margin increased approximately 260 basis points driven by higher ASP, net of discounts, higher margins in direct to consumer, higher mix of full-price sales and growth in licensee revenues.

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

Operating overhead expense increased as a result of higher professional services costs, higher wage-related expenses and lower bad debt recoveries.

Demand creation expense increased due to higher marketing and advertising costs, partially offset by lower retail brand presentation costs.

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

(Dollars in millions)

2022 2021 % CHANGE

2022 2021 % CHANGE 2022 2021 % CHANGE

Revenues $ 5 $ (16) — $ 1 $ (37) —

9 unchanged sentences

and certain other foreign currency derivative instruments.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

Corporate's loss before interest and taxes increased $29 million for the first quarter of fiscal 2023, primarily due to the following:

SECOND QUARTER OF FISCAL 2023 COMPARED TO SECOND QUARTER OF FISCAL 2022

Corporate's loss before interest and taxes increased $241 million for the second quarter of fiscal 2023, primarily due to the following:

• an unfavorable change of $149 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 $149 million primarily related to the loss recognized upon the sale of our entities in Argentina and Uruguay to a third-party distributor;

these results are reported as a component of consolidated Other (income) expense, net;

• a favorable change in net foreign currency gains and losses of $141 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;

• a favorable change of $44 million related to settlements of legal matters, partially offset by net favorable activity in the prior year related to our strategic distributor partnership transition within APLA.

• an unfavorable change of $84 million primarily related to increased wage-related expenses, reported as a component of consolidated Operating overhead expense.

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

Corporate's loss before interest and taxes increased $270 million for the first six months of fiscal 2023, primarily due to the following:

• an unfavorable change of $289 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;

• a favorable change in net foreign currency gains and losses of $208 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 $106 million primarily related to the loss recognized upon the completion of the sale of our entities in Argentina and Uruguay to a third-party distributor, partially offset by settlements of legal matters, reported as a component of consolidated Other (income) expense, net;

• an unfavorable change of $83 million primarily related to increased wage and other professional service related expenses, reported as a component of consolidated Operating overhead expense.

FOREIGN CURRENCY EXPOSURES AND HEDGING PRACTICES

7 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, 2022, 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, 2022, 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 detriment of approximately $823 million for the three months ended August 31, 2022, and a benefit of approximately $382 million for the three months ended August 31, 2021.

The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $253 million for the three months ended August 31, 2022, and a benefit of approximately $117 million for the three months ended August 31, 2021.

The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $1.1 billion and $2.0 billion for the three and six months ended November 30, 2022, respectively, and a benefit of approximately $63 million and $445 million for the three and six months ended November 30, 2021, respectively.

The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $316 million and $569 million for the three and six months ended November 30, 2022, respectively, and a benefit of approximately $12 million and $129 million for the three and six months ended November 30, 2021, 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 Argentina subsidiary within our APLA operating segment and our Turkey subsidiary within our EMEA operating segment are operating in hyper-inflationary markets.

As a result, beginning in the second quarter of fiscal 2019 and the first quarter of fiscal 2023, the functional currency of our Argentina subsidiary and our Turkey subsidiary, respectively, changed from the local currency to the U.S.

As of and for the three months ended August 31, 2022, these changes did not have a material impact on our results of operations or financial condition, and we do not anticipate they will have a material impact in future periods based on current rates.

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.

As of and for the three and six months ended November 30, 2022, 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.

As of and for the three and six months ended November 30, 2022, this change did not have a material impact on our results of operations or financial condition.

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 an unfavorable impact of approximately $234 million on our Income before income taxes for the three months ended August 31, 2022.

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 $174 million and $361 million on our Income before income taxes for the three and six months ended November 30, 2022.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $357 million for the first three months of fiscal 2023, compared to $1,111 million for the first three months of fiscal 2022.

Net income, adjusted for non-cash items, generated $1,771 million of operating cash inflow for the first three months of fiscal 2023, compared to $2,076 million for the first three 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 $1,414 million for the first three months of fiscal 2023 compared to $965 million for the first three months of fiscal 2022.

The net change in working capital was unfavorably impacted by an increase in Inventories of $1,464 million as a result of higher inventory levels due to extended lead times and shifts in product flow as a result of ongoing supply chain volatility.

The change in working capital was also impacted by a $707 million favorable change in Accounts payable due to higher product purchases and the net favorable change in cash collateral with derivative counterparties as a result of hedging transactions.

During the first three months of fiscal 2023, we received cash collateral of $476 million as compared to $39 million during the first three months of fiscal 2022.

Refer to the Credit Risk section of Note 8 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional details.

Cash provided (used) by investing activities was an outflow of $214 million for the first three months of fiscal 2023, compared to an inflow of $501 million for the first three months of fiscal 2022, primarily driven by the net change in short-term investments.

For the first three months of fiscal 2023, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash outflow of $89 million compared to a cash inflow of $583 million for the first three months of fiscal 2022.

Cash provided (used) by financing activities was an outflow of $1,404 million for the first three months of fiscal 2023 compared to $743 million for the first three months of fiscal 2022.

The increased outflow in the first three months of fiscal 2023 was driven by lower proceeds from stock option exercises, which resulted in a cash inflow of $82 million in the first three months of fiscal 2023 compared to $473 million in the first three months of fiscal 2022, as well as higher share repurchases of $983 million for the first three months of fiscal 2023 compared to $752 million in the first three months of fiscal 2022.

During the first three months of fiscal 2023, we repurchased a total of 9.0 million shares of NIKE's Class B Common Stock for $991.1 million (an average price of $110.58 per share).

Cash provided (used) by operations was an inflow of $1,358 million for the first six months of fiscal 2023, compared to $3,868 million for the first six months of fiscal 2022.

Net income, adjusted for non-cash items, generated $3,367 million of operating cash inflow for the first six months of fiscal 2023, compared to $3,704 million for the first six 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 $2,009 million for the first six months of fiscal 2023 compared to an increase of $164 million for the first six months of fiscal 2022.

The net change in working capital compared to the prior year was driven by higher Accounts Receivable of $1,421 million and Inventories of $1,216 million.

Higher Accounts Receivable primarily resulted from an increase in sales to wholesale customers and the timing of when those sales were recognized compared to the prior year.

Increased Inventories was the result of higher units, mix and input costs in the first six months of fiscal 2023 compared to a lower supply of available inventory to meet consumer demand in the first six months of fiscal 2022 as a result of supply chain constraints.

Cash provided (used) by investing activities was an outflow of $23 million for the first six months of fiscal 2023, compared to $1,105 million for the first six months of fiscal 2022, primarily driven by the net change in short-term investments.

For the first six months of fiscal 2023, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash inflow of $423 million compared to a cash outflow of $776 million for the first six months of fiscal 2022.

Cash provided (used) by financing activities was an outflow of $3,321 million for the first six months of fiscal 2023 compared to $1,846 million for the first six months of fiscal 2022.

The increased outflow in the first six months of fiscal 2023 was driven by higher share repurchases of $2,550 million for the first six months of fiscal 2023 compared to $1,723 million in the first six months of fiscal 2022, as well as lower proceeds from stock option exercises, which resulted in a cash inflow of $260 million in the first six months of fiscal 2023 compared to $846 million in the first six months of fiscal 2022.

During the first six months of fiscal 2023, we repurchased a total of 25.5 million shares of NIKE's Class B Common Stock for $2.6 billion (an average price of $101.96 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.

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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 August 31, 2022, we had repurchased 2.5 million shares at a cost of approximately $281.1 million (an average price of $112.48 per share) under this new program.

As of November 30, 2022, we had repurchased 19.0 million shares at a cost of approximately $1.9 billion (an average price of $99.28 per share) under this new program.

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

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The Shelf expires on July 21, 2025.

As of August 31, 2022, our committed credit facilities were unchanged from the information previously reported on Form 10-K for the fiscal year ended May 31, 2022.

As of November 30, 2022, our committed credit facilities were unchanged from the information previously reported on 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 August 31, 2022, 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, 2022 and May 31, 2022, no amounts were outstanding under our committed credit facilities.

As of November 30, 2022, 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, 2022 and May 31, 2022, 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, 2022, we did not have any borrowings outstanding under our $3 billion program.

As of and for the three months ended November 30, 2022, 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.

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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, 2022, we had cash, cash equivalents and short-term investments totaling $11.9 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

As of November 30, 2022, we had cash, cash equivalents and short-term investments totaling $10.6 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

Treasury obligations and other investment grade fixed-income securities.

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

While individual securities have varying durations, as of August 31, 2022, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 136 days.

While individual securities have varying durations, as of November 30, 2022, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 117 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.

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OFF-BALANCE SHEET ARRANGEMENTS

As of August 31, 2022, 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.

As of November 30, 2022, 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

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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