NIKE, Inc. — Fiscal 2027 First Quarter Earnings Summary

Financial Performance

• Total revenues were $11.2 billion, a 4% decrease on a reported basis and a 5% decrease on a currency-neutral basis compared to the prior year period.
• Gross margin expanded 60 basis points to 42.8%, driven primarily by lower warehousing and logistics costs.
• Selling and administrative expense decreased 3% to $3.9 billion.
• Demand creation expense increased 5% to $1.3 billion due to higher brand marketing investment.
• Operating overhead expense decreased 6% to $2.7 billion, driven by lower wage-related and administrative costs.
• Net income was $0.7 billion, down 2% year-over-year.
• Diluted earnings per share was $0.48, down from $0.49 in the prior year period.
• The effective tax rate was 22.7%, compared to 21.1% in the prior year period, primarily due to foreign tax audit settlements.
• Inventories were $7.8 billion, down 3% from the prior year.
• Cash and equivalents combined with short-term investments were $8.4 billion, down approximately $0.2 billion.
• Long-term debt decreased 26% to $5.9 billion, while the current portion of long-term debt increased to $2.0 billion.

Guidance and Future Outlook

• Revenues for fiscal 2027 are expected to decline in the high-single digits.
• The effective tax rate for fiscal 2027 is expected to be in the mid-20 percent range.
• Adjusted diluted earnings per share for fiscal 2027 is expected to be between $1.15 and $1.35, excluding approximately $0.15 of restructuring expenses related to the Pace program.
• The Pace operating model transformation is expected to deliver approximately $2.5 billion in cumulative savings through fiscal 2031.
• Pace is expected to incur approximately $1.0 billion in pre-tax charges through fiscal 2031, primarily consisting of employee-related costs.
• Approximately $0.3 billion of severance costs related to Pace were recognized in fiscal 2026, with another $0.3 billion expected to be recognized in fiscal 2027.

Business Segments and Product Lines

• NIKE Brand revenues were $11.0 billion, down 4% on a reported and currency-neutral basis.
• NIKE Brand wholesale revenues were $6.8 billion, down 1% on a reported and currency-neutral basis.
• NIKE Direct revenues were $4.1 billion, down 8% on a reported basis and 9% on a currency-neutral basis.
• NIKE Brand Digital revenues decreased 13%, and NIKE-owned store revenues decreased 5%.
• Converse revenues were $263 million, down 28% on a reported and currency-neutral basis due to declines across all territories.
• North America revenues grew 2% (currency-neutral), driven by footwear growth of 1% and apparel growth of 6%.
• Europe, Middle East & Africa (EMEA) revenues declined 5% (currency-neutral), with footwear down 11% and apparel up 5%.
• Greater China revenues declined 22% (currency-neutral), with footwear down 22% and apparel down 23%.
• Asia Pacific & Latin America revenues declined 2% (reported) but were flat on a currency-neutral basis.
• The company is taking actions to reposition NIKE Sportswear, Jordan Brand, and Greater China.

Market and Competitive Landscape

• The "Sport Offense" strategy is driving measurable progress across the performance business.
• Management identified the need for deliberate actions to strengthen NIKE Sportswear, Jordan Brand, and Greater China for the long term.
• The company is modernizing its global supply chain and establishing a new campus in India to fuel enterprise capabilities.
• The organization is being realigned to three geographies to streamline operations.

Risks and Challenges

• Risks include the possibility that anticipated cost savings may not be realized in the amounts or timeframes expected.
• Estimates for charges and cash expenditures are preliminary and subject to change as estimates are refined.
• Implementation of the Pace program could face delays due to local law requirements in various jurisdictions.
• Execution of the program could cause potential disruptions to business, operations, or the workforce.
• Actual savings, charges, and cash expenditures may differ materially from estimates due to assumptions including local law requirements.

Management Commentary and Tone

• Elliott Hill, President and CEO, stated that the Sport Offense is driving measurable progress and that the new Pace program will help accelerate and scale this momentum.
• Hill acknowledged there is more work to do in NIKE Sportswear, Jordan Brand, and Greater China.
• Dave Denton, Executive Vice President and CFO, noted results were consistent with expectations, supported by improved gross margin and disciplined cost management.
• Management emphasized a focus on strengthening the product portfolio, improving enterprise productivity, and allocating resources with discipline to support long-term shareholder value.

Other Key Points

• NIKE announced "Pace," an operating model transformation program to scale the success of the Sport Offense, building upon the March 2026 cost realignment plan.
• The company returned approximately $610 million to shareholders through dividends in the first quarter, an increase of 3% from the prior year.
• Dividends declared per common share were $0.410, up from $0.400 in the prior year period.
• A conference call to review results was scheduled for October 1, 2026, at 2:00 p.m. PT.