NIKE, Inc. (נייקי)
Analytical review · Quarter ended August 31, 2026 (Q1 of fiscal 2027)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. NIKE's quarterly report on Form 10-Q for the quarter ended August 31, 2026, filed October 2, 2026; the earnings release and the Form 8-K on the "Pace" program dated October 1, 2026; the annual report on Form 10-K for fiscal 2026, filed July 15, 2026; the earnings releases for the four quarters of fiscal 2026; and Forms 8-K on management changes, the annual meeting and the board. Market data: price as of October 5, 2026; Bank of Israel representative USD rate of the same day.
Company Profile
NIKE, Inc. is the world's largest seller of athletic footwear and apparel. It designs, markets and sells footwear, apparel, equipment and accessories, but manufactures almost nothing itself: in fiscal 2026, 52% of NIKE Brand footwear was made in Vietnam, 27% in Indonesia and 16% in China, by 15 contract manufacturers. The company is headquartered in Beaverton, Oregon, and had approximately 73,000 employees at the end of May 2026.
The company has three brands: NIKE, focused on athletic performance and sport-inspired lifestyle products; Jordan, reported within the NIKE Brand, with fiscal 2026 sales of $7.0 billion; and Converse, a separate athletic-lifestyle brand with revenue of $1.2 billion. Revenue comes through two channels: sales to retailers and distributors (wholesale) and direct sales to consumers in company stores and through its website and app (NIKE Direct).
NIKE's fiscal year ends on May 31. "Fiscal 2027" in this review is the period from June 2026 to May 2027. CEO Elliott Hill has served since 2024, after joining the company in 1988. Class A shares, approximately 79% of which are held by Swoosh, LLC, formed by founder Phil Knight, elect 8 of the 12 directors. The shares traded on the New York Stock Exchange are Class B.
Financial Performance
The latest quarter: revenue down, profit stable
In the June–August 2026 quarter, revenue fell 4% to $11,213 million, or 5% currency-neutral. Net income fell 2% to $712 million. Gross margin rose to 42.8%. According to the company, the increase came mainly from lower warehousing and logistics costs (+90 basis points) and currency (+40), offset by higher discounts and channel mix (−30) and royalties (−40). Demand creation expense rose 5%, and operating overhead fell 6%, mainly in wages.
In footwear, about 63% of NIKE Brand sales, revenue fell 6%: unit sales fell 5% and average selling price per pair fell by about one percentage point. In apparel, revenue rose 2%, with average price up about 4 percentage points and units down.
The tariff recovery: one inflated quarter, a nearly clean year
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unauthorized. In the March–May 2026 quarter, NIKE recorded a recovery of $986 million as a reduction of cost of sales. Without the recovery, that quarter's gross margin would have been about 40.2% rather than 49.2%, and EPS about $0.20 rather than $0.72. According to the annual report, the recovery "largely offset" the tariffs recognized during fiscal 2026, so the full-year effect is close to zero. The company does not quantify how much of the recovery relates to earlier periods.
The gross margin bridge for the latest quarter contains no tariff line. In the prior-year quarter, the company attributed part of its gross margin decline to "higher tariffs in North America." The filing does not describe the current tariff regime or its cost.
Fiscal 2027 outlook — according to management
According to management, fiscal 2027 revenue will decline high-single digits, the effective tax rate will be in the mid-20 percent range, and adjusted diluted EPS will be $1.15 to $1.35, excluding approximately $0.15 of "Pace" restructuring expenses. The first quarter already produced $0.48 per share. Arithmetically, the outlook leaves $0.67–$0.87 for the remaining three quarters combined. For comparison, the company earned $2.10 per share in fiscal 2026, or about $2.31 excluding $385 million of severance costs.
| $ millions | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Revenue | 46,710 | 51,217 | 51,362 | 46,309 | 46,398 |
| Gross margin | 46.0% | 43.5% | 44.6% | 42.7% | 42.9% |
| EBIT | — | — | 6,539 | 3,778 | 3,850 |
| Net income | 6,046 | 5,070 | 5,700 | 3,219 | 3,108 |
| Diluted EPS ($) | 3.75 | 3.23 | 3.73 | 2.16 | 2.10 |
| Cash from operations | 5,188 | 5,841 | 7,429 | 3,698 | 2,868 |
Fiscal years ending May 31. EBIT for FY2022–FY2023 not included in this review. Source: Forms 10-K and SEC XBRL data.
Balance Sheet & Capital
At August 31, 2026, NIKE held $8,368 million in cash and short-term investments against financial debt of $7,893 million. $2,000 million of that debt is due within a year. The company also has $3,179 million of operating lease liabilities, mainly for stores. Its debt is rated A+ by S&P and A2 by Moody's, and its $3 billion commercial paper program was undrawn. Shareholders' equity stood at $15,220 million.
Inventories were $7,846 million: down 3% year over year and up 5% since the start of the fiscal year, which the company attributes to shifts in product mix. Accounts payable include about $1.1 billion that suppliers elected to finance through supplier finance programs — the same level as in May 2025. Sales-related reserves (returns, discounts and claims) fell from $1,834 million in May 2025 to $1,589 million in May 2026 and $1,488 million in August 2026.
Cash flow and dividend
Free cash flow (cash from operations less capital expenditures) fell from $6.6 billion in fiscal 2024 to $2.2 billion in fiscal 2026. Over the same period, dividends paid rose from $2.2 billion to $2.4 billion. Fiscal 2026 is the first year in the table in which dividends paid exceeded free cash flow. In the latest quarter free cash flow was negative $64 million, after approximately $684 million of tariff recovery was received. The quarterly dividend is $0.41 per share. The $18 billion share repurchase program from 2022 has been paused since the first quarter of fiscal 2026; to date it has repurchased 124.4 million shares for $12.1 billion, at an average price of $97.57 per share.
| $ millions | FY2024 | FY2025 | FY2026 | Q1 FY2027 |
|---|---|---|---|---|
| Cash from operations | 7,429 | 3,698 | 2,868 | 135 |
| Capital expenditures | 812 | 430 | 684 | 199 |
| Free cash flow | 6,617 | 3,268 | 2,184 | −64 |
| Dividends paid | 2,169 | 2,300 | 2,407 | 610 |
| Share repurchases | 4,250 | 2,985 | 146 | 0 |
Segments
NIKE reports four geographic segments for the NIKE Brand (including Jordan) and Converse as a separate segment. Design, product creation and digital costs are held in "Global Brand Divisions" and are not allocated to the regions, so regional EBIT exceeds consolidated EBIT.
| Segment | FY2026 revenue | FY2026 EBIT | Q1 FY2027 revenue | Change, currency-neutral | Segment EBIT change |
|---|---|---|---|---|---|
| North America | 20,511 | 5,376 | 5,127 | +2% | +3% |
| Europe, Middle East & Africa | 12,572 | 2,417 | 3,176 | −5% | −1% |
| Greater China | 5,847 | 1,278 | 1,180 | −26% | −34% |
| Asia Pacific & Latin America | 6,243 | 1,387 | 1,463 | 0% | −7% |
| Converse | 1,174 | 18 | 263 | −28% | −36% |
North America FY2026 EBIT includes $965 million of tariff recovery, against tariffs charged to the segment during the year.
North America (44% of revenue) is the only region that grew: in fiscal 2026 revenue rose 5% and footwear unit sales rose 6%. In the latest quarter, wholesale in the region rose 9% and NIKE Direct fell 6%. In Greater China revenue fell 26% currency-neutral, with wholesale down 31% and digital down 28%; the company describes declining store traffic, promotions and elevated inventory across the marketplace. In EMEA footwear fell 11% and digital 26%. Converse earned $18 million of EBIT in fiscal 2026, compared with $474 million in fiscal 2024.
Sales channels
The company is reducing its reliance on the direct channel and returning volume to retail partners. NIKE Direct's share of NIKE Brand revenue fell from 43.6% in fiscal 2024 to 39.2% in fiscal 2026 and 37.8% in the latest quarter. In the quarter, digital sales fell 13% and company-store sales 5%. The company is repositioning digital as a full-price platform while liquidating inventory through markdowns.
Competitive Position
NIKE is the world's largest seller of athletic footwear and apparel, and its demand creation expense totaled $4.75 billion in fiscal 2026: athlete, team and league sponsorships, and advertising. In its annual report it lists among its competitors adidas, Anta, ASICS, Deckers, Li Ning, lululemon, New Balance, On, Puma and Under Armour. According to the company, competition turns on product innovation, consumer connection and distribution reach.
The data show an uneven picture. In North America, footwear unit sales rose in fiscal 2026, and the company attributes the progress to organizing by sport ("Sport Offense"). On the other hand, NIKE Brand Digital fell 12% in fiscal 2026 and 13% in the latest quarter, Converse fell 31% for the year, and Greater China revenue is down 22% since fiscal 2024. The company does not publish market share data, and this review did not check market share data from external sources.
How to Think About This Company
At NIKE, one year's earnings are not one number. Fiscal 2026 included a $986 million tariff recovery, $385 million of severance costs and a lower-than-usual tax rate. Any question about "how much the company earns" starts with separating those three layers.
The inflated quarter and the clean year. The tariff recovery was recorded entirely in the March–May 2026 quarter, but according to the company it largely offsets tariffs recognized throughout the year. So that quarter looks very strong, and the full year looks almost as if there had been no tariffs. Any trailing-twelve-month calculation includes the entire recovery but not the June–August 2025 tariffs that the recovery reversed.
A "one-time" expense that recurs. The company recorded $443 million of restructuring in fiscal 2024, $385 million of severance in fiscal 2026, and in October 2026 announced "Pace," with about $1 billion more of charges through fiscal 2031. It excludes them from adjusted earnings. Anyone comparing adjusted earnings across years has to ask whether an expense that appears every two years is still one-time.
The gap between the outlook and the first quarter. According to management, fiscal 2027 adjusted EPS will be $1.15–$1.35. The first quarter produced $0.48. The outlook therefore leaves an average of $0.22–$0.29 per quarter for the remaining three. The filing does not explain what drives that decline: tariffs, discounts, marketing investment or lower revenue.
Tariffs are the variable missing from the filing. In the prior-year quarter the company attributed part of its gross margin decline to tariffs. In the latest quarter there is no tariff line in the gross margin bridge. If the tariffs were removed, a 60 basis point improvement is modest; if they were replaced by other tariffs, the filing does not say what they cost. Without that number it is hard to tell how much of the gross margin improvement is operational.
Two turnarounds at different speeds. In North America, where management acted first, revenue rose in fiscal 2026 and segment EBIT rose again in the latest quarter. In Greater China, Converse and digital the decline continues. In the July 2026 annual report the company wrote that its actions would be completed by the end of December 2026; in the October 2026 quarterly report it wrote that in Sportswear, Jordan and Greater China they would extend beyond fiscal 2027.
Wholesale: demand or shelf-fill. North America wholesale rose 9% in the quarter while direct-to-consumer sales in the region fell 6%. The annual report attributes part of the growth to expanded distribution and higher shipments to existing partners. The filing does not publish sell-through data at retailers, so it cannot distinguish consumer demand from inventory building at partners.
The dividend as a measuring tool. The annual dividend ($1.64) is above management's fiscal 2027 adjusted EPS range, and fiscal 2026 free cash flow was below dividends paid. The balance sheet — $8.4 billion of cash and an A+ rating — allows the company to pay it without full coverage for a time. The dividend decision belongs to the board, most of whose members are elected by Class A holders.
New finance leadership and an ongoing turnaround. CFO David Denton took office on August 17, 2026, and the Chief Accounting Officer left on September 4; Denton holds both roles. His special performance award is measured by the improvement in fiscal 2027 EBIT margin over fiscal 2026. In September, Alexandre Arnault of LVMH joined the board.
The framework is meant to organize the questions. It does not decide and does not take part in the decision — the decision belongs to the reader.
This framework is intended to structure analysis, not to produce an investment conclusion.
Risks & Monitoring
Risks drawn from the filings
- Trade policy and tariffs: most production is in Vietnam, Indonesia and China. The company cites "evolving tariff policies" as a source of uncertainty and does not quantify current tariff costs.
- Greater China: down 26% currency-neutral in the quarter; according to the company, actions there will extend beyond fiscal 2027.
- Digital and Converse: down 13% and 28% in the quarter, respectively.
- Restructuring costs: per the company's preliminary estimate, "Pace" will cost about $1 billion pre-tax through fiscal 2031, mostly in cash. According to the company, the amounts may change.
- Belgian customs claim: Belgian customs authorities claim underpaid duties on imports since fiscal 2018. The company is appealing, has issued bank guarantees, and cannot estimate the range of loss.
- Control structure: Class A holders elect 8 of 12 directors. At the annual meeting, 32% of votes cast opposed the executive compensation advisory vote.
Items to monitor for the Q2 fiscal 2027 report (late December 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | Fiscal 2027 adjusted EPS outlook | $1.15–$1.35 |
| 2 | NIKE Direct (currency-neutral) | −9%; digital −13% |
| 3 | Greater China (currency-neutral) | −26% |
| 4 | Tariff line in the gross margin bridge | None in Q1 |
| 5 | Inventory vs. revenue trend | $7.85B, −3% YoY |
| 6 | Free cash flow vs. dividend | −$64M vs. $610M in Q1 |
| 7 | Sales-related reserves | $1,488M |
| 8 | Actual "Pace" charges | ~$0.3B for fiscal 2027, per the company |
| 9 | Board decision on the quarterly dividend | $0.41 per share |
Scenario Framework
The scenarios below are descriptive, not predictive. They contain no prices, no probabilities, and do not rank outcomes. Their sole purpose is to organize the conditions that would need to hold for each state to materialize, so they can be checked against future filings.
Scenarios are descriptive, not predictive.
- If the declines in NIKE Direct and Greater China moderate in coming quarters while North America keeps growing
- If the fiscal 2027 outlook is maintained in upcoming reports and the company quantifies tariff costs
- If "Pace" savings show up as lower operating overhead, not only as restructuring charges
- If free cash flow again covers the dividend without relying on tariff refunds
- If North America keeps growing slightly while Greater China and Converse keep declining
- If gross margin stays around 42%–43% and demand creation keeps rising
- If the dividend stays at its level and is partly funded from the balance sheet
- If the timeline for Sportswear, Jordan and Greater China extends beyond fiscal 2027, as the company wrote
- If the fiscal 2027 outlook is lowered in the Q2 report, or tariff costs turn out higher than assumed
- If North America wholesale growth stalls and partner inventory rises
- If company inventory grows faster than revenue while returns reserves keep falling
- If "Pace" charges exceed the preliminary estimate or stretch over a longer period
Analytical Lens
The six questions below are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company along the same six dimensions as every other company.
Key Observations
1. In the June–August 2026 quarter NIKE reported revenue of $11,213 million (−4%) and diluted EPS of $0.48 ($0.49 in the prior-year quarter). According to management, fiscal 2027 adjusted EPS will be $1.15–$1.35; in fiscal 2026 the company earned $2.10 per share.
2. In the March–May 2026 quarter the company recorded a $986 million tariff recovery which, according to the company, largely offsets fiscal 2026 tariffs. The latest quarter's gross margin bridge contains no tariff line.
3. Greater China fell 26% currency-neutral, digital 13% and Converse 28%. North America rose 2%, with wholesale revenue there up 9%.
4. Fiscal 2026 free cash flow ($2,184 million) was below dividends paid ($2,407 million). Share repurchases are paused, and in October 2026 the company announced "Pace," with about $1 billion of charges and about $2.5 billion of cumulative savings through fiscal 2031, before reinvestment.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held a licensed investment adviser qualification in Israel during 2008–2023. As of the publication date of this document, the firm does not hold an investment advice, investment marketing or portfolio management licence.
This document is intended for research and professional study purposes only. Nothing herein constitutes a recommendation to buy, sell, hold or carry out any transaction in securities. Nothing herein substitutes for advice that takes into account the data and needs of each person. Every decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data were drawn from official sources: the quarterly report on Form 10-Q for the quarter ended August 31, 2026 (October 2, 2026), the earnings release and Form 8-K of October 1, 2026, the annual report on Form 10-K for fiscal 2026 (July 15, 2026), the fiscal 2026 quarterly earnings releases, and the company's 2026 filings with the U.S. Securities and Exchange Commission. Filings published after this date are not included.
Review for qualified clients — Family Office
The full analytical review of NIKE (NKE) for the quarter ended August 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company" paragraphs, a structured scenario framework, and a six-dimension Analytical Lens.
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