NKE US Equity☆

ITEM 7. 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 NIKE Direct operations, which is comprised of both NIKE-owned retail stores and sales through our digital platforms (also referred to as "NIKE Brand Digital"), to wholesale accounts and to 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 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.

Through the Consumer Direct Acceleration strategy, we are focused on creating the marketplace of the future with more premium, consistent and seamless consumer experiences, leading with digital and our owned stores, as well as select wholesale partners. In addition, our product creation and marketing organizations are aligned to a consumer construct focused on sports dimensions through Men's, Women's and Kids', which allows us to better serve consumer needs. We continue to invest in a new Enterprise Resource Planning Platform, data and analytics, demand sensing, insight gathering, and other areas to create an end-to-end technology foundation, which we believe will further accelerate our digital transformation. We believe this unified approach will accelerate growth and unlock more efficiency for our business, while driving speed and responsiveness as we serve consumers globally.

FINANCIAL HIGHLIGHTS

•In fiscal 2023, NIKE, Inc. achieved record Revenues of $51.2 billion, which increased 10% and 16% on a reported and currency-neutral basis, respectively

•NIKE Direct revenues grew 14% from $18.7 billion in fiscal 2022 to $21.3 billion in fiscal 2023, and represented approximately 44% of total NIKE Brand revenues for fiscal 2023

•Gross margin for the fiscal year decreased 250 basis points to 43.5% primarily driven by higher product costs, higher markdowns and unfavorable changes in foreign currency exchange rates, partially offset by strategic pricing actions

•Inventories as of May 31, 2023 were $8.5 billion, flat compared to the prior year, driven by the actions we took throughout fiscal 2023 to manage inventory levels

•We returned $7.5 billion to our shareholders in fiscal 2023 through share repurchases and dividends

•Return on Invested Capital ("ROIC") as of May 31, 2023 was 31.5% compared to 46.5% as of May 31, 2022. ROIC is considered a non-GAAP financial measure, see "Use of Non-GAAP Financial Measures" for further information.

For discussion related to the results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2022 Form 10-K, which was filed with the United States Securities and Exchange Commission on July 21, 2022.

CURRENT ECONOMIC CONDITIONS AND MARKET DYNAMICS

•Consumer Spending:Our fiscal 2023 growth in Revenues reflects strong demand for our products despite ongoing uncertainty in the global economy. We will continue to closely monitor macroeconomic conditions, including potential impacts of inflation and rising interest rates on consumer behavior.

•Inflationary Pressures:Inflationary pressures, including higher product input, freight and logistics costs negatively impacted gross margin for fiscal 2023. The strategic pricing actions we have taken partially offset the impacts of these higher costs.

•Supply Chain Volatility:Supply chain challenges, macroeconomic conditions and the impact of the COVID-19 pandemic on the manufacturing of our product disrupted the flow of seasonal product in fiscal 2022 and the first quarter of fiscal 2023, resulting in elevated inventory levels at the end of the first quarter of fiscal 2023. Throughout fiscal 2023, we took action to reduce excess inventory by decreasing future inventory purchases and increasing promotional activity. These actions, along with the stabilization of inventory transit times in the second and third quarters of fiscal 2023, resulted in the normalization of the seasonal flow of product in the fourth quarter of fiscal 2023.

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•COVID-19 Impacts in Greater China:During the first and second quarters of fiscal 2023, we managed through continued temporary store closures and reduced retail traffic in Greater China, primarily due to COVID-19 related local government restrictions. At the beginning of the third quarter of fiscal 2023, the government mandated restrictions were lifted and we experienced improvement in physical retail traffic.

•Foreign Currency Impacts: As a global company with significant operations outside the United States, we are exposed to risk arising from foreign currency exchange rates. For fiscal 2023, fluctuations in foreign currency exchange rates negatively impacted our reported Revenues by approximately $2,859 million, reducing our revenue growth rate to 10% on a reported basis from 16% on a currency-neutral basis. Foreign currency impacts, net of hedges, also reduced our reported Income before income taxes by approximately $1,023 million. For further information, refer to "Foreign Currency Exposures and Hedging Practices".

The operating environment could remain volatile in fiscal 2024 as the risk exists that worsening macroeconomic conditions could have a material adverse impact on our future revenue growth as well as overall profitability. For more information refer to Item 1A Risk Factors, within Part I, Item 1. Business.

RECENT DEVELOPMENTS

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

Throughout this Annual Report on Form 10-K, 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 Consolidated Statements of Income. Total NIKE, Inc. EBIT for fiscal 2023 and fiscal 2022 is as follows:

YEAR ENDED MAY 31,

Add: Interest expense (income), net (6) 205

Earnings before interest and taxes $ 6,195 $ 6,856

EBIT Margin: Calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. Our EBIT Margin calculation for fiscal 2023 and fiscal 2022 is as follows:

YEAR ENDED MAY 31,

Numerator

Earnings before interest and taxes $ 6,195 $ 6,856

Denominator

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Return on Invested Capital ("ROIC"): Represents a performance measure that management believes is useful information in understanding the Company's ability to effectively manage invested capital. Our ROIC calculation as of May 31, 2023 and 2022 is as follows:

FOR THE TRAILING FOUR QUARTERS ENDED

Numerator

Add: Interest expense (income), net (6) 205

Earnings before interest and taxes 6,195 6,856

Earnings before interest and after taxes $ 5,065 $ 6,232

AVERAGE FOR THE TRAILING FIVE QUARTERS ENDED

Denominator

Less: Cash and equivalents and Short-term investments 11,394 13,748

RETURN ON INVESTED CAPITAL 31.5% 46.5%

(1)Equals Earnings before interest and taxes multiplied by the effective tax rate as of the respective quarter end.

(2)Total debt includes the following: 1) Current portion of long-term debt, 2) Notes Payable, 3) Current portion of operating lease liabilities, 4) Long-term debt and 5) Operating lease liabilities.

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.

Wholesale equivalent revenues: References to wholesale equivalent revenues are intended to provide context as to the total size of our NIKE Brand market footprint if we had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of (1) sales to external wholesale customers and (2) internal sales from our wholesale operations to our NIKE Direct operations, which are charged at prices comparable to those charged to external wholesale customers.

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 includes revenues from stores that were temporarily closed during the period as a result of COVID-19. 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.

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RESULTS OF OPERATIONS

Interest expense (income), net (6) 205 — 262 —

Other (income) expense, net (280) (181) — 14 —

Diluted earnings per common share $ 3.23 $ 3.75 -14 % $ 3.56 5 %

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CONSOLIDATED OPERATING RESULTS

REVENUES

NIKE, Inc. Revenues:

NIKE Brand Revenues by:

Supplemental NIKE Brand Revenues Details:

NIKE Brand Revenues by:

NIKE Brand Revenues on a Wholesale Equivalent Basis(1):

NIKE Brand Wholesale Equivalent Revenues by:(1),(4)

(1)The percent change excluding currency changes and the presentation of wholesale equivalent revenues represent non-GAAP financial measures. For further 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.

(4)As a result of the Consumer Direct Acceleration strategy, announced in fiscal 2021, the Company is now organized around a consumer construct of Men's, Women's and Kids'. Beginning in the first quarter of fiscal 2022, unisex products are classified within Men's, and Jordan Brand revenues are separately reported. Certain prior year amounts were reclassified to conform to fiscal 2022 presentation. These changes had no impact on previously reported consolidated results of operations or shareholders' equity.

(5)Others include products not allocated to Men's, Women's, NIKE Kids' and Jordan Brand, as well as certain adjustments that are not allocated to products designated by consumer.

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FISCAL 2023 NIKE BRAND REVENUE HIGHLIGHTS

The following tables present NIKE Brand revenues disaggregated by reportable operating segment, distribution channel and major product line:

FISCAL 2023 COMPARED TO FISCAL 2022

•NIKE, Inc. Revenues were $51.2 billion in fiscal 2023, which increased 10% and 16% compared to fiscal 2022 on a reported and currency-neutral basis, respectively. The increase was due to higher revenues in North America, Europe, Middle East & Africa ("EMEA"), APLA and Greater China, which contributed approximately 7, 6, 2 and 1 percentage points to NIKE, Inc. Revenues, respectively.

•NIKE Brand revenues, which represented over 90% of NIKE, Inc. Revenues,increased10% and 16% on a reported and currency-neutral basis, respectively. This increase was primarily due to higher revenues in Men's, the Jordan Brand, Women's and Kids' which grew 17%, 35%,11% and 10%, respectively, on a wholesale equivalent basis.

•NIKE Brand footwear revenues increased 20% on a currency-neutral basis, due to higher revenues in Men's, the Jordan Brand, Women's and Kids'. Unit sales of footwear increased 13%, while higher average selling price ("ASP") per pair contributed approximately 7 percentage points of footwear revenue growth. Higher ASP was primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, and growth in the size of our NIKE Direct business, partially offset by lower NIKE Direct ASP.

•NIKE Brand apparel revenues increased 8% on a currency-neutral basis, primarily due to higher revenues in Men's. Unit sales of apparel increased 4%, while higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth. Higher ASP was primarily due to higher full-price ASP and growth in the size of our NIKE Direct business, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity.

•NIKE Direct revenues increased 14% from $18.7 billion in fiscal 2022 to $21.3 billion in fiscal 2023. On a currency-neutral basis, NIKE Direct revenues increased 20% primarily driven by NIKE Brand Digital sales growth of 24%, comparable store sales growth of 14% and the addition of new stores. For further information regarding comparable store sales, including the definition, see "Comparable Store Sales". NIKE Brand Digital sales were $12.6 billion for fiscal 2023 compared to $10.7 billion for fiscal 2022.

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GROSS MARGIN

FISCAL 2023 COMPARED TO FISCAL 2022

For fiscal 2023, our consolidated gross profit increased 4% to $22,292 million compared to $21,479 million for fiscal 2022. Gross margin decreased 250 basis points to 43.5% for fiscal 2023 compared to 46.0% for fiscal 2022 due to the following:

*Wholesale equivalent

The decrease in gross margin for fiscal 2023 was primarily due to:

•Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due to higher input costs and elevated inbound freight and logistics costs as well as product mix;

•Lower margin in our NIKE Direct business, 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;

•Unfavorable changes in net foreign currency exchange rates, including hedges; and

•Lower off-price margin, on a wholesale equivalent basis.

This was partially offset by:

•Higher NIKE Brand full-price ASP, net of discounts, on a wholesale equivalent basis, due primarily to strategic pricing actions and product mix; and

•Lower other costs, primarily due to higher inventory obsolescence reserves recognized in Greater China in the fourth quarter of fiscal 2022.

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

(Dollars in millions) FISCAL 2023 FISCAL 2022 % CHANGE FISCAL 2021 % CHANGE

(1)Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, complimentary product, television, digital and print advertising and media costs, brand events and retail brand presentation.

FISCAL 2023 COMPARED TO FISCAL 2022

Demand creation expense increased 5% for 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 4 percentage points.

Operating overhead expense increased 12%, primarily due to higher wage-related expenses, NIKE Direct variable costs, strategic technology enterprise investments and other administrative costs. Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 3 percentage points.

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OTHER (INCOME) EXPENSE, NET

Other (income) expense, net $ (280) $ (181) $ 14

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.

FISCAL 2023 COMPARED TO FISCAL 2022

Other (income) expense, net increased from $181 million of other income, net in fiscal 2022 to $280 million in the current fiscal year, primarily due to a net favorable change in foreign currency conversion gains and losses, including hedges, and the one-time charge related to the deconsolidation of our Russian operations recognized in the prior year. 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 18 — Acquisitions and Divestitures within the accompanying Notes to the 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 an unfavorable impact on our Income before income taxes of $1,023 million for fiscal 2023.

INCOME TAXES

FISCAL 2023 COMPARED TO FISCAL 2022

Our effective tax rate was 18.2% for fiscal 2023, compared to 9.1% for fiscal 2022, primarily due to decreased benefits from stock-based compensation and a non-cash, one-time benefit in the prior year related to the onshoring of certain non-U.S. intangible property ownership rights.

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. Based on our current analysis of the provisions, we do not expect these tax law changes to have a material impact on our financial statements; however, we will continue to evaluate their impact as further information becomes available.

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OPERATING SEGMENTS

As discussed in Note 15 — Operating Segments and Related Information in the accompanying Notes to the 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:

(1) The percent change excluding currency changes represents a non-GAAP financial measure. For further information, see "Use of Non-GAAP Financial Measures".

(2) For additional information on the transition of our NIKE Brand businesses within our CASA territory to a third-party distributor, see Note 18 — Acquisitions and Divestitures of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report.

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

(4) 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 is Earnings Before Interest and Taxes ("EBIT"). As discussed in Note 15 — Operating Segments and Related Information in the accompanying Notes to the Consolidated Financial Statements, certain corporate costs are not included in EBIT.

The breakdown of EBIT is as follows:

(Dollars in millions) FISCAL 2023 FISCAL 2022 % CHANGE FISCAL 2021 % CHANGE

Interest expense (income), net (6) 205 — 262 —

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $ 6,201 $ 6,651 -7 % $ 6,661 0 %

(1) Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT Margin represent non-GAAP financial measures. See "Use of Non-GAAP Financial Measures" for further information.

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NORTH AMERICA

Revenues by:

Revenues by:

FISCAL 2023 COMPARED TO FISCAL 2022

•North America revenues increased 18% on a currency-neutral basis, primarily due to higher revenues in Men's and the Jordan Brand. NIKE Direct revenues increased 18%, driven by strong digital sales growth of 23%, comparable store sales growth of 9% and the addition of new stores.

•Footwear revenues increased 22% on a currency-neutral basis, primarily due to higher revenues in Men's and the Jordan Brand. Unit sales of footwear increased 17%, 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 and growth in NIKE Direct, partially offset by lower NIKE Direct ASP, reflecting higher promotional activity as well as lower available inventory supply in the prior period and a lower mix of full-price sales.

•Apparel revenues increased 9% on a currency-neutral basis, primarily due to higher revenues in Men's. Unit sales of apparel increased 7%, while higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth. Higher ASP per unit was 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 7% due to higher revenues and the following:

•Gross margin contraction of 310 basis points primarily due to higher product costs, reflecting higher input costs and inbound freight and logistics costs and product mix, 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 strategic pricing actions and product mix.

•Selling and administrative expense increased 15% due to higher operating overhead and demand creation expense. The increase in operating overhead expense was primarily due to higher wage-related costs and higher NIKE Direct variable costs, in part due to new store additions. Demand creation expense increased primarily due to higher sports marketing expense and an increase in digital marketing.

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EUROPE, MIDDLE EAST & AFRICA

Revenues by:

Revenues by:

FISCAL 2023 COMPARED TO FISCAL 2022

•EMEA revenues increased 21% on a currency-neutral basis, due to higher revenues in Men's, the Jordan Brand, Women's and Kids'. NIKE Direct revenues increased 33%, driven primarily by strong digital sales growth of 43% and comparable store sales growth of 22%.

•Footwear revenues increased 25% on a currency-neutral basis, due to higher revenues in Men's, the Jordan Brand, Women's and Kids'. Unit sales of footwear increased 9%, while higher ASP per pair contributed approximately 16 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and growth in NIKE Direct.

•Apparel revenues increased 14% on a currency-neutral basis, primarily due to higher revenues in Men's. Unit sales of apparel increased 2%, while higher ASP per unit contributed approximately 12 percentage points of apparel revenue growth. Higher ASP per unit was 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 7% due to higher revenues and the following:

•Gross margin contraction of 60 basis points primarily due to higher product costs reflecting higher input costs, inbound freight and logistics costs and product mix, higher other costs and unfavorable changes in standard foreign currency exchange rates. This was partially offset by higher full-price ASP, net of discounts, primarily due to strategic pricing actions and product mix.

•Selling and administrative expense increased 4% due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily due to higher wage-related expenses and other administrative costs, partially offset by favorable changes in foreign currency exchange rates. Demand creation expense increased primarily due to higher advertising and marketing expense, partially offset by favorable changes in foreign currency exchange rates.

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GREATER CHINA

Revenues by:

Revenues by:

FISCAL 2023 COMPARED TO FISCAL 2022

•Greater China revenues increased 4% on a currency-neutral basis, primarily due to higher revenues in the Jordan Brand, partially offset by lower revenues in Men's and Women's. NIKE Direct revenues increased 5%, due to comparable store sales growth of 9% and the addition of new stores, partially offset by digital sales declines of 4%.

•Footwear revenues increased 8% on a currency-neutral basis, primarily due to higher revenues in the Jordan Brand and Men's. Unit sales of footwear increased 7%, while higher ASP per pair contributed approximately 1 percentage point of footwear revenue growth. Higher ASP per pair was primarily due to higher NIKE Direct ASP and a higher mix of full-price sales, largely offset by a lower mix of NIKE Direct sales.

•Apparel revenues decreased 7% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's. Unit sales of apparel decreased 8%, while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth. Higher ASP per unit was primarily due to a higher mix of full price sales, partially offset by lower off-price ASP.

Reported EBIT decreased 3% due to lower revenues and the following:

•Gross margin expansion of approximately 140 basis points, primarily due to higher inventory obsolescence reserves recognized in the fourth quarter of fiscal 2022, favorable changes in standard foreign currency exchange rates and higher full-price ASP, net of discounts, in part due to product mix. This was partially offset by higher product costs reflecting higher input costs and product mix.

•Selling and administrative expense was flat due to increased operating overhead expense offset by lower demand creation expense. The increase in operating overhead expense was primarily due to higher wage-related expenses and other administrative costs, partially offset by favorable changes in foreign currency exchange rates. Demand creation expense decreased 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.

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ASIA PACIFIC & LATIN AMERICA

Revenues by:

Revenues by:

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. The impacts of 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 18 — Acquisitions and Divestitures within the accompanying Notes to the Consolidated Financial Statements.

FISCAL 2023 COMPARED TO FISCAL 2022

•APLA revenues increased 17% on a currency-neutral basis due to higher revenues across nearly all territories, led by Southeast Asia and India, Korea and Japan. The 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 growth in Men's, Women's and the Jordan Brand. NIKE Direct revenues increased 22%, driven by digital sales growth of 23% and comparable store sales growth of 28%.

•Footwear revenues increased 19% on a currency-neutral basis, primarily due to higher revenues in Men's, Women's and the Jordan Brand. Unit sales of footwear increased 16%, while higher ASP per pair contributed approximately 3 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and growth in NIKE Direct, partially offset by lower NIKE Direct ASP.

•Apparel revenues increased 13% on a currency-neutral basis, primarily due to higher revenues in Men's. Unit sales of apparel increased 9%, while higher ASP per unit contributed approximately 4 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price and off-price ASPs, partially offset by lower NIKE Direct ASP.

Reported EBIT increased 2% due to higher revenues and the following:

•Gross margin contraction of approximately 190 basis points primarily due to higher product costs, reflecting product mix and higher input costs, as well as unfavorable changes in standard foreign currency exchange rates. This was partially offset by higher full-price ASP, net of discounts, due to product mix and strategic pricing actions.

•Selling and administrative expense increased 8% due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily due to higher wage-related expenses and an increase in NIKE Direct variable costs, partially offset by favorable changes in foreign currency exchange rates. Demand creation expense increased primarily due to higher sports marketing expense and higher advertising and marketing expense, partially offset by favorable changes in foreign currency exchange rates.

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GLOBAL BRAND DIVISIONS

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.

FISCAL 2023 COMPARED TO FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 14% for fiscal 2023 primarily due to a 12% increase in selling and administrative expense from higher operating overhead expense largely driven by higher wage-related costs and strategic technology enterprise investments.

CONVERSE

Revenues by:

Revenues by:

EARNINGS BEFORE INTEREST AND TAXES $ 676 $ 669 1 % $ 543 23 %

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

FISCAL 2023 COMPARED TO FISCAL 2022

•Converse revenues increased 8% on a currency-neutral basis for fiscal 2023 due to revenue growth in North America, Western Europe and licensee markets, partially offset by declines in Asia. Combined unit sales within the wholesale and direct to consumer channels increased 1% while ASP increased 6%, driven by strategic pricing actions in Western Europe and North America.

•Direct to consumer revenues increased 8% on a currency-neutral basis, led by strong digital sales growth in North America.

•Wholesale revenues increased 7% on a currency-neutral basis, as growth in North America and Western Europe was partially offset by declines in Asia due to marketplace dynamics in China.

Reported EBIT increased 1% due to higher revenues and the following:

•Gross margin expansion of approximately 50 basis points as higher full-price ASP, net of discounts, lower other costs, and growth in licensee revenues were partially offset by higher product costs, lower margins in direct to consumer in part reflecting increased promotional activity, and unfavorable changes in standard foreign currency exchange rates.

•Selling and administrative expense increased 7% due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily as a result of higher wage-related expenses. Demand creation expense increased as a result of higher advertising and marketing costs, partially offset by lower retail brand presentation costs.

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CORPORATE

(Dollars in millions) FISCAL 2023 FISCAL 2022 % CHANGE FISCAL 2021 % CHANGE

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.

FISCAL 2023 COMPARED TO FISCAL 2022

Corporate's loss before interest and taxes increased $621 million during fiscal 2023, primarily due to the following:

•an unfavorable change of $371 million primarily related to higher wage and other professional services expenses, reported as a component of consolidated Operating overhead expense;

•an unfavorable change of $352 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 $45 million largely due to net unfavorable activity related to our strategic distributor partnership transition within APLA, including the loss recognized upon completion of the sale our entities in Argentina and Uruguay to a third-party distributor in the second quarter of fiscal 2023. This was partially offset by the one-time charge related to the deconsolidation of our Russian operations recognized in the prior year, with the net amount of these activities reported as a component of consolidated Other (income) expense, net; and

•a favorable change in net foreign currency gains and losses of $174 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.

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. We manage these exposures by taking advantage of natural offsets and currency correlations existing within the portfolio and, where practical and material, by hedging a portion of the remaining exposures using derivative instruments such as forward contracts and options. As described below, the implementation of the NIKE Trading Company ("NTC") and our foreign currency adjustment program enhanced our ability to manage our foreign exchange risk by increasing the natural offsets and currency correlation benefits existing within our portfolio of foreign exchange exposures. 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 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.

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Refer to Note 4 — Fair Value Measurements and Note 12 — Risk Management and Derivatives in the accompanying Notes to the Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end.

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 — NIKE's product costs are exposed to fluctuations in foreign currencies in the following ways:

1.Product purchases denominated in currencies other than the functional currency of the transacting entity:

a.Certain NIKE entities purchase product from the NTC, a wholly-owned sourcing hub that buys NIKE branded products from third-party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the products to NIKE entities in their respective functional currencies. NTC sales to a NIKE entity with a different functional currency results in a foreign currency exposure for the NTC.

b.Other NIKE entities purchase product directly from third-party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.

In both purchasing scenarios, a weaker U.S. Dollar reduces inventory costs incurred by NIKE whereas a stronger U.S. Dollar increases its cost.

2.Factory input costs: NIKE operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories' foreign currency exposures, some of which are natural offsets to our existing foreign currency exposures. Under this program, our payments to these factories are adjusted for rate fluctuations in the basket of currencies ("factory currency exposure index") in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products ("factory input costs") are denominated.

As an offset to the impacts of the fluctuating U.S. Dollar on our non-functional currency denominated product purchases described above, a strengthening U.S. Dollar against the foreign currencies within the factory currency exposure indices reduces NIKE's U.S. Dollar inventory cost. Conversely, a weakening U.S. Dollar against the indexed foreign currencies increases our inventory cost.

•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 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 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.

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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 and are intended to offset the foreign currency impact of the remeasurement of the related non-functional currency denominated asset or liability being hedged.

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. In the translation of our Consolidated Statements of Income, a weaker U.S. Dollar in relation to foreign functional currencies benefits our consolidated earnings whereas a stronger U.S. Dollar reduces our consolidated earnings. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $2,859 million, $295 million and a benefit of approximately $893 million for the years ended May 31, 2023, 2022 and 2021, respectively. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $824 million, $87 million and a benefit of approximately $260 million for the years ended May 31, 2023, 2022 and 2021, 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 generally accepted accounting principles in the United States of America ("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 $1,023 million and a favorable impact of approximately $132 million and $19 million on our Income before income taxes for the years ended May 31, 2023, 2022 and 2021, respectively.

NET INVESTMENTS IN FOREIGN SUBSIDIARIES

We are also exposed to the impact of foreign exchange fluctuations on our investments in wholly-owned foreign subsidiaries denominated in a currency other than the U.S. Dollar, which could adversely impact the U.S. Dollar value of these investments and therefore the value of future repatriated earnings. We have, in the past, hedged and may, in the future, hedge net investment positions in certain foreign subsidiaries to mitigate the effects of foreign exchange fluctuations on these net investments. These hedges are accounted for as net investment hedges in accordance with U.S. GAAP. There were no outstanding net investment hedges as of May 31, 2023 and 2022. There were no cash flows from net investment hedge settlements for the years ended May 31, 2023, 2022 and 2021.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $5,841 million for fiscal 2023, compared to $5,188 million for fiscal 2022. Net income, adjusted for non-cash items, generated $6,354 million of operating cash inflow for fiscal 2023, compared to $6,848 million for fiscal 2022. The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $513 million for fiscal 2023 compared to a decrease of $1,660 million for fiscal 2022. For fiscal 2023, the net change in working capital compared to the prior year was impacted by unfavorable changes in Accounts payable, offset by favorable impacts from Inventories and Accounts receivable. These changes were, in part, due to reduced inventory purchases in the current period and timing of wholesale shipments. 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 $564 million for fiscal 2023, compared to an outflow of $1,524 million for fiscal 2022, primarily driven by the net change in short-term investments. For fiscal 2023, the net change in short-term

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investments (including sales, maturities and purchases) resulted in a cash inflow of $1,481 million compared to a cash outflow of $747 million for fiscal 2022. Additionally, we continue to invest in our infrastructure to support future growth, specifically focused around digital capabilities, our end-to-end technology foundation, our corporate facilities and improvements across our supply chain.

Cash provided (used) by financing activities was an outflow of $7,447 million for fiscal 2023 compared to an outflow of $4,836 million for fiscal 2022. The increased outflow in fiscal 2023 was driven by higher share repurchases of $5,480 million for fiscal 2023 compared to $4,014 million for fiscal 2022, the repayment of $500 million of senior notes that matured in fiscal 2023, as well as lower proceeds from stock option exercises, which resulted in a cash inflow of $651 million in fiscal 2023 compared to $1,151 million in fiscal 2022.

In fiscal 2023, we purchased a total of 50.0 million shares of NIKE's Class B Common Stock for $5.5 billion (an average price of $110.32 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. Under this program, we repurchased 6.5 million shares for a total approximate cost of $710.0 million (an average price of $109.85 per share) during the first quarter of fiscal 2023 and 83.8 million shares for a total approximate cost of $9.4 billion (an average price of $111.82 per share) during the term of the program. 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 May 31, 2023, we had repurchased 43.5 million shares at a cost of approximately $4.8 billion (an average price of $110.38 per share) under this new program. We continue to expect funding of share repurchases will come from operating cash flows. The timing and the amount of share repurchases will be dictated by our capital needs and stock market conditions.

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.

On March 11, 2022, we entered into a five-year committed credit facility agreement with a syndicate of banks which provides for up to $2 billion of borrowings, with the option to increase borrowings up to $3 billion in total with lender approval. The facility matures on March 11, 2027, with options to extend the maturity date up to an additional two years. This facility replaces the prior $2 billion five-year credit facility agreement entered into on August 16, 2019, which would have matured on August 16, 2024. Refer to Note 5 — Short-Term Borrowings and Credit Lines for additional information.

On March 10, 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.

We currently have long-term debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively. As it relates to our committed credit facilities entered into on March 11, 2022 and March 10, 2023, if our long-term debt ratings were to decline, the facility fees and interest rates would increase. Conversely, if our long-term debt ratings were to improve, the facility fees and interest rates would decrease. Changes in our long-term debt ratings would not trigger acceleration of maturity of any then-outstanding borrowings or any future borrowings under the committed credit facilities. Under these facilities, we have agreed to various covenants. These covenants include limits on the disposal of assets and the amount of debt secured by liens we may incur. In the event we were to have any borrowings outstanding under these facilities, failed to meet any covenant and were unable to obtain a waiver from a majority of the banks in the applicable syndicate, any borrowings would become immediately due and payable. As of May 31, 2023, we were in full compliance with each of these covenants, and we believe it is unlikely we will fail to meet any of these covenants in the foreseeable future.

Liquidity is also provided by our $3 billion commercial paper program. As of and for the fiscal years ended May 31, 2023 and 2022, we did not have any borrowings outstanding under our $3 billion program.

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

To date, 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 May 31, 2023, we had Cash and equivalents and Short-term investments totaling $10.7 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 May 31, 2023, the weighted-average days to maturity of our cash equivalents and short-term investments portfolio was 98 days.

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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.

Our material cash requirements as of May 31, 2023, were as follows:

•Debt Obligations — Refer to Note 5 — Short-Term Borrowings and Credit Lines and Note 6 — Long-Term Debt in the accompanying Notes to the Consolidated Financial Statements for further information.

•Operating Leases — Refer to Note 17 — Leases in the accompanying Notes to the Consolidated Financial Statements for further information.

•Endorsement Contracts — As of May 31, 2023, we had endorsement contract obligations of $7.6 billion, with $1.3 billion payable within 12 months, representing approximate amounts of base compensation and minimum guaranteed royalty fees we are obligated to pay athlete, public figure, sport team and league endorsers of our products. Actual payments under some contracts may be higher than these amounts as these contracts provide for bonuses to be paid to the endorsers based upon athletic achievements and/or royalties on product sales in future periods. Actual payments under some contracts may also be lower as these contracts include provisions for reduced payments if athletic performance declines in future periods. In addition to the cash payments, we are obligated to furnish our endorsers with NIKE product for their use. It is not possible to determine how much we will spend on this product on an annual basis as the amount of product provided to the endorsers will depend on many factors and the contracts generally do not stipulate a minimum amount of cash to be spent on the product.

•Product Purchase Obligations — As of May 31, 2023, we had product purchase obligations of $6.4 billion, all of which are payable within the next 12 months. Product purchase obligations represent agreements (including open purchase orders) to purchase products in the ordinary course of business that are enforceable and legally binding and specify all significant terms. We generally order product at least four to five months in advance of sale based primarily on advanced orders received from external wholesale customers and internal orders from our direct to consumer operations. In some cases, prices are subject to change throughout the production process.

•Other Purchase Obligations — As of May 31, 2023, we had $3.3 billion of other purchase obligations, with $1.7 billion payable within the next 12 months. Other purchase obligations primarily include technology investments, construction, service and marketing commitments, including marketing commitments associated with endorsement contracts, made in the ordinary course of business. The amounts represent the minimum payments required by legally binding contracts and agreements that specify all significant terms, and may include open purchase orders for non-product purchases.

In addition to the above, we have long-term obligations for uncertain tax positions and various post-retirement benefits for which we are not able to reasonably estimate when cash payments will occur. Refer to Note 7 — Income Taxes and Note 11 — Benefit Plans in the accompanying Notes to the Consolidated Financial Statements for further information related to uncertain tax positions and post-retirement benefits, respectively.

As a part of the transition tax related to the Tax Cuts and Jobs Act, as of May 31, 2023, we had $644 million in estimated future cash payments, with $161 million payable within the next 12 months. These amounts represent the transition tax on deemed repatriation of undistributed earnings of foreign subsidiaries, which are reflected net of foreign tax credits we utilized.

Refer to Note 16 — Commitments and Contingencies in the accompanying Notes to the Consolidated Financial Statements for further information related to our off-balance sheet arrangements, bank guarantees and letters of credit.

OFF-BALANCE SHEET ARRANGEMENTS

As of May 31, 2023, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current and future financial condition, results of operations, liquidity, capital expenditures or capital resources. In connection with various contracts and agreements, we routinely provide indemnification relating to the enforceability of intellectual property rights, coverage for legal issues that arise and other items where we are acting as the guarantor. Currently, we have several such agreements in place. Based on our historical experience and the estimated probability of future loss, we have determined that the fair value of such indemnification is not material to our financial position or results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

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

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CRITICAL ACCOUNTING ESTIMATES

Our previous discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. 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. Note 1 — Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.

We believe the assumptions and judgments involved in the accounting estimates described below have the greatest potential impact on our Consolidated Financial Statements, so we consider these to be our critical accounting estimates. Management has reviewed and discussed these critical accounting estimates with the Audit & Finance Committee of the Board of Directors.

Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in the preparation of our Consolidated Financial Statements. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

SALES-RELATED RESERVES

Provisions for anticipated sales returns consist of both contractual return rights and discretionary authorized returns. Provisions for post-invoice sales discounts consist of both contractual programs and discretionary discounts that are expected to be granted at a later date.

Estimates of discretionary authorized returns, discounts and claims are based on (1) historical rates, (2) specific identification of outstanding returns not yet received from customers and outstanding discounts and claims and (3) estimated returns, discounts and claims expected but not yet finalized with customers. Actual returns, discounts and claims in any future period are inherently uncertain and may differ from estimates recorded. If actual or expected future returns, discounts or claims were significantly different than reserves established, a reduction or increase to net revenues would be recorded in the period in which such determination was made.

Refer to Note 14 — Revenues in the accompanying Notes to the Consolidated Financial Statements for additional information.

INVENTORY RESERVES

We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions. If we estimate the net realizable value of our inventory is less than the cost of the inventory recorded on our books, we record a reserve equal to the difference between the cost of the inventory and the estimated net realizable value. This reserve is recorded as a charge to Cost of sales. If changes in market conditions result in reductions to the estimated net realizable value of our inventory below our previous estimate, we would increase our reserve in the period in which we made such a determination.

HEDGE ACCOUNTING FOR DERIVATIVES

We use derivative contracts to hedge certain anticipated foreign currency and interest rate transactions as well as certain non-functional currency monetary assets and liabilities. When the specific criteria to qualify for hedge accounting has been met, changes in the fair value of contracts hedging probable forecasted future cash flows are recorded in Accumulated other comprehensive income (loss), rather than Net income, until the underlying hedged transaction affects Net income. In most cases, this results in gains and losses on hedge derivatives being released from Accumulated other comprehensive income (loss) into Net income sometime after the maturity of the derivative. One of the criteria for this accounting treatment is that the notional value of these derivative contracts should not be in excess of the designated amount of anticipated transactions. By their very nature, our estimates of anticipated transactions may fluctuate over time and may ultimately vary from actual transactions. When the designated amount of anticipated or actual transactions decline below hedged levels, or if it is no longer probable a forecasted transaction will occur by the end of the originally specified time period or within an additional two-month period of time thereafter, we reclassify the cumulative change in fair value of the over-hedged portion of the related hedge contract from Accumulated other comprehensive income (loss) to Other (income) expense, net during the quarter in which the decrease occurs. In rare circumstances, the additional period of time may exceed two months due to extenuating circumstances related to the nature of the forecasted transaction that are outside our control or influence.

Refer to Note 12 — Risk Management and Derivatives in the accompanying Notes to the Consolidated Financial Statements for additional information.

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INCOME TAXES

We are subject to taxation in the United States, as well as various state and foreign jurisdictions. The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. On an interim basis, we estimate our effective tax rate for the full fiscal year. This estimated annual effective tax rate is then applied to the year-to-date Income before income taxes excluding infrequently occurring or unusual items, to determine the year-to-date Income tax expense. The income tax effects of infrequent or unusual items are recognized in the interim period in which they occur. As the fiscal year progresses, we continually refine our estimate based upon actual events and earnings by jurisdiction during the year. This continual estimation process periodically results in a change to our expected effective tax rate for the fiscal year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs.

On a quarterly basis, we evaluate the probability a tax position will be effectively sustained and the appropriateness of the amount recognized for uncertain tax positions based on factors including changes in facts or circumstances, changes in tax law, settled audit issues and new audit activity. Changes in our assessment may result in the recognition of a tax benefit or an additional charge to the tax provision in the period our assessment changes. We recognize interest and penalties related to income tax matters in Income tax expense.

Refer to Note 7 — Income Taxes in the accompanying Notes to the Consolidated Financial Statements for additional information.

OTHER CONTINGENCIES

In the ordinary course of business, we are subject to various legal proceedings, claims and government investigations related to our business, products and actions of our employees and representatives, including contractual and employment relationships, product liability, antitrust, customs, tax, intellectual property and other matters. We record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable. Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants and courts. Recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. If future adjustments to estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record additional charges during the period in which the actual loss or change in estimate occurred. In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility the ultimate loss will materially exceed the recorded liability.

Refer to Note 16 — Commitments and Contingencies in the accompanying Notes to the Consolidated Financial Statements for additional information.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business and consistent with established policies and procedures, we employ a variety of financial instruments to manage exposure to fluctuations in the value of foreign currencies and interest rates. It is our policy to utilize these financial instruments only where necessary to finance our business and manage such exposures; we do not enter into these transactions for trading or speculative purposes.

We are exposed to foreign currency fluctuations, primarily as a result of our international sales, product sourcing and funding activities. 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 use forward and option contracts to hedge certain anticipated, but not yet firmly committed, transactions as well as certain firm commitments and the related receivables and payables, including third-party and intercompany transactions. Where exposures are hedged, our program has the effect of delaying the impact of exchange rate movements on our Consolidated Financial Statements.

The timing for hedging exposures, as well as the type and duration of the hedge instruments employed, are guided by our hedging policies and determined based upon the nature of the exposure and prevailing market conditions. Typically, the Company may enter into hedge contracts starting 12 to 24 months in advance of the forecasted transaction and may place incremental hedges up to 100% of the exposure by the time the forecasted transaction occurs. The majority of derivatives outstanding as of May 31, 2023, are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, British Pound/Euro, Chinese Yuan/U.S. Dollar, and Japanese Yen/U.S. Dollar currency pairs. Refer to Note 12 — Risk Management and Derivatives in the accompanying Notes to the Consolidated Financial Statements for additional information.

Our earnings are also exposed to movements in short- and long-term market interest rates. Our objective in managing this interest rate exposure is to limit the impact of interest rate changes on earnings and cash flows and to reduce overall borrowing costs. To achieve these objectives, we maintain a mix of commercial paper, bank loans, and fixed-rate debt of varying maturities.

MARKET RISK MEASUREMENT

We monitor foreign exchange risk, interest rate risk and related derivatives using a variety of techniques including a review of market value, sensitivity analysis and Value-at-Risk ("VaR"). Our market-sensitive derivative and other financial instruments are foreign currency forward contracts, foreign currency option contracts, intercompany loans denominated in non-functional currencies and fixed interest rate U.S. Dollar denominated debt.

We use VaR to monitor the foreign exchange risk of our foreign currency forward and foreign currency option derivative instruments only. The VaR determines the maximum potential one-day loss in the fair value of these foreign exchange rate-sensitive financial instruments. The VaR model estimates assume normal market conditions and a 95% confidence level. There are various modeling techniques that can be used in the VaR computation. Our computations are based on interrelationships between currencies and interest rates (a "variance/co-variance" technique). These interrelationships are a function of foreign exchange currency market changes and interest rate changes over the preceding one-year period. The value of foreign currency options does not change on a one-to-one basis with changes in the underlying currency rate. We adjust the potential loss in option value for the estimated sensitivity (the "delta" and "gamma") to changes in the underlying currency rate. This calculation reflects the impact of foreign currency rate fluctuations on the derivative instruments only and does not include the impact of such rate fluctuations on non-functional currency transactions (such as anticipated transactions, firm commitments, cash balances and accounts and loans receivable and payable), including those which are hedged by these instruments.

The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value we will incur nor does it consider the potential effect of favorable changes in market rates. It also does not represent the full extent of the possible loss that may occur. Actual future gains and losses will differ from those estimated because of changes or differences in market rates and interrelationships, hedging instruments and hedge percentages, timing and other factors.

The estimated maximum one-day loss in fair value on our foreign currency sensitive derivative financial instruments, derived using the VaR model, was $111 million and $99 million as of May 31, 2023 and 2022, respectively. The VaR increased year-over-year as a result of an increase in foreign currency volatilities as of May 31, 2023. Such a hypothetical loss in the fair value of our derivatives would be offset by increases in the value of the underlying transactions being hedged. The average monthly change in the fair values of foreign currency forward and foreign currency option derivative instruments was $289 million and $170 million during fiscal 2023 and fiscal 2022, respectively.

The instruments not included in the VaR are intercompany loans denominated in non-functional currencies and fixed interest rate U.S. Dollar denominated debt. Intercompany loans and related interest amounts are eliminated in consolidation. Furthermore, our non-functional currency intercompany loans are substantially hedged against foreign exchange risk through the use of forward

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contracts, which are included in the VaR calculation above. Therefore, we consider the interest rate and foreign currency market risks associated with our non-functional currency intercompany loans to be immaterial to our consolidated financial position, results of operations and cash flows.

Details of third-party debt are provided in the table below. The table presents principal cash flows and related weighted average interest rates by expected maturity dates.

EXPECTED MATURITY DATE YEAR ENDING MAY 31,

Interest Rate Risk

Long-term U.S. Dollar debt — Fixed rate

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management of NIKE, Inc. is responsible for the information and representations contained in this Annual Report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include certain amounts based on our best estimates and judgments. Other financial information in this Annual Report is consistent with these financial statements.

Our accounting systems include controls designed to reasonably assure assets are safeguarded from unauthorized use or disposition and provide for the preparation of financial statements in conformity with U.S. GAAP. These systems are supplemented by the selection and training of qualified financial personnel and an organizational structure providing for appropriate segregation of duties.

An internal corporate audit department reviews the results of its work with the Audit & Finance Committee of the Board of Directors, presently comprised of four outside, independent directors. The Audit & Finance Committee is responsible for the appointment of the independent registered public accounting firm and reviews, with the independent registered public accounting firm, management and the internal corporate audit staff, the scope and the results of the annual audit, the effectiveness of the accounting control system and other matters relating to the financial affairs of NIKE as the Audit & Finance Committee deems appropriate. The independent registered public accounting firm and the internal corporate auditors have full access to the Audit & Finance Committee, with and without the presence of management, to discuss any appropriate matters.

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MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13(a) - 15(f) and Rule 15(d) - 15(f) of the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of May 31, 2023.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited (1) the Consolidated Financial Statements and (2) the effectiveness of our internal control over financial reporting as of May 31, 2023, as stated in their report herein.

John J. Donahoe II Matthew Friend

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of NIKE, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of NIKE, Inc. and its subsidiaries (the “Company”) as of May 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended May 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of May 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Income Taxes

As described in Notes 1 and 7 to the consolidated financial statements, the Company recorded income tax expense of $1,131 million for the year ended May 31, 2023, and has net deferred tax assets of $1,799 million, including a valuation allowance of $22 million, and total gross unrecognized tax benefits, excluding related interest and penalties, of $936 million as of May 31, 2023, $651 million of which would affect the Company's effective tax rate if recognized in future periods. The realization of deferred tax assets is dependent on future taxable earnings. Management assesses the scheduled reversal of deferred tax liabilities, projected future taxable income and available tax planning strategies and considers foreign tax credit utilization in making this assessment of realization. A valuation allowance is established against the net deferred tax asset to the extent that recovery is not likely. The Company is subject to taxation in the United States, as well as various state and foreign jurisdictions. As disclosed by management, the use of significant judgment and estimates, as well as the interpretation and application of complex tax laws is required by management to determine the Company's provision for income taxes.

The principal considerations for our determination that performing procedures relating to the accounting for income taxes is a critical audit matter are a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management's assessment of complex tax laws and regulations as it relates to determining the provision for income taxes. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to income taxes, evaluating changes in and compliance with tax laws, and testing the calculation of the provision of income taxes. Professionals with specialized skill and knowledge were used to assist in evaluating changes in and compliance with the tax laws and regulations and the provision for income taxes.

/s/ PricewaterhouseCoopers LLP

Portland, Oregon

July 20, 2023

We have served as the Company's auditor since 1974.

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NIKE, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED MAY 31,

Interest expense (income), net (6) 205 262

Other (income) expense, net (280) (181) 14

Earnings per common share:

Weighted average common shares outstanding:

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED MAY 31,

Other comprehensive income (loss), net of tax:

Change in net foreign currency translation adjustment 267 (522) 496

Change in net gains (losses) on cash flow hedges (348) 1,214 (825)

Change in net gains (losses) on other (6) 6 5

Total other comprehensive income (loss), net of tax (87) 698 (324)

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

Current assets:

Prepaid expenses and other current assets 1,942 2,129

Property, plant and equipment, net 5,081 4,791

Operating lease right-of-use assets, net 2,923 2,926

Identifiable intangible assets, net 274 286

Deferred income taxes and other assets 3,770 3,821

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt $ — $ 500

Notes payable 6 10

Current portion of operating lease liabilities 425 420

Deferred income taxes and other liabilities 2,558 2,613

Commitments and contingencies (Note 16)

Redeemable preferred stock — —

Shareholders' equity:

Common stock at stated value:

Class A convertible — 305 and 305 shares outstanding — —

Accumulated other comprehensive income (loss) 231 318

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 37,531 $ 40,321

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED MAY 31,

Cash provided (used) by operations:

Adjustments to reconcile net income to net cash provided (used) by operations:

Amortization, impairment and other 156 123 53

Net foreign currency adjustments (213) (26) (138)

Changes in certain working capital components and other assets and liabilities:

(Increase) decrease in accounts receivable 489 (504) (1,606)

(Increase) decrease in inventories (133) (1,676) 507

Cash provided (used) by investing activities:

Additions to property, plant and equipment (969) (758) (695)

Other investing activities 52 (19) 171

Cash provided (used) by investing activities 564 (1,524) (3,800)

Cash provided (used) by financing activities:

Increase (decrease) in notes payable, net (4) 15 (52)

Repayment of borrowings (500) — (197)

Cash provided (used) by financing activities (7,447) (4,836) (1,459)

Effect of exchange rate changes on cash and equivalents (91) (143) 143

Net increase (decrease) in cash and equivalents (1,133) (1,315) 1,541

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Interest, net of capitalized interest $ 347 $ 290 $ 293

Non-cash additions to property, plant and equipment 211 160 179

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

CLASS A CLASS B

(In millions, except per share data) SHARES AMOUNT SHARES AMOUNT

Conversion to Class B Common Stock (10) 10 —

Repurchase of Class B Common Stock (5) (28) (622) (650)

Stock-based compensation 611 611

Other comprehensive income (loss) (324) (324)

Stock-based compensation 638 638

Other comprehensive income (loss) 698 698

Stock-based compensation 755 755

Other comprehensive income (loss) (87) (87)

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Summary of Significant Accounting Policies 61

Note 2 Property, Plant and Equipment 67

Note 3 Accrued Liabilities 67

Note 4 Fair Value Measurements 68

Note 5 Short-Term Borrowings and Credit Lines 70

Note 6 Long-Term Debt 71

Note 7 Income Taxes 72

Note 8 Redeemable Preferred Stock 74

Note 9 Common Stock and Stock-Based Compensation 74

Note 10 Earnings Per Share 77

Note 11 Benefit Plans 77

Note 12 Risk Management and Derivatives 77

Note 13 Accumulated Other Comprehensive Income (Loss) 81

Note 15 Operating Segments and Related Information 84

Note 16 Commitments and Contingencies 88

Note 18 Acquisitions and Divestitures 89

Note 19 Restructuring 90

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NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

NIKE, Inc. is a worldwide leader in the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. NIKE, Inc. portfolio brands include the NIKE Brand, Jordan Brand and Converse. The NIKE Brand is focused on performance athletic footwear, apparel, equipment, accessories and services across Men's, Women's and Kids', amplified with sport-inspired lifestyle products carrying the Swoosh trademark, as well as other NIKE Brand trademarks. The Jordan Brand is focused on athletic and casual footwear, apparel and accessories using the Jumpman trademark. Sales and operating results of Jordan Brand products are reported within the respective NIKE Brand geographic operating segments. Converse designs, distributes, licenses and sells casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks. In some markets outside the U.S., these trademarks are licensed to third parties who design, distribute, market and sell similar products. Operating results of the Converse brand are reported on a stand-alone basis.

BASIS OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the "Company" or "NIKE"). All significant intercompany transactions and balances have been eliminated.

REVENUE RECOGNITION

Revenue transactions associated with the sale of NIKE Brand footwear, apparel and equipment, as well as Converse products, comprise a single performance obligation, which consists of the sale of products to customers either through wholesale or direct to consumer channels. The Company satisfies the performance obligation and records revenues when transfer of control to the customer has occurred, based on the terms of sale. A customer is considered to have control once they are able to direct the use and receive substantially all of the benefits of the product.

Control is transferred to wholesale customers upon shipment or upon receipt depending on the country of the sale and the agreement with the customer. Control transfers to retail store customers at the time of sale and to substantially all digital commerce customers upon shipment. The transaction price is determined based upon the invoiced sales price, less anticipated sales returns, discounts and miscellaneous claims from customers. Payment terms for wholesale transactions depend on the country of sale or agreement with the customer and payment is generally required within 90 days or less of shipment to or receipt by the wholesale customer. Payment is due at the time of sale for retail store and digital commerce transactions.

Consideration for trademark licensing contracts is earned through sales-based or usage-based royalty arrangements, and the associated revenues are recognized over the license period.

Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, and are collected by the Company from a customer, are excluded from Revenues and Cost of sales in the Consolidated Statements of Income. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in Cost of sales when the related revenues are recognized.

SALES-RELATED RESERVES

Consideration promised in the Company's contracts with customers is variable due to anticipated reductions, such as sales returns, discounts and miscellaneous claims from customers. The Company estimates the most likely amount it will be entitled to receive and records an anticipated reduction against Revenues, with an offsetting increase to Accrued liabilities at the time revenues are recognized. The estimated cost of inventory for product returns is recorded in Prepaid expenses and other current assets on the Consolidated Balance Sheets.

The provision for anticipated sales returns consists of both contractual return rights and discretionary authorized returns. Provisions for post-invoice sales discounts consist of both contractual programs and discretionary discounts that are expected to be granted at a later date.

Estimates of discretionary authorized returns, discounts and claims are based on (1) historical rates, (2) specific identification of outstanding returns not yet received from customers and outstanding discounts and claims and (3) estimated returns, discounts and claims expected but not yet finalized with customers. Actual returns, discounts and claims in any future period are inherently uncertain and thus may differ from estimates recorded. If actual or expected future returns, discounts or claims are significantly greater or lower than the reserves established, a reduction or increase to net Revenues is recorded in the period in which such determination is made.

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COST OF SALES

Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third-party royalties, certain foreign currency hedge gains and losses and product design costs. Shipping and handling costs are expensed as incurred and included in Cost of sales.

DEMAND CREATION EXPENSE

Demand creation expenseconsists of advertising and promotion costs, including costs of endorsement contracts, complimentary products, television, digital and print advertising as well as media costs, brand events and retail brand presentation. Advertising production costs are expensed the first time an advertisement is run. Advertising media costs are expensed when the advertisement appears. Costs related to brand events are expensed when the event occurs. Costs related to retail brand presentation are expensed when the presentation is complete and delivered.

A significant amount of the Company's promotional expenses result from payments under endorsement contracts. In general, endorsement payments are expensed on a straight-line basis over the term of the contract. However, certain contracts contain elements that may be accounted for differently based upon the facts and circumstances of each individual contract. Prepayments made under contracts are included in Prepaid expenses and other current assets or Deferred income taxes and other assets depending on the period to which the prepayment applies.

Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sport (e.g., winning a championship). The Company records Demand creation expense for these amounts when the endorser achieves the specific goal.

Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). When the Company determines payments are probable, the amounts are reported inDemand creation expense ratably over the contract period based on the Company's best estimate of the endorser's performance. In these instances, to the extent actual payments to the endorser differ from the Company's estimate due to changes in the endorser's performance, adjustments to Demand creation expense may be recorded in a future period.

Certain contracts provide for royalty payments to endorsers based upon a predetermined percent of sales of particular products, which the Company records in Cost of sales as the related sales occur. For contracts containing minimum guaranteed royalty payments, the Company records the amount of any guaranteed payment in excess of that earned through sales of product within Demand creation expense.

Through cooperative advertising programs, the Company reimburses its wholesale customers for certain costs of advertising the Company's products. To the extent the Company receives a distinct good or service in exchange for consideration paid to the customer that does not exceed the fair value of that good or service, the amounts reimbursed are recorded in Demand creation expense.

Total Demand creation expense was $4,060 million, $3,850 million and $3,114 million for the years ended May 31, 2023, 2022 and 2021, respectively. Prepaid advertising and promotion expenses totaled $755 million and $773 million at May 31, 2023 and 2022, respectively, of which $372 million and $329 million, respectively, were recorded in Prepaid expenses and other current assets, and $383 million and $444 million, respectively, were recorded in Deferred income taxes and other assets, depending on the period to which the prepayment applied.

OPERATING OVERHEAD EXPENSE

Operating overhead expense consists primarily of wage and benefit-related expenses, research and development costs, bad debt expense as well as other administrative expenses such as rent, depreciation and amortization, professional services, certain technology investments, meetings and travel.

CASH AND EQUIVALENTS

Cash and equivalents represent cash and short-term, highly liquid investments, that are both readily convertible to known amounts of cash and so near their maturity they present insignificant risk of changes in value because of changes in interest rates, with maturities three months or less at the date of purchase.

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SHORT-TERM INVESTMENTS

Short-term investments consist of highly liquid investments with maturities over three months at the date of purchase. At May 31, 2023 and 2022, Short-term investments consisted of available-for-sale debt securities, which are recorded at fair value with unrealized gains and losses reported, net of tax, in Accumulated other comprehensive income (loss), unless unrealized losses are determined to be unrecoverable. Realized gains and losses on the sale of securities are determined by specific identification. The Company considers all available-for-sale debt securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and, therefore, classifies all securities with maturity dates beyond three months at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.

Refer to Note 4 — Fair Value Measurements for more information on the Company's Short-term investments.

ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE

Accounts receivable, netconsist primarily of amounts due from customers. The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for expected losses resulting from the inability of its customers to make required payments. In addition to judgments about the creditworthiness of significant customers based on ongoing credit evaluations, the Company considers historical levels of credit losses, as well as macroeconomic and industry trends to determine the amount of the allowance. The allowance for uncollectible accounts receivable was $35 million and $34 million as of May 31, 2023 and 2022, respectively.

INVENTORY VALUATION

Inventories, substantially all of which are finished goods, are stated at lower of cost and net realizable value and valued on either an average or a specific identification cost basis. In some instances, the Company ships products directly from its suppliers to the customer, with the related inventory and cost of sales recognized on a specific identification basis. Inventory costs primarily consist of product cost from the Company's suppliers, as well as inbound freight, import duties, taxes, insurance, logistics and other handling fees.

PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION

Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for land improvements, buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.

Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. Depreciation and amortization of all other assets are recorded in Operating overhead expense.

SOFTWARE DEVELOPMENT COSTS

Expenditures for major software purchases and software developed for internal use are capitalized and amortized over 2 to 12 years on a straight-line basis. The Company's policy provides for the capitalization of external direct costs associated with developing or obtaining internal use computer software. The Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.

Development costs of computer software to be sold, leased or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company's products are released soon after technological feasibility has been established; therefore, software development costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally, most software development costs have been expensed as incurred.

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IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group's carrying amount and its estimated fair value.

GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS

The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value.

For purposes of testing goodwill for impairment, the Company allocates goodwill across its reporting units, which are considered the Company's operating segments. For both goodwill and indefinite-lived intangible assets, which primarily consist of acquired trade names and trademarks, the Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or an intangible asset with an indefinite life is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is greater than its carrying amount, an impairment test is unnecessary.

If an impairment test is necessary, the Company will estimate the fair value of the related reporting unit or indefinite-lived intangible asset. If the carrying value of a reporting unit or indefinite-lived intangible asset exceeds its fair value, the goodwill of that reporting unit or indefinite-lived intangible asset is determined to be impaired and the Company will record an impairment charge equal to the excess of the carrying value over the related fair value.

There were no accumulated impairment losses as of May 31, 2023 and 2022. Additionally, the impact to Goodwill as a result of acquisitions and divestitures during fiscal 2023 and 2022, was not material.

OPERATING LEASES

The Company primarily leases retail store space, certain distribution and warehouse facilities, office space, equipment and other non-real estate assets. The Company determines if an arrangement is a lease at inception and begins recording lease activity at the commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the asset. Lease components are not separated from non-lease components for real estate leases within the Company's lease portfolio. Right-of-use ("ROU") assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. The Company's incremental borrowing rate is used to determine the present value of future lease payments unless the implicit rate is readily determinable.

Lease agreements may contain rent escalation clauses, renewal or termination options, rent holidays or certain landlord incentives, including tenant improvement allowances. ROU assets include amounts for scheduled rent increases and are reduced by the amount of lease incentives. The lease term includes the non-cancelable period of the lease and options to extend or terminate the lease when it is reasonably certain the Company will exercise those options. The Company does not record leases with an initial term of 12 months or less on the Consolidated Balance Sheets and recognizes related lease payments in the Consolidated Statements of Income on a straight-line basis over the lease term. Certain lease agreements include variable lease payments, which are based on a percent of retail sales over specified levels or adjust periodically for inflation as a result of changes in a published index, primarily the Consumer Price Index, and are expensed as incurred.

FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives, equity securities and available-for-sale debt securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy that prioritizes fair value measurements based on the types of inputs used, as follows:

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•Level 1: Quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs with little or no market data available, which require the reporting entity to develop its own assumptions.

The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.

Pricing vendors are utilized for a majority of Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates and considers nonperformance risk of the Company and its counterparties.

The Company's fair value measurement process includes comparing fair values to another independent pricing vendor to ensure appropriate fair values are recorded.

Refer to Note 4 — Fair Value Measurements for additional information.

FOREIGN CURRENCY TRANSLATION AND FOREIGN CURRENCY TRANSACTIONS

Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of Accumulated other comprehensive income (loss).

The Company's global subsidiaries have various monetary assets and liabilities, primarily receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to remeasurement, the impact of which is recorded in Other (income) expense, net, within the Consolidated Statements of Income.

ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES

The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates and interest rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (loss), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items. For undesignated hedges and designated cash flow hedges, this is primarily within the Cash provided by operations component of the Consolidated Statements of Cash Flows. For designated net investment hedges, this is within the Cash provided by investing activities component of the Consolidated Statements of Cash Flows. For the Company's fair value hedges, which are interest rate swaps used to mitigate the change in fair value of its fixed-rate debt attributable to changes in interest rates, the related cash flows from periodic interest payments are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows.

Refer to Note 12 — Risk Management and Derivatives for additional information on the Company's risk management program and derivatives.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation by estimating the fair value, net of estimated forfeitures, of equity awards and recognizing the related expense as Cost of sales or Operating overhead expense, as applicable, in the Consolidated Statements of Income on a straight-line basis over the vesting period. Substantially all awards vest ratably over four years of continued employment, with stock options expiring 10 years from the date of grant. Performance-based restricted stock units vest based on the Company's achievement of certain performance criteria throughout the three-year performance period and continued employment through the vesting date. The fair value of options, stock appreciation rights and employees' purchase rights under the employee stock purchase plans ("ESPPs") is determined using the Black-Scholes option pricing model. The fair value of restricted stock and time-vesting restricted stock units is established by the market price on the date of grant. The fair value of performance-based restricted stock units is estimated as of the grant date using a Monte Carlo simulation.

Refer to Note 9 — Common Stock and Stock-Based Compensation for additional information on the Company's stock-based compensation programs.

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INCOME TAXES

The Company accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. Realization of deferred tax assets is dependent on future taxable earnings and is therefore uncertain. At least quarterly, the Company assesses taxable income in prior carryback periods, the scheduled reversal of deferred tax liabilities, projected future taxable income and available tax planning strategies. The Company uses forecasts of taxable income and considers foreign tax credit utilization in making this assessment of realization, which are inherently uncertain and can result in significant variation between estimated and actual results. To the extent the Company believes that recovery is not likely, a valuation allowance is established against the net deferred tax asset, which increases the Company's income tax expense in the period when such determination is made.

The Company recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not the position will be sustained upon examination by relevant tax authorities. The Company recognizes interest and penalties related to income tax matters in Income tax expense.

Refer to Note 7 — Income Taxes for further discussion.

EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing Net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards.

Refer to Note 10 — Earnings Per Share for further discussion.

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Additionally, the macroeconomic environment could remain volatile as the risk exists that worsening macroeconomic conditions could have a material, adverse impact on future revenue growth as well as overall profitability.

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2022, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances transparency surrounding the use of supplier finance programs. The new guidance requires qualitative and quantitative disclosure sufficient to enable users of the financial statements to understand the nature, activity during the period, changes from period to period and potential magnitude of such programs. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company will adopt the required guidance in the first quarter of fiscal 2024 and is currently evaluating the ASU to determine its impact on the Company's disclosures.

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NOTE 2 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net included the following:

Land and improvements $ 326 $ 330

Construction in process 525 399

Total property, plant and equipment, gross 10,715 10,097

Less accumulated depreciation 5,634 5,306

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $ 5,081 $ 4,791

Capitalized interest was not material for the fiscal years ended May 31, 2023, 2022 and 2021.

NOTE 3 — ACCRUED LIABILITIES

Accrued liabilities included the following:

Compensation and benefits, excluding taxes $ 1,737 $ 1,297

Endorsement compensation 552 496

Allowance for expected loss on sale(1) — 397

Total Accrued Liabilities $ 5,723 $ 6,220

(1)Refer to Note 18 — Acquisitions and Divestitures for additional information.

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NOTE 4 — FAIR VALUE MEASUREMENTS

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of May 31, 2023 and 2022, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement. Refer to Note 1 — Summary of Significant Accounting Policies for additional detail regarding the Company's fair value measurement methodology.

Level 1:

Level 2:

U.S. Agency securities 46 — 46

Level 1:

Level 2:

U.S. Agency securities 2 — 2

As of May 31, 2023, the Company held $2,563 million of available-for-sale debt securities with maturity dates within one year and $671 million with maturity dates over one year and less than five years in Short-term investments on the Consolidated Balance Sheets. The fair value of the Company's available-for-sale debt securities approximates their amortized cost.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $297 million, $94 million and $34 million for the years ended May 31, 2023, 2022 and 2021, respectively.

The Company records the assets and liabilities of its derivative financial instruments on a gross basis on the Consolidated Balance Sheets. The Company's derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. Any amounts of cash collateral received related to these instruments associated with the Company's credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company's derivative asset balance. Any amounts of cash collateral posted related to these instruments associated with the Company's credit-related contingent features are recorded in Prepaid expenses and other current assets, which would further offset against the Company's derivative liability balance. Cash collateral received or posted related to the Company's credit-related contingent features is presented in the Cash provided by operations component of the Consolidated Statements of Cash Flows. The Company does not recognize amounts of non-cash collateral received, such as securities, on the Consolidated Balance Sheets. For further information related to credit risk, refer to Note 12 — Risk Management and Derivatives.

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The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

Level 2:

(1)If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $178 million as of May 31, 2023. As of that date, the Company received $36 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of May 31, 2023.

DERIVATIVE ASSETS DERIVATIVE LIABILITIES

Level 2:

(1)If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $76 million as of May 31, 2022. As of that date, the Company had received $486 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of May 31, 2022.

For additional information related to the Company's derivative financial instruments, refer to Note 12 — Risk Management and Derivatives. For fair value information regarding Notes payable and Long-term debt, refer to Note 5 — Short-Term Borrowings and Credit Lines and Note 6 — Long-Term Debt, respectively.