NIKE, Inc. Form 10-Q Summary
Business context and period: NIKE designs, markets and sells athletic footwear, apparel, equipment and accessories globally through wholesale and NIKE Direct. This unaudited filing covers the three months ended August 31, 2026, the first quarter of fiscal 2027; results may not indicate full-year performance.
Financial performance
| Metric | Q1 FY2027 | Q1 FY2026 | Change |
|---|---|---|---|
| Revenue | $11.213 billion | $11.720 billion | -4% reported; -5% currency-neutral |
| Gross profit / margin | $4.798 billion / 42.8% | $4.943 billion / 42.2% | Profit -3%; margin +60 bps |
| Selling and administrative expense | $3.910 billion | $4.016 billion | -3%; 34.9% of revenue vs. 34.3% |
| Operating income (EBIT) | $907 million | $904 million | EBIT margin 8.1% vs. 7.7% |
| Net income / diluted EPS | $712 million / $0.48 | $727 million / $0.49 | Net income -2% |
| Cash from operations | $135 million | $222 million | Lower year over year |
- Gross-margin improvement primarily reflected lower warehousing and logistics costs, partly offset by higher other costs and lower NIKE Brand average selling prices, including discounting and channel mix.
- Revenue trends varied: North America +2%; EMEA -5%; Greater China -26%; Asia Pacific & Latin America flat; Converse -28%, all on a currency-neutral basis. NIKE Direct revenue fell 9% currency-neutral, while wholesale declined 1%.
- Footwear revenue declined 6% currency-neutral; apparel increased 2%. Demand creation expense rose 5%, while operating overhead fell 6%.
Liquidity, debt and capital allocation
- Cash and equivalents were $6.903 billion and short-term investments $1.465 billion at August 31, 2026, totaling $8.368 billion. Cash declined $660 million during the quarter.
- Long-term debt was $5.893 billion, plus $2.000 billion current debt. No borrowings were outstanding under committed credit facilities or the $3 billion commercial paper program. NIKE reported compliance with facility covenants and said liquidity should cover needs for the next 12 months and beyond.
- Operating cash flow was $135 million; investing cash outflow was $192 million, including $199 million of capital expenditures; financing cash outflow was $618 million, primarily dividends. Shareholder dividends paid were $610 million.
- Inventory rose 5% from May 31 to $7.846 billion, primarily reflecting product-mix shifts. Accounts payable included approximately $1.1 billion of obligations under supplier finance programs.
- The $18 billion share-repurchase authorization remains in effect without a fixed expiration date; no shares were repurchased in the quarter. Cumulative repurchases under the program were approximately $12.1 billion.
Outlook, management commentary and risks
- Management described ongoing actions to rebalance footwear inventory and product mix, reposition NIKE Brand Digital toward full-price sales, reinvest in wholesale and physical retail, and increase marketing around key sports. These actions, markdowns and marketplace pressures are expected to continue weighing on revenue and profitability; additional Sportswear and Jordan actions extend beyond fiscal 2027.
- Greater China faces declining store traffic, elevated promotions and high marketplace inventory. Converse is undergoing a strategic reset expected to continue through fiscal 2027.
- In October 2026, NIKE announced the multi-year Pace program, including supply-chain and organizational changes and a planned three-geography structure in fiscal 2028. It expects about $1.0 billion of additional pre-tax charges, approximately $0.3 billion in fiscal 2027 and the remainder through fiscal 2031, and estimates about $2.5 billion of cumulative savings through fiscal 2031 before charges and reinvestment. Estimates may change; most charges are expected to involve future cash expenditures.
- Risks highlighted include geopolitical and tariff uncertainty, foreign-exchange volatility, changing consumer demand, competitive and marketplace pressure, and execution risks around restructuring. NIKE also disclosed a disputed Belgian customs claim for which it cannot estimate a loss range; an adverse outcome could be material. The filing reports ongoing U.S. tax audits and a European Commission investigation regarding Dutch tax rulings.
- The effective tax rate rose to 22.7% from 21.1%, primarily due to foreign tax audit settlements. Management said there were no material changes to the risk factors disclosed in its latest Form 10-K.
Important facts for investors to verify
- Whether revenue and Direct-channel declines stabilize, particularly in Greater China, EMEA and Converse, and whether NIKE can reduce discounting without further sales pressure.
- Inventory quality and sell-through, and the impact of product-mix shifts and markdowns on future margins and cash flow.
- Execution, timing, cash costs and realized savings from Pace; the estimates are forward-looking and subject to change.
- Developments in the Belgian customs matter, U.S. tax audits and the Dutch State Aid investigation.
- Working-capital movements and the sustainability of operating cash generation relative to dividends, capital spending and potential future repurchases.