What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-06 compared with 2023-01-05 · 269 added, 252 removed, 364 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 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.

Over the last several years, as we have executed against the Consumer Direct Acceleration, we have grown our NIKE Direct revenues, on a reported basis, to be approximately 45% and 43% of total NIKE Brand revenues for the third quarter and first nine months of fiscal 2023, respectively.

We have also reduced the number of wholesale accounts globally.

Additionally, we have aligned our product creation and category organizations around a new consumer construct focused on Men’s, Women’s and Kids’ and continue to invest in data and analytics, demand sensing, insight gathering, inventory management and other areas to create an end-to-end technology foundation, which we expect will further accelerate our digital transformation.

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CURRENT ECONOMIC CONDITIONS AND MARKET DYNAMICS

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

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.

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

In the first quarter of fiscal 2022, government mandated shutdowns in Vietnam and Indonesia due to COVID-19 impacted our contract manufacturers’ operations and our supply of available product.

This, coupled with elevated inventory transit times due to port congestion, transportation delays and labor and container shortages, caused seasonal product to arrive later than planned.

We expected these elevated inventory transit times to continue and as a result we purchased product for fiscal 2023 earlier than normal.

However, during the first quarter of fiscal 2023, inventory transit times improved ahead of plan resulting in seasonal product arriving early.

This disruption in the flow of seasonal inventory led to elevated inventory levels at the end of the first quarter of fiscal 2023.

Starting in the first quarter of fiscal 2023, we took action to reduce excess inventory by decreasing inventory purchases and increasing promotional activity.

These actions led to Inventories decreasing sequentially in the second and third quarters of fiscal 2023.

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

During the first nine months of fiscal 2023, we experienced higher product input, freight and logistics costs primarily due to inflationary pressures.

These costs, combined with higher promotional activity, contributed to gross margin contraction of 330 basis points and 280 basis points in the third quarter and first nine months of fiscal 2023, respectively.

These impacts were partially offset by strategic pricing actions taken in prior quarters.

Fluctuations in currency exchange rates also create volatility in our reported results as we translate the balance sheets, operational results and cash flows of our subsidiaries into U.S.

Dollars for consolidated reporting.

During the third quarter of fiscal 2023, foreign currency headwinds increased significantly as the U.S.

Dollar strengthened in relation to most foreign currencies, reducing reported Revenues by $549 million and $2.5 billion for the third quarter and first nine months of fiscal 2023, respectively.

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

Most of our geographies operated with little to no COVID-19 related disruptions during the third quarter of fiscal 2023.

In Greater China, however, the shifting of the local government’s COVID-19 policies in December 2022 led to temporary store closures as well as lower physical traffic during the month.

Since January 2023, nearly all stores in Greater China have remained open and are operating on normal hours with improved physical traffic.

Across our geographies and Converse, the operating environment remains dynamic, and we expect promotional activity to continue in the fourth quarter of fiscal 2023.

In addition, we expect product costs to remain elevated due to higher input, freight and logistics costs, which could result in continued gross margin contraction.

We also continue to closely monitor macroeconomic conditions, including potential impacts inflation and rising interest rates could have on consumer behavior.

While we believe our Consumer Direct Acceleration Strategy continues to drive our business toward our long-term financial goals, worsening macroeconomic conditions could affect our business, including, among other things, higher inventory levels in various markets, higher inventory obsolescence reserves, higher promotional activity, reduced demand for our products, reduced orders from our wholesale customers for our products and order cancellations.

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Any of these factors, among others, could have material adverse impacts on our revenue growth as well as overall profitability in future periods.

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.

THIRD QUARTER OVERVIEW

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

Revenues increased 14% to $12.4 billion compared to the third quarter of fiscal 2022 and increased 19% on a currency-neutral basis.

Net income was $1,240 million and diluted earnings per common share was $0.79 for the third quarter of fiscal 2023, compared to Net income of $1,396 million and diluted earnings per common share of $0.87 for the third quarter of fiscal 2022.

Income before income taxes decreased 12% compared to the third quarter of fiscal 2022 due to higher Selling and administrative expense and gross margin contraction, partially offset by higher revenues.

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

Revenues, increased 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.

Revenues, increased 14% compared to the third quarter of fiscal 2022.

On a currency-neutral basis, NIKE Brand revenues increased 19%, driven by higher revenues across all geographies, led by increases in North America and Europe, Middle East & Africa (EMEA).

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

Revenues for Converse increased 8% and 12% compared to the third quarter of fiscal 2022, on a reported and currency-neutral basis, respectively, as revenue growth in North America, Western Europe and licensee markets was partially offset by declines in Asia.

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

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to the U.S.

corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for NIKE beginning June 1, 2023, and a one percent excise tax on net repurchases of stock after December 31, 2022.

corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for NIKE beginning June 1, 2023.

Based on our current analysis of the provisions, we do not expect these tax law changes to have a material impact on our financial statements;

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For more information see Note 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Now that we have completed the shift from a wholesale and direct to consumer operating model 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.

However, over time we expect the future operating model to have a favorable impact on our overall profitability as we reduce selling and administrative expenses, as well as lessen exposure to foreign exchange rate volatility.

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

and Asia Pacific & Latin America (APLA) revenue growth will be reduced due to different commercial terms.

However, over time we expect the future operating model to have a favorable impact on our overall profitability as we reduce selling and administrative expenses, as well as reduce exposure to foreign exchange rate volatility.

USE OF NON-GAAP FINANCIAL MEASURES

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RESULTS OF OPERATIONS

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CONSOLIDATED OPERATING RESULTS

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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.

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

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

On a currency-neutral basis, NIKE, Inc.

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, 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.

Revenues increased 19% the third quarter of fiscal 2023, driven by higher revenues in both the NIKE Brand and Converse.

Higher revenues in North America, EMEA, APLA and Converse contributed approximately 9, 7, 2 and 1 percentage points to NIKE, Inc.

Revenues, respectively.

On a currency-neutral basis, NIKE Brand footwear revenues increased 25% in the third quarter of fiscal 2023, driven by higher revenues in Men's, the Jordan Brand and Women's.

Unit sales of footwear increased 19%, while higher average selling price (ASP) per pair contributed approximately 6 percentage points of footwear revenue growth, primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, and growth in NIKE Direct.

This was partially offset by lower NIKE Direct ASP.

Currency-neutral NIKE Brand apparel revenues for the third quarter of fiscal 2023 increased 10%, driven by higher revenues in Men's.

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

NIKE Brand wholesale revenues increased 12% and 18% compared to the third quarter of fiscal 2022, on a reported and currency-neutral basis, respectively.

On a reported basis, NIKE Direct revenues represented approximately 45% of our total NIKE Brand revenues for the third quarter of fiscal 2023 compared to 44% for the third quarter of fiscal 2022.

NIKE Brand Digital sales were $3.1 billion for the third quarter of fiscal 2023 compared to $2.7 billion for the third quarter of fiscal 2022.

On a currency-neutral basis, NIKE Direct revenues increased 22%, primarily driven by NIKE Brand Digital sales growth of 24% and comparable store sales growth of 20%.

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

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As a result, our calculation of this metric may not be comparable to similarly titled measures used by other companies.

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

FIRST NINE MONTHS OF FISCAL 2023 COMPARED TO FIRST NINE 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 increased 19% for the first nine months of fiscal 2023, driven by higher revenues in North America, EMEA, APLA and Converse, which contributed approximately 9, 7, 3 and 1 percentage points to NIKE, Inc.

Revenues, respectively.

Lower revenues in Greater China reduced NIKE, Inc.

Revenues by approximately 1 percentage point.

On a currency-neutral basis, NIKE Brand footwear revenues increased 24%, driven by growth in Men's and the Jordan Brand.

Unit sales of footwear increased 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.

Unit sales of footwear increased 15%, while higher ASP per pair contributed approximately 9 percentage points of footwear revenue growth, primarily due to higher full-price ASP and growth in NIKE Direct.

Currency-neutral NIKE Brand apparel revenues increased 10%, driven by growth in Men's.

Unit sales of apparel increased 7% and higher ASP per unit contributed approximately 3 percentage points of apparel revenue growth.

Higher ASP per unit was primarily due to higher full-price ASP, 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.

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Higher ASP per unit was primarily due to higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

NIKE Brand wholesale revenues increased 10% and 18% compared to the first nine months of fiscal 2022, on a reported and currency-neutral basis, respectively.

On a reported basis, NIKE Direct revenues represented approximately 43% of our total NIKE Brand revenues for the first nine months of fiscal 2023 and the first nine months of fiscal 2022.

NIKE Brand Digital sales were $9.4 billion for the first nine months of fiscal 2023 compared to $7.9 billion for the first nine months of fiscal 2022.

On a currency-neutral basis, NIKE Direct revenues increased 20%, primarily driven by NIKE Brand Digital sales growth of 27% and comparable store sales growth of 11%.

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Gross margin 43.3 % 46.6 % (330) bps 43.5 % 46.3 % (280) 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);

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

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

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

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

• Lower 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:

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

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

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

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

• 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.

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

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

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(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.

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.

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

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

Changes in foreign currency exchange rates decreased Demand creation expense by approximately 3 percentage points.

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

Operating overhead expense increased 17% primarily due to higher wage-related expenses, higher strategic technology enterprise investments and NIKE Direct variable costs.

Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 3 percentage points.

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.

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

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

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

Changes in foreign currency exchange rates decreased Demand creation expense by approximately 5 percentage points.

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

Operating overhead expense increased 13% primarily due to an increase in wage-related expenses, higher strategic technology enterprise investments and NIKE Direct variable costs.

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

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

OTHER (INCOME) EXPENSE, NET

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

For the first nine months of fiscal 2023, Other (income) expense, net increased from $235 million of other income, net to $283 million in the current year, primarily due to a net favorable change in foreign currency conversion gains and losses, including hedges, and settlements of legal matters.

This increase was partially offset by net unfavorable activity related to our strategic distributor partnership transition within APLA, including the loss recognized upon the completion of the sale of our entities in Argentina and Uruguay to a third-party distributor in the second quarter of fiscal 2023.

For more information related to our distributor partnership transition within APLA, see Note 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in Other (income) expense, net had unfavorable impacts of approximately $174 million and $361 million on our Income before income taxes for the second quarter and first six months of fiscal 2023, respectively.

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We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in Other (income) expense, net had unfavorable impacts of approximately $147 million and $508 million on our Income before income taxes for the third quarter and first nine months of fiscal 2023, respectively.

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Effective tax rate 16.0 % 16.4 % (40) bps 18.5 % 12.7 % 580 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.

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

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

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

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The breakdown of Revenues is as follows:

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

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NORTH AMERICA

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EARNINGS BEFORE INTEREST AND TAXES $ 1,190 $ 967 23 % $ 4,064 $ 3,636 12 %

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.

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

On a currency-neutral basis, North America revenues for the third quarter of fiscal 2023 increased 27%, due primarily to higher revenues in Men's and the Jordan Brand.

NIKE Direct revenues increased 23%, primarily driven by strong digital sales growth of 25%, comparable store sales growth of 17% and the addition of new stores.

Currency-neutral footwear revenues increased 31%, primarily driven by higher revenues in the Jordan Brand and Men's.

Unit sales of footwear increased 26%, while higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher full-price ASP, 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 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.

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

Currency-neutral apparel revenues increased 18%, primarily driven by higher revenues in Men's.

Unit sales of apparel increased 20%, while lower ASP per unit reduced apparel revenues by approximately 2 percentage points.

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

This activity was partially offset by higher ASP in both full and off-price.

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

Gross margin decreased approximately 200 basis points largely driven by lower margin in NIKE Direct in part due to higher promotional activity, higher product costs reflecting higher input costs and inbound freight and logistics costs, including supply chain network costs, and a lower mix of full-price sales.

This was partially offset by higher full-price ASP, net of discounts, driven by strategic pricing actions and product mix.

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

Operating overhead expense increased primarily due to 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.

Operating overhead expense increased primarily due to higher wage-related expenses and NIKE Direct variable costs, in part due to new store additions.

The increase in demand creation expense was primarily due to an increase in digital marketing.

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

On a currency-neutral basis, North America revenues for the first nine months of fiscal 2023 increased 23%, due primarily to higher revenues in Men's and the Jordan Brand.

NIKE Direct revenues increased 20%, primarily driven by strong digital sales growth of 25%, comparable store sales growth of 9% and the addition of new stores.

Currency-neutral footwear revenues increased 28%, largely driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 23%, while higher ASP per pair contributed approximately 5 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher full-price ASP, 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.

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

Currency-neutral apparel revenues increased 12%, driven primarily by higher revenues in Men's.

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

Reported EBIT increased 12% primarily due to higher revenues, partially offset by gross margin contraction and higher selling and administrative expense.

Gross margin decreased approximately 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.

Gross margin decreased approximately 340 basis points primarily due to higher product costs, reflecting higher input costs and inbound freight and logistics costs, lower margins in NIKE Direct due to higher promotional activity and a lower mix of full-price sales.

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

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

Operating overhead expense increased primarily as a result of higher wage-related costs, 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.

Operating overhead expense increased primarily as a result of higher wage-related costs and NIKE Direct variable costs.

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

EUROPE, MIDDLE EAST & AFRICA

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

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2023 2022 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2023 2022 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

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EARNINGS BEFORE INTEREST AND TAXES $ 785 $ 713 10 % $ 2,750 $ 2,394 15 %

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 37%, driven by higher revenues in Men's, the Jordan Brand and Women's.

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

On a currency-neutral basis, EMEA revenues for the third quarter of fiscal 2023 increased 26%, primarily driven by growth in Men's.

NIKE Direct revenues increased 39%, driven by strong digital sales growth of 43% and comparable store sales growth of 36%.

Currency-neutral footwear revenues increased 39%, driven by higher revenues in Men's and Women's.

Unit sales of footwear increased 24%, while higher ASP per pair contributed approximately 15 percentage points of footwear revenue growth.

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

Higher ASP per pair was primarily due to higher full-price ASP, growth in NIKE Direct and higher NIKE Direct ASP.

Currency-neutral apparel revenues increased 10% due primarily to higher revenues in Men's.

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 apparel decreased 2%, while higher ASP per unit contributed approximately 12 percentage points of apparel revenue growth, primarily due to growth in NIKE Direct and higher full-price ASP, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

Reported EBIT increased 10% primarily due to higher revenues, partially offset by gross margin contraction and higher selling and administrative expenses.

Gross margin decreased approximately 250 basis points primarily due to higher product costs reflecting higher input costs and inbound freight and logistics costs as well as product mix and unfavorable changes in standard foreign currency exchange rates.

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

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

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

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

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

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

NIKE Direct revenues increased 34% primarily due to strong digital sales growth of 51% and comparable store sales growth of 18%.

Currency-neutral footwear revenues increased 30%, driven by higher revenues led by Men's, the Jordan Brand and Women's.

Unit sales of footwear increased 13%, while higher ASP per pair contributed approximately 17 percentage points of footwear revenue growth.

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

Higher ASP per pair was primarily due to higher full-price and NIKE Direct ASPs, as well as growth in NIKE Direct.

Currency-neutral apparel revenues increased 18% due primarily to higher revenues in Men's.

Unit sales of apparel increased 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.

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

Reported EBIT increased 15% due to higher revenues and gross margin expansion, partially offset by higher selling and administrative expense.

Gross margin increased approximately 30 basis points primarily due to higher full-price ASP, net of discounts, in part due to strategic pricing actions and product mix.

This activity was partially offset by higher product costs reflecting higher input costs, inbound freight and logistics costs as well as product mix.

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

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

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

GREATER CHINA

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

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2023 2022 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2023 2022 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

7 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 702 $ 784 -10 % $ 1,754 $ 2,054 -15 %

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.

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

On a currency-neutral basis, Greater China revenues for the third quarter of fiscal 2023 increased 1%.

The increase in revenues was primarily due to higher revenues in Men's, the Jordan Brand and Kid's, largely offset by lower revenues in Women's.

NIKE Direct revenues increased 3% due to comparable store sales growth of 9%, in part due to improved physical traffic, and growth in non-comparable store sales, partially offset by digital sales declines of 11%.

Currency-neutral footwear revenues increased 5%, driven primarily by higher revenues in Men's.

Unit sales of footwear increased 6%, while lower ASP per unit reduced footwear revenues by approximately 1 percentage point.

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

Unit sales of apparel decreased 16%, partially offset by approximately 8 percentage points of growth due to higher ASP per unit.

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

Reported EBIT decreased 10% as lower revenues and gross margin contraction were partially offset by lower selling and administrative expense.

Gross margin decreased approximately 80 basis points, primarily due to higher product costs reflecting higher input costs and product mix.

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

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

The decrease in demand creation expense was primarily due to lower retail brand presentation expense, favorable changes in foreign currency exchange rates and lower 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 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.

The decrease in demand creation expense was primarily due to lower retail brand presentation expense, favorable changes in foreign currency exchange rates and lower digital marketing, partially offset by higher advertising and marketing expense.

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

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

On a currency-neutral basis, Greater China revenues for the first nine months of fiscal 2023 decreased 2%, reflecting impacts from COVID-19 related disruptions.

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

NIKE Direct revenues increased 2% due to growth in non-comparable store sales and a 1% increase in comparable store sales, partially offset by a decline in digital sales of 1%.

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

Unit sales of footwear increased 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.

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

Currency-neutral apparel revenues decreased 17%, due primarily to lower revenues in Men's and Women's.

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

Reported EBIT decreased 15% as lower revenues and gross margin contraction more than offset lower selling and administrative expense.

Gross margin decreased approximately 80 basis points, primarily due to higher product costs reflecting product mix and higher input costs.

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

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

The decrease in demand creation expense was primarily due to lower retail brand presentation costs, lower digital marketing and favorable changes in foreign currency exchange rates, partially offset by higher advertising and marketing expense.

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

ASIA PACIFIC & LATIN AMERICA

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

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2023 2022 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2023 2022 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

8 unchanged sentences

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

We completed the sale of our entity in Chile and our entities in Argentina and Uruguay to third-party distributors in the first and second quarters of fiscal 2023, respectively, 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 CASA marketplace now reflects a full distributor operating model.

We completed the sale of our entity in Chile and our entities in Argentina and Uruguay to third-party distributors in the first and second quarters of fiscal 2023, respectively.

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

This completed the transition of our NIKE Brand businesses within our CASA marketplace, which now reflects a full distributor operating model.

For more information, see Note 14 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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.

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

On a currency-neutral basis, APLA revenues increased 15% for the third quarter of fiscal 2023 driven by higher revenues across nearly all territories, led by Southeast Asia & India and Japan.

This increase was partially offset by a decline in our CASA territory.

Within our CASA territory, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model reduced APLA revenue growth by approximately 8 percentage points.

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

NIKE Direct revenues increased 22%, primarily due to digital sales growth of 23% and comparable store sales growth of 36% in part due to improved physical retail traffic, partially offset by stores included in the sale of our Chile, Argentina and Uruguay entities.

Currency-neutral footwear revenues increased 40%, due primarily to higher revenues in Men's, Women's and the Jordan Brand.

Currency-neutral footwear revenues increased 20%, due primarily to higher revenues in Men's, the Jordan Brand and Women's.

Unit sales of footwear increased 14%, while higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth.

Higher ASP per pair was 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.

Higher ASP per pair was driven by higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

Currency-neutral apparel revenues increased 9%, due primarily to higher revenues in Men's.

Unit sales of apparel decreased 1%, while higher ASP per unit contributed approximately 10 percentage points of apparel revenue growth, driven by higher full-price and off-price ASPs and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 1% for the third quarter of fiscal 2023, as higher revenues more than offset higher selling and administrative expense and gross margin contraction.

Gross margin decreased approximately 190 basis points due to higher product costs reflecting product mix and higher input costs and unfavorable changes in standard foreign currency exchange rates.

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

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

The increase in demand creation expense was primarily due to higher advertising and marketing expense and an increase in digital marketing.

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

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

On a currency-neutral basis, APLA revenues increased 22% for the first nine months of fiscal 2023 driven by higher revenues across nearly all territories, led by Southeast Asia & India, Korea and Japan.

This increase was partially offset by a decline in our CASA territory.

Within our CASA territory, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model reduced APLA revenue growth by approximately 5 percentage points.

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

NIKE Direct revenues increased 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.

NIKE Direct revenues increased 27%, primarily due to digital sales growth of 29% and comparable store sales growth of 31%, in part due to improved physical retail traffic.

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

Unit sales of footwear increased 17%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth.

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

Higher ASP per pair was driven by higher full-price ASP and growth in NIKE Direct.

Currency-neutral apparel revenues increased 18%, due primarily to higher revenues in Men's.

Unit sales of apparel increased 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.

Unit sales of apparel increased 13%, while higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth, driven by higher full-price and off-price ASPs, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 9% for the third quarter of fiscal 2023 as a result of higher revenues, partially offset by higher selling and administrative expense and gross margin contraction.

Gross margin decreased approximately 100 basis points primarily due to higher product costs, reflecting product mix, increased inbound freight and logistics costs and input costs, partially offset by higher full-price ASP, net of discounts, in part due to product mix and strategic pricing actions.

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

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

Demand creation expense increased primarily due to increases in advertising and marketing expense and higher sports marketing expense, partially offset by favorable changes in foreign currency exchange rates.

GLOBAL BRAND DIVISIONS

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

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions)

4 unchanged sentences

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

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,

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

Global Brand Divisions' loss before interest and taxes increased 19% for the third quarter of fiscal 2023 driven primarily by higher operating overhead and demand creation expense.

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

Higher demand creation expense was primarily due to an increase in digital marketing and higher advertising and marketing expense.

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

Global Brand Divisions' loss before interest and taxes increased 18% for the first nine months of fiscal 2023 driven by higher operating overhead and higher demand creation expense.

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

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

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions)

12 unchanged sentences

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

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.

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

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

Direct to consumer revenues increased 10%, driven by strong digital sales growth in North America.

Combined unit sales within the wholesale and direct to consumer channels increased 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 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.

Combined unit sales within the wholesale and direct to consumer channels increased 4%, primarily driven by growth in North America, while ASP increased 7%, driven by strategic pricing actions.

Reported EBIT decreased 2%, driven by higher selling and administrative expense and gross margin contraction, partially offset by higher revenues.

Gross margin decreased approximately 150 basis points, driven by lower margins in direct to consumer, in part reflecting increased promotional activity, higher product costs and unfavorable changes in standard foreign currency exchange rates, partially offset by higher ASP, net of discounts, and lower other costs.

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

Operating overhead expense increased as a result of higher wage-related expenses and professional services costs.

Demand creation expense increased as a result of increased advertising and marketing expense.

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

On a currency-neutral basis, Converse revenues increased 10% for the first nine months of fiscal 2023 as revenue growth in North America, Western Europe, and licensee markets was partially offset by declines in Asia.

Direct to consumer revenues increased 13%, driven by strong digital sales growth in North America.

Combined unit sales within the wholesale and direct to consumer channels 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.

Combined unit sales within the wholesale and direct to consumer channels increased 1%, primarily driven by growth in North America, while ASP increased 8%, driven by growth in direct to consumer and strategic pricing actions.

Reported EBIT increased 4%, driven by higher revenues and gross margin expansion, partially offset by higher selling and administrative expense.

Gross margin increased approximately 120 basis points driven by higher ASP, net of discounts, lower other costs, and growth in licensee revenues, partially offset by higher product costs.

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

Operating overhead expense increased as a result of higher 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,

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

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

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions)

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and certain other foreign currency derivative instruments.

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:

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

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

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

• an unfavorable change of $77 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses;

these results are reported as a component of consolidated gross margin;

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

• an unfavorable change of $44 million related to net favorable settlements of legal and insurance matters in the prior year as well as favorable activity in the prior year related to our strategic distributor partnership transition within APLA;

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

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

• 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:

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

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

• an unfavorable change of $366 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses;

these results are reported as a component of consolidated gross margin;

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

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

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

• 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

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

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.

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

Refer to Note 4 — Fair Value Measurements and Note 9 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end.

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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 $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.

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

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

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

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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.

As of and for the three and nine months ended February 28, 2023, this change did not have a material impact on our results of operations or financial condition, and we do not anticipate it will have a material impact in future periods based on current rates.

Prior to the completion of the sale of our Argentina entity within our APLA operating segment during the second quarter of fiscal 2023, Management concluded this subsidiary was operating in a hyper-inflationary market.

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

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.

As of and for the three and nine months ended February 28, 2023, this change did not have a material impact on our results of operations or financial condition.

MANAGING TRANSLATIONAL EXPOSURES

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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 $174 million and $361 million on our Income before income taxes for the three and six months ended November 30, 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 $147 million and $508 million on our Income before income taxes for the three and nine months ended February 28, 2023.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $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).

Cash provided (used) by operations was an inflow of $3,588 million for the first nine months of fiscal 2023, compared to $4,037 million for the first nine months of fiscal 2022.

Net income, adjusted for non-cash items, generated $4,805 million of operating cash inflow for the first nine months of fiscal 2023, compared to $5,387 million for the first nine months of fiscal 2022.

The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $1,217 million for the first nine months of fiscal 2023 compared to a decrease of $1,350 million for the first nine months of fiscal 2022.

For the first nine months of fiscal 2023, the net change in working capital compared to the prior year was relatively flat and impacted by unfavorable changes in Accounts payable and Accounts receivable, offset by favorable impacts from Inventories.

These changes were, in part, due to reduced inventory purchases in the current period as we reduce our excess inventory and higher wholesale revenues, which carry a higher level of days sales outstanding.

Further impacting these changes was a lower available supply of inventory in the prior year due to supply chain constraints.

Cash provided (used) by investing activities was an inflow of $137 million for the first nine months of fiscal 2023, compared to an outflow of $1,711 million for the first nine months of fiscal 2022, primarily driven by the net change in short-term investments.

For the first nine months of fiscal 2023, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash inflow of $775 million compared to a cash outflow of $1,156 million for the first nine months of fiscal 2022.

Cash provided (used) by financing activities was an outflow of $5,266 million for the first nine months of fiscal 2023 compared to $3,456 million for the first nine months of fiscal 2022.

The increased outflow in the first nine months of fiscal 2023 was driven by higher share repurchases of $4,101 million for the first nine months of fiscal 2023 compared to $2,923 million in the first nine months of fiscal 2022, as well as lower proceeds from stock option exercises, which resulted in a cash inflow of $413 million in the first nine months of fiscal 2023 compared to $959 million in the first nine months of fiscal 2022.

During the first nine months of fiscal 2023, we repurchased a total of 38.4 million shares of NIKE's Class B Common Stock for $4.1 billion (an average price of $107.16 per share).

In August 2022, we terminated the previous four-year, $15 billion share repurchase program approved by the Board of Directors in June 2018.

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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 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.

As of February 28, 2023, we had repurchased 32.0 million shares at a cost of approximately $3.4 billion (an average price of $106.61 per share) under this new program.

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

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On July 21, 2022, we filed a shelf registration statement (the “Shelf”) with the U.S.

Securities and Exchange Commission (SEC) which permits us to issue an unlimited amount of debt securities from time to time.

Securities and Exchange Commission (the "SEC") which permits us to issue an unlimited amount of debt securities from time to time.

The Shelf expires on July 21, 2025.

As of 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.

As of February 28, 2023, our committed credit facilities were unchanged from the information previously reported in our Form 10-K for the fiscal year ended May 31, 2022.

We currently have long-term debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively.

Any changes to these ratings could result in interest rate and facility fee changes.

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

As of February 28, 2023, we were in full compliance with the covenants under our facilities and believe it is unlikely we will fail to meet any of the covenants in the foreseeable future.

As of February 28, 2023 and May 31, 2022, no amounts were outstanding under our committed credit facilities.

On March 10, 2023, subsequent to the end of the third quarter of fiscal 2023, we entered into a 364-day committed credit facility agreement with a syndicate of banks which provides for up to $1 billion of borrowings, with the option to increase borrowings up to $1.5 billion in total with lender approval.

The facility matures on March 8, 2024, with an option to extend the maturity date by 364 days.

This facility replaces the prior $1 billion 364-day credit facility agreement entered into on March 11, 2022, which matured on March 10, 2023.

Refer to Note 5 — Short-term Borrowings and Credit Lines for additional information.

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

As of and for the three months ended February 28, 2023, we did not have any borrowings outstanding under our $3 billion program.

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

We currently have short-term debt ratings of A1+ and P1 from Standard and Poor's Corporation and Moody's Investor Services, respectively.

To date, in fiscal 2023, we have not experienced difficulty accessing the credit markets;

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 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.

To date, in fiscal 2023, we have not experienced difficulty accessing the capital or bank markets;

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

As of February 28, 2023, we had Cash and equivalents and Short-term investments totaling $10.8 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

Treasury obligations and other investment grade fixed-income securities.

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

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.

While individual securities have varying durations, as of February 28, 2023, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 104 days.

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

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

OFF-BALANCE SHEET ARRANGEMENTS

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.

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

NEW ACCOUNTING PRONOUNCEMENTS

There have been no material changes in recently issued or adopted accounting standards from those disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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

CRITICAL ACCOUNTING ESTIMATES

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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