NIKE, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW NIKE designs, develops, markets and sells athletic footwear, apparel, equipment, accessories and services worldwide. We are the largest seller of athletic footwear and apparel in the world. We sell our products through two distribution channels: NIKE Direct operations which are comprised of both NIKE-owned retail stores and sales through our digital platforms (also referred to as "NIKE Brand Digital") and to wholesale accounts, which include a mix of independent distributors, licensees and sales representatives in nearly all countries around the world. Our goal is to deliver value to our shareholders by building a profitable global portfolio of branded footwear, apparel, equipment and accessories businesses. Our strategy is to achieve sustainable, profitable long-term revenue growth by creating innovative, "must-have" products, building deep personal consumer connections with our brands and delivering compelling consumer experiences through digital platforms and at retail. Under the leadership of our new Chief Executive Officer, Elliott Hill, we are focused on leading with sport, building a complete product portfolio, creating stories to inspire and emotionally connect with consumers, repositioning NIKE Brand Digital as a full-price platform and increasing investment with our wholesale partners. QUARTERLY FINANCIAL HIGHLIGHTS • NIKE, Inc. Revenues for the second quarter of fiscal 2025 were $12.4 billion compared to $13.4 billion for the second quarter of fiscal 2024 • NIKE Direct revenues were $5.0 billion for the second quarter of fiscal 2025 compared to $5.7 billion for the second quarter of fiscal 2024, and represented approximately 42% of total NIKE Brand revenues • NIKE Brand wholesale revenues were $6.9 billion for the second quarter of fiscal 2025 compared to $7.1 billion for the second quarter of fiscal 2024 • Gross margin for the second quarter of fiscal 2025 decreased 100 basis points to 43.6%, primarily due to higher discounts and changes in channel mix, partially offset by lower product input costs as well as lower warehousing and logistics costs • Inventories as of November 30, 2024, were $8.0 billion, an increase of 6% compared to May 31, 2024, primarily driven by an increase in units • We returned approximately $1.6 billion to our shareholders in the second quarter of fiscal 2025 through share repurchases and dividends FACTORS IMPACTING OUR BUSINESS Our results for the second quarter and six months ended November 30, 2024, reflect lower wholesale shipments, increased sales-related reserves, a decrease in traffic and elevated promotional activity across NIKE Direct which resulted in a negative impact on our Revenues and overall profitability. We are taking actions across the following areas: • Product Management: Reducing the supply of certain footwear products in the marketplace as we shift to new and innovative products and rebalance the mix of our footwear portfolio. • Marketplace Management: Repositioning NIKE Brand Digital as a full-price platform and reinvesting in wholesale distribution. This includes liquidating inventory through increased markdowns across NIKE Direct, and higher sales-related returns and discounts with our wholesale partners to reduce inventory and create capacity for new product. • Brand Management: Increasing investment in demand creation including brand marketing and sports marketing to support key product launches and sports moments. As we continue to take actions to reposition our business over the next several quarters, we expect a negative impact on our Revenues and gross margin as well as higher Demand creation expense. However, we believe these actions will reposition our business to drive long-term shareholder value. 22 Table of Contents USE OF NON-GAAP FINANCIAL MEASURES Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures, which should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with U.S. GAAP. References to these measures should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. Management uses these non-GAAP measures when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. Earnings Before Interest and Taxes ("EBIT"): Calculated as Net income before Interest expense (income), net and Income tax expense in the Unaudited Condensed Consolidated Statements of Income. Total NIKE, Inc. EBIT for the three and six months ended November 30, 2024 and 2023 are as follows: THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 2024 2023 Net income $ 1,163 $ 1,578 $ 2,214 $ 3,028 Add: Interest expense (income), net (24) (22) (67) (56) Add: Income tax expense 253 344 509 542 Earnings before interest and taxes $ 1,392 $ 1,900 $ 2,656 $ 3,514 EBIT margin: Calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. Our EBIT margin calculation for the three and six months ended November 30, 2024 and November 30, 2023 are as follows: THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 2024 2023 Numerator Earnings before interest and taxes $ 1,392 $ 1,900 $ 2,656 $ 3,514 Denominator Total NIKE, Inc. Revenues $ 12,354 $ 13,388 $ 23,943 $ 26,327 EBIT margin 11.3 % 14.2 % 11.1 % 13.3 % Currency-neutral revenues: Currency-neutral revenues enhance visibility to underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Currency-neutral revenues are calculated using actual exchange rates in use during the comparative prior year period in place of the exchange rates in use during the current period. COMPARABLE STORE SALES Comparable store sales: This key metric, which excludes NIKE Brand Digital sales, comprises revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met: (1) the store has been open at least one year, (2) square footage has not changed by more than 15% within the past year and (3) the store has not been permanently repositioned within the past year. Comparable store sales represents a performance metric that we believe is useful information for management and investors in understanding the performance of our established NIKE-owned in-line and factory stores. Management considers this metric when making financial and operating decisions. The method of calculating comparable store sales varies across the retail industry. As a result, our calculation of this metric may not be comparable to similarly titled metrics used by other companies. 23 Table of Contents RESULTS OF OPERATIONS THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions, except per share data) 2024 2023 % CHANGE 2024 2023 % CHANGE Revenues $ 12,354 $ 13,388 -8 % $ 23,943 $ 26,327 -9 % Cost of sales 6,965 7,417 -6 % 13,297 14,636 -9 % Gross profit 5,389 5,971 -10 % 10,646 11,691 -9 % Gross margin 43.6 % 44.6 % 44.5 % 44.4 % Demand creation expense 1,122 1,114 1 % 2,348 2,183 8 % Operating overhead expense 2,883 3,032 -5 % 5,705 6,079 -6 % Total selling and administrative expense 4,005 4,146 -3 % 8,053 8,262 -3 % % of revenues 32.4 % 31.0 % 33.6 % 31.4 % Interest expense (income), net (24) (22) — (67) (56) — Other (income) expense, net (8) (75) — (63) (85) — Income before income taxes 1,416 1,922 -26 % 2,723 3,570 -24 % Income tax expense 253 344 -26 % 509 542 -6 % Effective tax rate 17.9 % 17.9 % 18.7 % 15.2 % NET INCOME $ 1,163 $ 1,578 -26 % $ 2,214 $ 3,028 -27 % Diluted earnings per common share $ 0.78 $ 1.03 -24 % $ 1.48 $ 1.97 -25 % CONSOLIDATED OPERATING RESULTS REVENUES THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1) NIKE, Inc. Revenues: NIKE Brand Revenues by: Footwear $ 7,655 $ 8,607 -11 % -12 % $ 15,117 $ 17,028 -11 % -11 % Apparel 3,738 3,774 -1 % -2 % 6,770 7,162 -5 % -6 % Equipment 544 479 14 % 12 % 1,147 1,010 14 % 13 % Global Brand Divisions (2) 13 12 8 % -2 % 27 25 8 % 9 % Total NIKE Brand Revenues 11,950 12,872 -7 % -8 % 23,061 25,225 -9 % -9 % Converse 429 519 -17 % -18 % 930 1,107 -16 % -16 % Corporate (3) (25) (3) — — (48) (5) — — TOTAL NIKE, INC. REVENUES $ 12,354 $ 13,388 -8 % -9 % $ 23,943 $ 26,327 -9 % -9 % Supplemental NIKE Brand Revenues Details: NIKE Brand Revenues by: Sales to Wholesale Customers $ 6,920 $ 7,118 -3 % -4 % $ 13,330 $ 14,101 -5 % -5 % Sales through NIKE Direct 5,017 5,742 -13 % -14 % 9,704 11,099 -13 % -13 % Global Brand Divisions (2) 13 12 8 % -2 % 27 25 8 % 9 % TOTAL NIKE BRAND REVENUES $ 11,950 $ 12,872 -7 % -8 % $ 23,061 $ 25,225 -9 % -9 % (1) The percent change excluding currency changes represents a non-GAAP financial measure. For additional information, see "Use of Non-GAAP Financial Measures". (2) Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. (3) Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program. 24 Table of Contents SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 • NIKE, Inc. Revenues for the second quarter of fiscal 2025 were $12.4 billion compared to $13.4 billion for the second quarter of fiscal 2024. On a currency-neutral basis, NIKE, Inc. Revenues decreased 9%, primarily due to lower revenues in North America, Europe, Middle East & Africa ("EMEA"), Greater China and Converse which each reduced NIKE, Inc. Revenues by approximately 3, 3, 2 and 1 percentage points, respectively. • NIKE Brand revenues, which represented over 90% of NIKE, Inc. Revenues, decreased 7% on a reported basis and 8% on a currency-neutral basis. The decrease on a currency-neutral basis was due to lower revenues in the Jordan Brand, Men's and Women's. • NIKE Brand footwear revenues decreased 12% on a currency-neutral basis. Unit sales of footwear decreased 7%, while lower average selling price ("ASP") per pair reduced footwear revenues by approximately 5 percentage points. Lower ASP per pair was primarily due to higher discounts and changes in channel mix. • NIKE Brand apparel revenues decreased 2% on a currency-neutral basis. Unit sales of apparel were flat, while lower ASP per unit reduced apparel revenues by approximately 2 percentage points. Lower ASP per unit was primarily due to changes in channel mix and higher discounts, partially offset by strategic pricing actions. • NIKE Brand wholesale revenues decreased 3% on a reported basis and 4% on a currency-neutral basis. The decrease on a currency-neutral basis was driven by lower revenues in Greater China, EMEA, North America and Asia Pacific & Latin America ("APLA"). • NIKE Direct revenues were $5.0 billion in the second quarter of fiscal 2025, compared to $5.7 billion for the second quarter of fiscal 2024. NIKE Brand Digital sales were $2.8 billion for the second quarter of fiscal 2025 compared to $3.5 billion for the second quarter of fiscal 2024. On a currency-neutral basis, NIKE Direct revenues decreased 14%, primarily due to NIKE Brand Digital sales declines of 21% and comparable store sales declines of 2% compared to the second quarter of fiscal 2024. For additional information regarding comparable store sales, including the definition, see "Comparable Store Sales". FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 • NIKE, Inc. Revenues were $23.9 billion for the first six months of fiscal 2025 compared to $26.3 billion for the first six months of fiscal 2024. On a currency-neutral basis, NIKE, Inc. Revenues decreased 9%, primarily due to lower revenues in North America, EMEA, Greater China and Converse which each reduced NIKE, Inc. Revenues by 4, 3, 1 and 1 percentage points, respectively. • NIKE Brand revenues, which represented over 90% of NIKE, Inc. Revenues, decreased 9% on a reported basis and 9% on a currency-neutral basis. The decrease on a currency-neutral basis was due to lower revenues in Men's, the Jordan Brand, Women's and Kids'. • NIKE Brand footwear revenues decreased 11% on a currency-neutral basis. Unit sales of footwear decreased 9%, while lower ASP per pair reduced footwear revenues by approximately 2 percentage points. Lower ASP per pair was primarily due to higher discounts and changes in channel mix, partially offset by strategic pricing actions. • NIKE Brand apparel revenues decreased 6% on a currency-neutral basis. Unit sales of apparel decreased 6%,while ASP per unit was flat, as strategic pricing actions and lower discounts were offset by changes in channel mix. • NIKE Brand wholesale revenues decreased 5% on a reported and currency-neutral basis. The decrease on a currency-neutral basis was driven by lower revenues in EMEA, North America, Greater China and APLA. • NIKE Direct revenues were $9.7 billion for the first six months of fiscal 2025, compared to $11.1 billion for the first six months of fiscal 2024. NIKE Brand Digital sales were $5.1 billion for the first six months of fiscal 2025 compared to $6.4 billion for the first six months of fiscal 2024. On a currency-neutral basis, NIKE Direct revenues decreased 13%, primarily due to NIKE Brand Digital sales declines of 20% and comparable store sales declines of 1% compared to the first six months of fiscal 2024. GROSS MARGIN THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE 2024 2023 % CHANGE Gross profit $ 5,389 $ 5,971 -10 % $ 10,646 $ 11,691 -9 % Gross margin 43.6 % 44.6 % (100) bps 44.5 % 44.4 % 10 bps 25 Table of Contents SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 For the second quarter of fiscal 2025, our consolidated gross margin was 100 basis points lower than the prior year due to: • Lower NIKE Brand ASP (decreasing gross margin approximately 330 basis points), primarily due to higher discounts, product mix and changes in channel mix, partially offset by benefits from strategic pricing actions; • Higher other costs (decreasing gross margin approximately 70 basis points), in part due to higher inventory obsolescence reserves; and • Lower gross margin from Converse (decreasing gross margin approximately 20 basis points). This was partially offset by: • Lower NIKE Brand product costs (increasing gross margin approximately 260 basis points), primarily due to product mix and lower product input costs; • Lower warehousing and logistics costs (increasing gross margin approximately 50 basis points); and • Favorable changes in foreign currency exchange rates, net of hedges (increasing gross margin approximately 20 basis points). FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 For the first six months of fiscal 2025, our consolidated gross margin was 10 basis points higher than the prior year due to: • Lower NIKE Brand product costs (increasing gross margin approximately 190 basis points), primarily due to product mix; and • Lower warehousing and logistics costs (increasing gross margin approximately 50 basis points). This was partially offset by: • Lower NIKE Brand ASP (decreasing gross margin approximately 150 basis points), primarily due to changes in channel mix, higher discounts and product mix, partially offset by benefits from strategic pricing actions; and • Higher other costs (decreasing gross margin approximately 60 basis points), in part due to higher inventory obsolescence reserves. TOTAL SELLING AND ADMINISTRATIVE EXPENSE THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE 2024 2023 % CHANGE Demand creation expense (1) $ 1,122 $ 1,114 1 % $ 2,348 $ 2,183 8 % Operating overhead expense (2) 2,883 3,032 -5 % 5,705 6,079 -6 % Total selling and administrative expense $ 4,005 $ 4,146 -3 % $ 8,053 $ 8,262 -3 % % of revenues 32.4 % 31.0 % 140 bps 33.6 % 31.4 % 220 bps (1) Demand creation expense consists of brand marketing expense, including advertising and promotion costs such as production and media costs, digital marketing expense, brand events and retail brand presentation costs, and sports marketing expense, including expenses related to endorsement contracts, complimentary product and sports marketing events. (2) Operating overhead expense consists primarily of wage and benefit-related expenses and other administrative expenses, such as research and development costs, bad debt expense, rent, depreciation and amortization and costs related to professional services, certain technology investments, meetings and travel. SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 Demand creation expense increased 1% primarily due to an increase in sports marketing expense offset by a decrease in brand marketing expense. Changes in foreign currency exchange rates did not have a material impact on Demand creation expense. Operating overhead expense decreased 5% due to lower wage-related expenses and lower other administrative costs. Changes in foreign currency exchange rates did not have a material impact on Operating overhead expense. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 Demand creation expense increased 8% primarily due to an increase in brand marketing expense, reflecting investment in key sports events. Changes in foreign currency exchange rates did not have a material impact on Demand creation expense. Operating overhead expense decreased 6% due to lower wage-related expenses and lower other administrative costs. Changes in foreign currency exchange rates did not have a material impact on Operating overhead expense. 26 Table of Contents OTHER (INCOME) EXPENSE, NET THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 2024 2023 Other (income) expense, net $ (8) $ (75) $ (63) $ (85) 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 outside the normal course of business. For the second quarter of fiscal 2025, Other (income) expense, net decreased from $75 million of other income, net, in the prior year to $8 million of other income, net, in the current year, primarily due to a net unfavorable change in foreign currency conversion gains and losses, including hedges. For the first six months of fiscal 2025, Other (income) expense, net decreased from $85 million of other income, net, in the prior year to $63 million of other income, net, in the current year, primarily due to a net unfavorable change in foreign currency conversion gains and losses, including hedges. 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 an unfavorable impact of $23 million and $35 million on our Income before income taxes for the second quarter and first six months of fiscal 2025, respectively. INCOME TAXES THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, 2024 2023 % CHANGE 2024 2023 % CHANGE Effective tax rate 17.9 % 17.9 % — bps 18.7 % 15.2 % 350 bps Our effective tax rate was 17.9% for the second quarter of fiscal 2025, compared to 17.9% for the second quarter of fiscal 2024. Our effective tax rate was 18.7% for the first six months of fiscal 2025, compared to 15.2% for the first six months of fiscal 2024, primarily due to one-time benefits in the first six months of fiscal 2024 provided by the delay of the effective date of certain U.S. foreign tax credit regulations and a reduction in accrued withholding taxes on undistributed foreign earnings. On December 10, 2024, the U.S. Department of Treasury published final regulations related to foreign currency gains and losses that are effective for us beginning June 1, 2025. These regulations require computation of a pre-transition foreign currency gain or loss to be included in the determination of future taxable income or loss. We are currently evaluating the regulations and expect to recognize a one-time, non-cash deferred tax benefit related to pre-transition foreign currency losses in the third quarter of fiscal 2025. We will continue to evaluate the impacts of these regulations on our financial statements and refine our estimates in subsequent periods. For additional information, refer to Note 4 — Income Taxes within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements. 27 Table of Contents OPERATING SEGMENTS As discussed in Note 10 — Operating Segments in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, our operating segments are evidence of the structure of the Company's internal organization. The NIKE Brand segments are defined by geographic regions for operations participating in NIKE Brand sales activity. The breakdown of Revenues is as follows: THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1) North America $ 5,179 $ 5,625 -8 % -8 % $ 10,005 $ 11,048 -9 % -9 % Europe, Middle East & Africa 3,303 3,567 -7 % -10 % 6,446 7,177 -10 % -11 % Greater China 1,711 1,863 -8 % -11 % 3,377 3,598 -6 % -7 % Asia Pacific & Latin America 1,744 1,805 -3 % -2 % 3,206 3,377 -5 % -2 % Global Brand Divisions (2) 13 12 8 % -2 % 27 25 8 % 9 % TOTAL NIKE BRAND 11,950 12,872 -7 % -8 % 23,061 25,225 -9 % -9 % Converse 429 519 -17 % -18 % 930 1,107 -16 % -16 % Corporate (3) (25) (3) — — (48) (5) — — TOTAL NIKE, INC. REVENUES $ 12,354 $ 13,388 -8 % -9 % $ 23,943 $ 26,327 -9 % -9 % (1) The percent change excluding currency changes represents a non-GAAP financial measure. For additional information, see "Use of Non-GAAP Financial Measures". (2) Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. (3) Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program. The primary financial measure used by the Company to evaluate performance of individual operating segments is EBIT. As discussed in Note 10 — Operating Segments in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments. The breakdown of EBIT is as follows: THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE 2024 2023 % CHANGE North America $ 1,371 $ 1,526 -10 % $ 2,587 $ 2,960 -13 % Europe, Middle East & Africa 831 927 -10 % 1,623 1,857 -13 % Greater China 375 514 -27 % 877 1,039 -16 % Asia Pacific & Latin America 460 521 -12 % 862 935 -8 % Global Brand Divisions (1,133) (1,168) 3 % (2,360) (2,373) 1 % TOTAL NIKE BRAND (1) 1,904 2,320 -18 % 3,589 4,418 -19 % Converse 53 115 -54 % 174 282 -38 % Corporate (565) (535) -6 % (1,107) (1,186) 7 % TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES (1) 1,392 1,900 -27 % 2,656 3,514 -24 % EBIT margin (1) 11.3 % 14.2 % 11.1 % 13.3 % Interest expense (income), net (24) (22) — (67) (56) — TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $ 1,416 $ 1,922 -26 % $ 2,723 $ 3,570 -24 % (1) Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT margin represent non-GAAP financial measures. For additional information, see "Use of Non-GAAP Financial Measures". 28 Table of Contents NORTH AMERICA THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES Revenues by: Footwear $ 3,236 $ 3,757 -14 % -14 % $ 6,448 $ 7,490 -14 % -14 % Apparel 1,693 1,668 1 % 1 % 3,024 3,147 -4 % -4 % Equipment 250 200 25 % 25 % 533 411 30 % 30 % TOTAL REVENUES $ 5,179 $ 5,625 -8 % -8 % $ 10,005 $ 11,048 -9 % -9 % Revenues by: Sales to Wholesale Customers $ 2,866 $ 2,902 -1 % -1 % $ 5,341 $ 5,674 -6 % -6 % Sales through NIKE Direct 2,313 2,723 -15 % -15 % 4,664 5,374 -13 % -13 % TOTAL REVENUES $ 5,179 $ 5,625 -8 % -8 % $ 10,005 $ 11,048 -9 % -9 % EARNINGS BEFORE INTEREST AND TAXES $ 1,371 $ 1,526 -10 % $ 2,587 $ 2,960 -13 % SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 • North America revenues decreased 8% on a currency-neutral basis, primarily due to lower revenues in the Jordan Brand and Women's, partially offset by higher revenues in Kids'. Wholesale revenues decreased 1%. NIKE Direct revenues decreased 15%, primarily due to digital sales declines of 22% and comparable store sales declines of 3%. • Footwear revenues decreased 14% on a currency-neutral basis. Unit sales of footwear decreased 6%, while lower ASP per pair reduced footwear revenues by approximately 8 percentage points. Lower ASP per pair was primarily due to higher discounts and changes in channel mix. • Apparel revenues increased 1% on a currency-neutral basis. Unit sales of apparel increased 11%, while lower ASP per unit reduced apparel revenues by approximately 10 percentage points. Lower ASP per unit was primarily due to changes in channel mix and higher discounts. Reported EBIT decreased 10% reflecting lower revenues and the following: • Gross margin was flat primarily due to lower ASP, reflecting product mix, changes in channel mix and higher discounts, as well as higher other costs, in part due to inventory obsolescence reserves. These were offset by lower product costs, reflecting product mix and lower product input costs, as well as lower warehousing and logistics costs. • Selling and administrative expense decrease of 5% driven by lower operating overhead expense and lower demand creation expense. The decrease in operating overhead expense was due to lower wage-related expenses and lower other administrative costs. The decrease in demand creation expense was due to lower brand marketing expense, partially offset by higher sports marketing expense. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 • North America revenues decreased 9% on a currency-neutral basis, primarily due to lower revenues in the Jordan Brand, Men's and Women's. Wholesale revenues decreased 6%. NIKE Direct revenues decreased 13%, primarily due to digital sales declines of 19% and comparable store sales declines of 1%. • Footwear revenues decreased 14% on a currency-neutral basis. Unit sales of footwear decreased 10%, while lower ASP per pair reduced footwear revenues by approximately 4 percentage points. Lower ASP per pair was primarily due to higher discounts and changes in channel mix, partially offset by strategic pricing actions. • Apparel revenues decreased 4% on a currency-neutral basis. Unit sales of apparel decreased 1%, while lower ASP per unit reduced apparel revenues by approximately 3 percentage points. Lower ASP per unit was primarily due to changes in channel mix and higher discounts, partially offset by strategic pricing actions. 29 Table of Contents Reported EBIT decreased 13% reflecting lower revenues and the following: • Gross margin expansion of 80 basis points primarily due to lower product costs, reflecting product mix and lower product input costs, as well as lower warehousing and logistics costs. This was partially offset by lower ASP, reflecting product mix, changes in channel mix and higher discounts, and higher other costs, in part due to higher inventory obsolescence reserves. • Selling and administrative expense was flat, as higher demand creation expense was offset by lower operating overhead expense. The increase in demand creation expense was primarily due to higher brand marketing expense, reflecting investment in key sports events. The decrease in operating overhead expense was due to lower wage-related expenses and lower other administrative costs. EUROPE, MIDDLE EAST & AFRICA THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES Revenues by: Footwear $ 1,982 $ 2,186 -9 % -12 % $ 3,934 $ 4,446 -12 % -12 % Apparel 1,136 1,200 -5 % -8 % 2,129 2,337 -9 % -10 % Equipment 185 181 2 % -1 % 383 394 -3 % -4 % TOTAL REVENUES $ 3,303 $ 3,567 -7 % -10 % $ 6,446 $ 7,177 -10 % -11 % Revenues by: Sales to Wholesale Customers $ 2,120 $ 2,138 -1 % -4 % $ 4,194 $ 4,517 -7 % -8 % Sales through NIKE Direct 1,183 1,429 -17 % -20 % 2,252 2,660 -15 % -17 % TOTAL REVENUES $ 3,303 $ 3,567 -7 % -10 % $ 6,446 $ 7,177 -10 % -11 % EARNINGS BEFORE INTEREST AND TAXES $ 831 $ 927 -10 % $ 1,623 $ 1,857 -13 % SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 • EMEA revenues decreased 10% on a currency-neutral basis due to lower revenues in Men's, the Jordan Brand, Women's and Kids'. Wholesale revenues decreased 4%. NIKE Direct revenues decreased 20%, due to digital sales declines of 32%, partially offset by comparable store sales growth of 2% and the addition of new stores. • Footwear revenues decreased 12% on a currency-neutral basis. Unit sales of footwear decreased 11%, while lower ASP per pair reduced footwear revenues by approximately 1 percentage point. Lower ASP per pair was primarily due to changes in channel mix and higher discounts, partially offset by strategic pricing actions. • Apparel revenues decreased 8% on a currency-neutral basis. Unit sales of apparel decreased 10%, while higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to strategic pricing actions and lower discounts, partially offset by changes in channel mix. Reported EBIT decreased 10% reflecting lower revenues and the following: • Gross margin expansion of 100 basis points primarily due to favorable changes in standard foreign currency exchange rates, as well as lower warehousing and logistics costs. This was partially offset by lower ASP, primarily due to changes in channel mix, partially offset by strategic pricing actions, and higher other costs, in part due to higher inventory obsolescence reserves. • Selling and administrative expense increase of 1% driven by higher demand creation expense, partially offset by lower operating overhead expense. The increase in demand creation expense was due to higher sports marketing expense and unfavorable changes in foreign currency exchange rates, partially offset by lower brand marketing expense. The decrease in operating overhead expense was due to lower wage-related expenses and lower other administrative costs, partially offset by unfavorable changes in foreign currency exchange rates. 30 Table of Contents FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 • EMEA revenues decreased 11% on a currency-neutral basis due to lower revenues in Men's, the Jordan Brand, Women's and Kids'. Wholesale revenues decreased 8%. NIKE Direct revenues decreased 17%, due to digital sales declines of 29%, partially offset by comparable store sales growth of 2% and the addition of new stores. • Footwear revenues decreased 12% on a currency-neutral basis. Unit sales of footwear decreased 12%, while ASP per pair was flat, as changes in channel mix and higher discounts were offset by strategic pricing actions. • Apparel revenues decreased 10% on a currency-neutral basis. Unit sales of apparel decreased 11%, while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth. Higher ASP per unit was primarily due to lower discounts and strategic pricing actions, partially offset by changes in channel mix. Reported EBIT decreased 13% reflecting lower revenues and the following: • Gross margin expansion of 140 basis points primarily due to lower product costs, reflecting lower ocean freight rates, as well as lower warehousing and logistics costs. This was partially offset by lower ASP, reflecting changes in channel mix, partially offset by strategic pricing actions. • Selling and administrative expense was flat, as lower operating overhead expense was offset by higher demand creation expense. The decrease in operating overhead expense was due to lower wage-related expenses and lower other administrative costs, partially offset by unfavorable changes in foreign currency exchange rates. The increase in demand creation expense was due to higher brand marketing expense, reflecting investment in key sports events, and unfavorable changes in foreign currency exchange rates, partially offset by lower sports marketing expense. GREATER CHINA THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES Revenues by: Footwear $ 1,203 $ 1,361 -12 % -14 % $ 2,449 $ 2,648 -8 % -8 % Apparel 472 469 1 % -3 % 832 870 -4 % -6 % Equipment 36 33 9 % 9 % 96 80 20 % 21 % TOTAL REVENUES $ 1,711 $ 1,863 -8 % -11 % $ 3,377 $ 3,598 -6 % -7 % Revenues by: Sales to Wholesale Customers $ 904 $ 1,027 -12 % -15 % $ 1,875 $ 1,922 -2 % -3 % Sales through NIKE Direct 807 836 -3 % -7 % 1,502 1,676 -10 % -11 % TOTAL REVENUES $ 1,711 $ 1,863 -8 % -11 % $ 3,377 $ 3,598 -6 % -7 % EARNINGS BEFORE INTEREST AND TAXES $ 375 $ 514 -27 % $ 877 $ 1,039 -16 % SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 • Greater China revenues decreased 11% on a currency-neutral basis primarily due to lower revenues in Men's, the Jordan Brand and Women's. Wholesale revenues decreased 15%. NIKE Direct revenues decreased 7% due to comparable store sales declines of 8%, declines in non-comparable store sales and digital sales declines of 4%. • Footwear revenues decreased 14% on a currency-neutral basis. Unit sales of footwear decreased 9%, while lower ASP per pair reduced footwear revenues by approximately 5 percentage points. Lower ASP per pair was primarily due to higher discounts, partially offset by strategic pricing actions. • Apparel revenues decreased 3% on a currency-neutral basis. Unit sales of apparel decreased 7%, while higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to strategic pricing actions. 31 Table of Contents Reported EBIT decreased 27% reflecting lower revenues and the following: • Gross margin contraction of approximately 490 basis points, primarily due to unfavorable changes in standard foreign currency exchange rates, lower ASP, reflecting higher discounts and product mix, partially offset by strategic pricing actions, and higher other costs, primarily due to higher inventory obsolescence reserves. This was partially offset by lower product costs, primarily due to product mix. • Selling and administrative expense decrease of 6% due to lower operating overhead expense and lower demand creation expense. Operating overhead expense decreased primarily due to lower other administrative costs, partially offset by unfavorable changes in foreign currency exchange rates. Demand creation expense decreased primarily due to lower brand marketing expense, partially offset by unfavorable changes in foreign currency exchange rates. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 • Greater China revenues decreased 7% on a currency-neutral basis primarily due to lower revenues in the Jordan Brand, Men's and Women's. Wholesale revenues decreased 3%. NIKE Direct revenues decreased 11% due to digital sales declines of 19% and comparable store sales declines of 8%. • Footwear revenues decreased 8% on a currency-neutral basis. Unit sales of footwear decreased 5%, while lower ASP per pair reduced footwear revenues by approximately 3 percentage points. Lower ASP per pair was primarily due to higher discounts and changes in channel mix, partially offset by strategic pricing actions. • Apparel revenues decreased 6% on a currency-neutral basis. Unit sales of apparel decreased 12%, while higher ASP per unit contributed approximately 6 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to strategic pricing actions. Reported EBIT decreased 16% reflecting lower revenues and the following: • Gross margin contraction of approximately 330 basis points, primarily due to unfavorable changes in standard foreign currency exchange rates and higher other costs, primarily due to higher inventory obsolescence reserves. • Selling and administrative expense decrease of 5% due to lower operating overhead expense and lower demand creation expense. Operating overhead expense decreased primarily due to lower other administrative costs, partially offset by unfavorable changes in foreign currency exchange rates. Demand creation expense decreased primarily due to lower brand marketing expense, partially offset by unfavorable changes in foreign currency exchange rates. ASIA PACIFIC & LATIN AMERICA THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES Revenues by: Footwear $ 1,234 $ 1,303 -5 % -4 % $ 2,286 $ 2,444 -6 % -3 % Apparel 437 437 0 % 0 % 785 808 -3 % -1 % Equipment 73 65 12 % 10 % 135 125 8 % 10 % TOTAL REVENUES $ 1,744 $ 1,805 -3 % -2 % $ 3,206 $ 3,377 -5 % -2 % Revenues by: Sales to Wholesale Customers $ 1,030 $ 1,051 -2 % -1 % $ 1,920 $ 1,988 -3 % -1 % Sales through NIKE Direct 714 754 -5 % -4 % 1,286 1,389 -7 % -4 % TOTAL REVENUES $ 1,744 $ 1,805 -3 % -2 % $ 3,206 $ 3,377 -5 % -2 % EARNINGS BEFORE INTEREST AND TAXES $ 460 $ 521 -12 % $ 862 $ 935 -8 % 32 Table of Contents SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 • APLA revenues decreased 2% on a currency-neutral basis due to lower revenues in Korea, Central and South America ("CASA") and Southeast Asia and India. APLA revenues decreased primarily due to lower revenues in Men's and the Jordan Brand. Wholesale revenues decreased 1%. NIKE Direct revenues decreased 4% due to digital sales declines of 8%, partially offset by the addition of new stores. Comparable store sales were flat. • Footwear revenues decreased 4% on a currency-neutral basis. Unit sales of footwear decreased 2%, while lower ASP per pair reduced footwear revenues by approximately 2 percentage points. Lower ASP per pair was primarily due to higher discounts and changes in channel mix. • Apparel revenues were flat on a currency-neutral basis. Unit sales of apparel decreased 3%, while higher ASP per unit contributed approximately 3 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to strategic pricing actions and lower discounts, partially offset by changes in channel mix. Reported EBIT decreased 12% reflecting lower revenues and the following: • Gross margin contraction of approximately 120 basis points primarily due to lower ASP, reflecting changes in channel mix and higher discounts, partially offset by strategic pricing actions, and higher warehousing and logistics costs. • Selling and administrative expense increase of 4% due to higher operating overhead expense and higher demand creation expense. Operating overhead expense increased primarily due to higher wage-related expenses and higher other administrative costs. Demand creation expense increased primarily due to higher brand marketing expense and higher sports marketing expense. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 • APLA revenues decreased 2% on a currency-neutral basis due to lower revenues in Korea and CASA, partially offset by higher revenues in Mexico. APLA revenues decreased primarily due to lower revenues in Men's and the Jordan Brand. Wholesale revenues decreased 1%. NIKE Direct revenues decreased 4% due to digital sales declines of 11%, partially offset by comparable store sales growth of 4% and the addition of new stores. • Footwear revenues decreased 3% on a currency-neutral basis. Unit sales of footwear decreased 3%, while ASP per pair was flat, as higher discounts and changes in channel mix were offset by strategic pricing actions. • Apparel revenues decreased 1% on a currency-neutral basis. Unit sales of apparel decreased 5%, while higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to strategic pricing actions. Reported EBIT decreased 8% reflecting lower revenues and the following: • Gross margin contraction of approximately 60 basis points primarily due to higher warehousing and logistics costs. This was partially offset by higher ASP, primarily due to strategic pricing actions, partially offset by higher discounts and changes in channel mix. • Selling and administrative expense decrease of 4% primarily due to lower demand creation expense. Demand creation expense decreased primarily due to lower brand marketing expense and lower sports marketing expense. Operating overhead expense was flat as favorable changes in foreign currency exchange rates were offset by higher wage-related expenses and higher other administrative costs. GLOBAL BRAND DIVISIONS THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES Revenues $ 13 $ 12 8 % -2 % $ 27 $ 25 8 % 9 % Earnings (Loss) Before Interest and Taxes $ (1,133) $ (1,168) 3 % $ (2,360) $ (2,373) 1 % Global Brand Divisions primarily represent demand creation and operating overhead expense, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. 33 Table of Contents SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 Global Brand Divisions' loss before interest and taxes decreased 3% due to lower operating overhead expense, partially offset by higher demand creation expense. The decrease in operating overhead expense was due to lower wage-related expenses and lower other administrative costs. Higher demand creation expense was due to increased sports marketing expense and brand marketing expense. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 Global Brand Divisions' loss before interest and taxes decreased 1% due to lower operating overhead expense, partially offset by higher demand creation expense. The decrease in operating overhead expense was primarily due to lower wage-related expenses. Higher demand creation expense was due to increased brand marketing expense and sports marketing expense. CONVERSE THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2024 2023 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES Revenues by: Footwear $ 364 $ 442 -18 % -18 % $ 800 $ 964 -17 % -17 % Apparel 26 30 -13 % -17 % 43 50 -14 % -16 % Equipment 6 7 -14 % -29 % 18 18 0 % 1 % Other (1) 33 40 -18 % -18 % 69 75 -8 % -7 % TOTAL REVENUES $ 429 $ 519 -17 % -18 % $ 930 $ 1,107 -16 % -16 % Revenues by: Sales to Wholesale Customers $ 212 $ 257 -18 % -18 % $ 488 $ 586 -17 % -17 % Sales through Direct to Consumer 184 222 -17 % -18 % 373 446 -16 % -17 % Other (1) 33 40 -18 % -18 % 69 75 -8 % -7 % TOTAL REVENUES $ 429 $ 519 -17 % -18 % $ 930 $ 1,107 -16 % -16 % EARNINGS BEFORE INTEREST AND TAXES $ 53 $ 115 -54 % $ 174 $ 282 -38 % (1) Other revenues consist of territories serviced by third-party licensees who pay royalties to Converse for the use of its registered trademarks and other intellectual property rights. SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 • Converse revenues decreased 18% on a currency-neutral basis driven by revenue declines in all territories. Unit sales decreased 12%, while ASP decreased 6% reflecting higher discounts in direct to consumer. • Wholesale revenues decreased 18% on a currency-neutral basis, as declines in Asia and Western Europe were partially offset by growth in North America. • Direct to consumer revenues decreased 18% on a currency-neutral basis due to reduced traffic in all territories and lower ASP due to higher discounts. Reported EBIT decreased 54% reflecting lower revenues and the following: • Gross margin contraction of approximately 380 basis points primarily due to lower ASP, higher logistics costs and higher other costs, primarily due to inventory obsolescence reserves. This was partially offset by lower product costs. • Selling and administrative expense decrease of 1% primarily due to lower operating overhead expense, partially offset by higher demand creation expense. Operating overhead expense decreased primarily due to lower other administrative costs. Demand creation expense increased due to higher brand marketing expense. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 • Converse revenues decreased 16% on a currency-neutral basis driven by revenue declines in all territories. Unit sales decreased 13%, while ASP decreased 3% reflecting higher discounts in direct to consumer. • Wholesale revenues decreased 17% on a currency-neutral basis, as declines in Asia and Western Europe were partially offset by growth in North America. • Direct to consumer revenues decreased 17% on a currency-neutral basis due to reduced traffic in all territories and lower ASP due to higher discounts. 34 Reported EBIT decreased 38% reflecting lower revenues and the following: • Gross margin contraction of approximately 200 basis points primarily due to lower ASP, higher logistics costs and unfavorable changes in standard foreign currency exchange rates, partially offset by lower product costs and growth in licensee revenues. • Selling and administrative expense decrease of 2% primarily due to lower operating overhead expense, partially offset by higher demand creation expense. Operating overhead expense decreased primarily due to lower wage-related expenses and lower other administrative costs. Demand creation expense increased due to higher brand marketing expense. CORPORATE THREE MONTHS ENDED NOVEMBER 30, SIX MONTHS ENDED NOVEMBER 30, (Dollars in millions) 2024 2023 % CHANGE 2024 2023 % CHANGE Revenues $ (25) $ (3) — $ (48) $ (5) — Earnings (Loss) Before Interest and Taxes $ (565) $ (535) -6 % $ (1,107) $ (1,186) 7 % Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program. The Corporate loss before interest and taxes primarily consists of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to our corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses. In addition to the foreign currency gains and losses recognized in Corporate revenues, foreign currency results in Corporate include gains and losses resulting from the difference between actual foreign currency exchange rates and standard rates used to record non-functional currency denominated product purchases within the NIKE Brand geographic operating segments and Converse; related foreign currency hedge results; conversion gains and losses arising from remeasurement of monetary assets and liabilities in non-functional currencies; and certain other foreign currency derivative instruments. SECOND QUARTER OF FISCAL 2025 COMPARED TO SECOND QUARTER OF FISCAL 2024 Corporate's loss before interest and taxes increased $30 million for the second quarter of fiscal 2025, primarily due to the following: • an unfavorable change of $61 million primarily 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 $47 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, reported as a component of consolidated gross margin; and • a favorable change of $69 million primarily related to lower wage-related expenses and lower other administrative costs, reported as a component of consolidated Operating overhead expense. FIRST SIX MONTHS OF FISCAL 2025 COMPARED TO FIRST SIX MONTHS OF FISCAL 2024 Corporate's loss before interest and taxes decreased $79 million for the first six months of fiscal 2025, primarily due to the following: • a favorable change of $130 million primarily related to lower wage-related expenses and lower other administrative costs, reported as a component of consolidated Operating overhead expense; • an unfavorable change of $33 million primarily 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; and • an unfavorable change of $29 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, reported as a component of consolidated gross margin. 35 Table of Contents FOREIGN CURRENCY EXPOSURES AND HEDGING PRACTICES OVERVIEW As a global company with significant operations outside the United States, in the normal course of business we are exposed to risk arising from changes in currency exchange rates. Our primary foreign currency exposures arise from the recording of transactions denominated in non-functional currencies and the translation of foreign currency denominated results of operations, financial position and cash flows into U.S. Dollars. Our foreign exchange risk management program is intended to lessen both the positive and negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows. We manage global foreign exchange risk centrally on a portfolio basis to address those risks material to NIKE, Inc. Our hedging policy is designed to partially or entirely offset the impact of exchange rate changes on the underlying net exposures being hedged. Where exposures are hedged, our program has the effect of delaying the impact of exchange rate movements on our Unaudited Condensed Consolidated Financial Statements; the length of the delay is dependent upon hedge horizons. We do not hold or issue derivative instruments for trading or speculative purposes. As of and for the three and six months ended November 30, 2024, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K for the fiscal year ended May 31, 2024 (the "Annual Report"). Refer to Note 3 — Fair Value Measurements and Note 7 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end. For additional information about our Foreign Currency Exposures and Hedging Practices, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within the Annual Report. TRANSACTIONAL EXPOSURES We conduct business in various currencies and have transactions which subject us to foreign currency risk. Our most significant transactional foreign currency exposures are: • Product Costs — Product purchases denominated in currencies other than the functional currency of the transacting entity and factory input costs from the foreign currency adjustments program with certain factories. • Non-Functional Currency Denominated External Sales — A portion of our NIKE Brand and Converse revenues associated with European operations are earned in currencies other than the Euro (e.g., the British Pound) but are recognized at a subsidiary that uses the Euro as its functional currency. These sales generate a foreign currency exposure. • Other Costs — Non-functional currency denominated costs, such as endorsement contracts, also generate foreign currency risk, though to a lesser extent. • Non-Functional Currency Denominated Monetary Assets and Liabilities — Our global subsidiaries have various monetary assets and liabilities, primarily receivables and payables, including intercompany receivables and payables, denominated in currencies other than their functional currencies. These balance sheet items are subject to remeasurement which may create fluctuations in Other (income) expense, net within our Unaudited Condensed Consolidated Statements of Income. MANAGING TRANSACTIONAL EXPOSURES Transactional exposures are managed on a portfolio basis within our foreign currency risk management program. We manage these exposures by taking advantage of natural offsets and currency correlations that exist within the portfolio and may also elect to use currency forward and option contracts to hedge the remaining effect of exchange rate fluctuations on probable forecasted future cash flows, including certain product cost exposures, non-functional currency denominated external sales and other costs described above. Generally, these are accounted for as cash flow hedges. Certain currency forward contracts used to manage the foreign exchange exposure of non-functional currency denominated monetary assets and liabilities subject to remeasurement are not formally designated as hedging instruments. Accordingly, changes in fair value of these instruments are recognized in Other (income) expense, net within our Unaudited Condensed Consolidated Statements of Income and are intended to offset the foreign currency impact of the remeasurement of the related non-functional currency denominated asset or liability being hedged. 36 Table of Contents TRANSLATIONAL EXPOSURES Many of our foreign subsidiaries operate in functional currencies other than the U.S. Dollar. Fluctuations in currency exchange rates create volatility in our reported results as we are required to translate the balance sheets, operational results and cash flows of these subsidiaries into U.S. Dollars for consolidated reporting. The translation of foreign subsidiaries' non-U.S. Dollar denominated balance sheets into U.S. Dollars for consolidated reporting results in a cumulative translation adjustment to Accumulated other comprehensive income (loss) within Shareholders' equity. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a benefit of approximately $127 million and a detriment of approximately $32 million for the three and six months ended November 30, 2024, respectively. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a benefit of approximately $37 million and a detriment of approximately $3 million for the three and six months ended November 30, 2024, respectively. MANAGING TRANSLATIONAL EXPOSURES To minimize the impact of translating foreign currency denominated revenues and expenses into U.S. Dollars for consolidated reporting, certain foreign subsidiaries use excess cash to purchase U.S. Dollar denominated available-for-sale investments. The variable future cash flows associated with the purchase and subsequent sale of these U.S. Dollar denominated investments at non-U.S. Dollar functional currency subsidiaries creates a foreign currency exposure that qualifies for hedge accounting under U.S. GAAP. We utilize forward contracts and/or options to mitigate the variability of the forecasted future purchases and sales of these U.S. Dollar investments. The combination of the purchase and sale of the U.S. Dollar investment and the hedging instrument has the effect of partially offsetting the year-over-year foreign currency translation impact on net earnings in the period the investments are sold. Hedges of the purchase of U.S. Dollar denominated available-for-sale investments are accounted for as cash flow hedges. We estimate the combination of translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in Other (income) expense, net had an unfavorable impact of approximately $23 million and $35 million on our Income before income taxes for the three and six months ended November 30, 2024, respectively. LIQUIDITY AND CAPITAL RESOURCES CASH FLOW ACTIVITY Cash provided (used) by operations was an inflow of $1,443 million for the first six months of fiscal 2025 compared to an inflow of $2,751 million for the first six months of fiscal 2024. Net income, adjusted for non-cash items, generated $2,824 million of operating cash inflow for the first six months of fiscal 2025, compared to $3,613 million for the first six months of fiscal 2024. The net change in certain working capital components and other assets and liabilities resulted in a decrease to cash provided by operations of $1,381 million for the first six months of fiscal 2025 compared to a decrease of $862 million for the first six months of fiscal 2024. This net change was primarily impacted by unfavorable changes to Inventories due to lower sales in the current period and reduced inventory purchases in the prior year. Cash provided (used) by investing activities was an outflow of $240 million for the first six months of fiscal 2025, compared to an inflow of $875 million for the first six months of fiscal 2024, primarily driven by the net change in short-term investments (including sales, maturities and purchases). For the first six months of fiscal 2025, the net change in short-term investments resulted in a cash outflow of $1 million compared to a cash inflow of $1,343 million for the first six months of fiscal 2024, primarily reflecting higher maturities in the prior period. Cash provided (used) by financing activities was an outflow of $3,070 million for the first six months of fiscal 2025 compared to an outflow $3,151 million for the first six months of fiscal 2024. The decreased outflow was primarily due to lower share repurchases of $2,280 million in the first six months of fiscal 2025 compared to $2,331 million in the first six months of fiscal 2024, offset by higher dividend payments of $1,115 million in the first six months of fiscal 2025 compared to $1,047 million in the first six months of fiscal 2024. During the first six months of fiscal 2025, we repurchased a total of 27.9 million shares of NIKE's Class B Common Stock for $2,254 million (an average price of $80.83 per share) under the four-year, $18 billion share repurchase plan authorized by the Board of Directors in June 2022. As of November 30, 2024, we have repurchased 112.8 million shares at a cost of approximately $11.3 billion (an average price of $100.26 per share) under this $18 billion share repurchase program. We continue to expect funding of share repurchases will come from operating cash flows, excess cash and/or proceeds from debt. The timing and the amount of share repurchases will be dictated by our capital needs and stock market conditions. 37 Table of Contents CAPITAL RESOURCES On July 21, 2022, we filed a shelf registration statement (the "Shelf") with the U.S. Securities and Exchange Commission (the "SEC") which permits us to issue an unlimited amount of debt securities from time to time. The Shelf expires on July 21, 2025. As of November 30, 2024, our committed credit facilities were unchanged from the information previously reported within the Annual Report. 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, 2024, 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, 2024 and May 31, 2024, no amounts were outstanding under our committed credit facilities. Liquidity is also provided by our $3 billion commercial paper program. As of and for the three months ended November 30, 2024, 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. To date, in fiscal 2025, we have not experienced difficulty accessing the capital or credit 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 November 30, 2024, we had Cash and equivalents and Short-term investments totaling $9.8 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S. Treasury obligations and other investment grade fixed-income securities. Our fixed-income investments are exposed to both credit and interest rate risk. All of our investments are investment grade to minimize our credit risk. While individual securities have varying durations, as of November 30, 2024, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 99 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. CONTRACTUAL OBLIGATIONS As a result of renewals of, and additions to, outstanding endorsement contracts, including associated marketing commitments, cash payments due under these contracts have increased from what was reported within our Annual Report. Obligations under these endorsement contracts as of November 30, 2024, and significant contracts entered into through the date of this report, were $15.9 billion, with $1.9 billion payable within 12 months. Other than the changes reported above, there have been no significant changes to the material cash requirements reported within our Annual Report. OFF-BALANCE SHEET ARRANGEMENTS As of November 30, 2024, 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. 38 Table of Contents NEW ACCOUNTING PRONOUNCEMENTS Refer to Note 1 — Summary of Significant Accounting Policies within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for recently adopted and issued accounting standards. CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We believe the assumptions and judgments involved in the accounting estimates described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section within the Annual Report have the greatest potential impact on our financial statements, so we consider these to be our critical accounting estimates. Actual results could differ from these estimates. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. 39 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes from the information previously reported under Part II, Item 7A within our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.