NIKE, Inc.

Income statement

Notes on this table. Revenue and diluted EPS for all five years are corroborated by the five-year charts in the FY2026 Annual Report to Shareholders (revenue 46,710 / 51,217 / 51,362 / 46,309 / 46,398; EPS 3.75 / 3.23 / 3.73 / 2.16 / 2.10). FY2026 gross profit is derived from the disclosed gross margin of 42.9% applied to disclosed revenue. FY2026 SG&A of 16,111 million USD reflects the disclosure that S&A was flat versus prior year at 16.1 billion USD, with demand creation of 4.8 billion USD (up 1%) and operating overhead of 11.4 billion USD (flat). FY2026 income tax expense of 792 million USD and the 20.31% effective rate are as reported; income before taxes and net income follow arithmetically and reconcile to the disclosed "net income of 3.1 billion USD, down 3 percent." EBITDA is not a measure NIKE reports and the figures above are approximations built from operating income plus estimated depreciation and amortisation; they should be treated as indicative only. FY2026 dividends declared per share of 1.62 USD is derived from the quarterly declaration pattern (the quarterly rate moved to 0.41 USD during the year) and total dividends paid of approximately 2.4 billion USD, up 5%; it is not a directly quoted disclosure and should be verified against the FY2026 statement of shareholders' equity.

Margins and growth

Five-year revenue CAGR (FY2021 base not shown; FY2022–FY2026): -0.2%. Over the four fiscal years from FY2022 to FY2026 NIKE's revenue is essentially unchanged in nominal terms while net income has fallen 49% and diluted EPS 44%. This is the single most important fact about NIKE's recent financial history: the top line has stagnated, but the profit line has halved. The delta is entirely operating leverage in reverse — demand creation has risen from 8.2% to 10.3% of revenue and operating overhead from 21.9% to 24.6%, a combined 480 basis points of structural cost inflation as a share of a top line that did not grow.

Gross margin commentary. The 310 basis point decline from FY2022's 46.0% to FY2026's 42.9% has three distinct drivers, in order of magnitude: (i) promotional intensity and off-price liquidation required to clear the FY2023–FY2025 inventory overhang; (ii) unfavourable channel mix as NIKE Direct — historically the higher-margin channel on a gross basis — declined while wholesale grew; and (iii) tariffs and input costs. FY2026's 20 basis point improvement is the first expansion in three years, but it is entirely an artefact of the IEEPA tariff recovery: excluding the 986 million USD Q4 benefit, Q4 gross margin was 40.2%, down 10 basis points, and full-year gross margin would have been approximately 40.8%. Underlying gross margin continued to deteriorate in FY2026.

The IEEPA tariff item. In Q4 FY2026 NIKE recognised 986 million USD as the expected recovery of tariffs paid under the International Emergency Economic Powers Act, contributing approximately 900 basis points to Q4 gross margin and 0.52 USD to Q4 diluted EPS. Approximately 0.3 billion USD of this was received in cash during FY2026. Excluding the benefit, FY2026 diluted EPS would have been approximately 1.58 USD and Q4 EPS 0.20 USD. This is a one-time, non-recurring recovery of previously incurred costs and should be stripped out of any forward-looking earnings base. On the Q4 call, management guided that tariff rates would rise from 10% to 15% from August 2026 on then-current forecasts — meaning the tariff line reverses from a one-off tailwind to an ongoing headwind in FY2027.

Balance sheet

Notes. FY2026 total assets of 38.41 billion USD and total liabilities of 23.55 billion USD are as reported by multiple market data services drawing on the FY2026 10-K; FY2026 cash of 7.56 billion USD, short-term investments of 1.46 billion USD, long-term debt excluding current maturities of 5.94 billion USD, shareholders' equity of 14.87 billion USD and inventories of 7.50 billion USD are consistent with both the Q4 press release and post-filing analysis.

Balance sheet commentary. The most consequential FY2026 balance sheet movement is the reduction of long-term debt from approximately 7.9 billion USD to 5.94 billion USD — a roughly 2.0 billion USD deleveraging achieved through bond repayment (referenced in the Q2 and Q3 FY2026 releases as "bond repayment" consuming cash). This is a deliberate, credit-supportive choice by management and is precisely what Moody's cited as underpinning its stable outlook. Total assets rose year-on-year despite flat revenue, most plausibly reflecting the tariff recovery receivable of roughly 0.7 billion USD (986 million recognised less approximately 300 million collected). Cash plus short-term investments has fallen from a 13.0 billion USD peak in FY2022 to 9.0 billion USD, a 31% reduction, as five years of dividends and buybacks have run ahead of free cash flow. Inventories at 7.5 billion USD are flat year-on-year — but management disclosed that this masks an increase in units offset by product mix shifts, which is a mildly negative signal: unit inventory is rising into a declining demand environment. EMEA inventory dollars were up low double-digits in Q4.

Cash flow

Share repurchases fell from 5,480 million USD in FY2023 to 123 million USD in FY2026 — a 98% reduction, and effectively a complete suspension after Q1 FY2026 (the 123 million USD and 1.8 million shares reported for the full year are identical to the figures reported for Q1 alone, indicating zero repurchases in Q2, Q3 and Q4 of FY2026). The four-year, 18 billion USD authorisation approved in June 2022 had 12.1 billion USD executed across 124.4 million shares as of 31 August 2025 and has been effectively dormant since. Meanwhile the dividend has continued to rise every year — NIKE cited 24 consecutive years of increases in December 2025 — and now consumes 2.4 billion USD annually against net income of 3.1 billion USD, a payout ratio of approximately 77% on GAAP earnings and materially higher on tariff-adjusted earnings of roughly 2.3 billion USD (a payout ratio above 100%). Moody's explicitly flagged that cash flow generation would remain constrained by higher capital expenditures and a sizable dividend that has increased over recent years. The dividend, not the buyback, is now the binding constraint on NIKE's capital allocation flexibility.

Ratios

Notes. ROIC is NIKE's own reported non-GAAP measure and is taken verbatim from the five-year chart in the FY2026 Annual Report to Shareholders: 46.5% / 31.5% / 34.9% / 20.2% / 18.7%. ROE and ROA are computed on year-end equity and assets. Net debt/EBITDA is negative because NIKE remains in a net cash position on a gross basis; note that Moody's-adjusted debt/EBITDA — which capitalises operating leases and pension obligations — is a materially different and more relevant credit metric, forecast by Moody's at 2.5x for FY2026 improving to mid-1x in FY2027. Interest coverage figures for FY2025 and FY2026 are Moody's modelled EBIT/interest of 10.2x and 8.8x respectively.

Ratio commentary. The decline in NIKE's reported ROIC from 46.5% to 18.7% over five fiscal years is the cleanest single summary of value destruction at the operating level. A business that earned 46.5% on invested capital in FY2022 now earns less than 19% — still a good number in absolute terms and comfortably above cost of capital, but a 60% erosion of the economic spread that justified NIKE's historic premium multiple. The market has repriced accordingly. ROE has fallen from roughly 40% to roughly 21%. The one improving metric is leverage: debt/equity fell to 0.40x on the FY2026 bond repayment, which is the correct defensive posture and gives NIKE optionality if the turnaround takes longer than management projects.

Management guidance

NIKE has not provided full-year guidance since 2024. The outstanding guidance as of the Q4 FY2026 call (30 June 2026) is:

• Earnings "flattish" through the first two quarters of FY2027.

• Q1 FY2027 gross margin slightly positive year-on-year.

• FY2027 gross margin expansion from structural supply chain and facility actions, plus positive operating leverage from the North America and EMEA severance and product-flow actions taken in Q4 FY2026.

• U.S. tariff rates assumed rising from 10% to 15% from August 2026.

• Explicit assumption that the macro environment will not improve meaningfully over the six months to December 2026.

• Greater China trends expected to remain in line with recent performance.

• Win Now actions in EMEA and APLA to be completed by end of calendar 2026; the Win Now programme concludes December 2026.

• Full-year guidance and the long-term plan to be provided at the Investor Day on 16–17 November 2026.

Consensus expectations

Sell-side positioning has turned decisively negative: BMO initiated at Underperform with a 30 USD target on 8 September 2026 and Morgan Stanley resumed at Underweight with a 31 USD target the same week, both below the prevailing 36.62 USD share price.

Bull case

1. North America proves the model works, and it is 44% of revenue. In FY2026 North America grew revenue 5% and EBIT 14%, recovered 200 basis points of EBIT margin to 26.2%, grew Q4 wholesale 10%, and produced Foot Locker's first positive comps in four years. This is not narrative — it is a segment P&L. If EMEA and APLA follow the same sequence with the same twelve-to-eighteen-month lag that North America ran, group revenue reaccelerates in FY2028 with group EBIT recovering faster than revenue on the same operating leverage that destroyed it.

2. The gross margin trough is behind, and the structural actions are quantified. Underlying FY2026 gross margin of approximately 40.8% embeds the peak of promotional clearance and one-off severance in supply chain. Management has committed to facility reduction and product-flow redesign delivering FY2027 expansion, and CFO Friend attributed the Q4 margin inflection specifically to discount improvement in North America and lower sales-related reserves, cancellations and discounts — i.e., to the health of the marketplace rather than to mix accident. Every 100 basis points of gross margin recovery is approximately 464 million USD of EBIT on the current revenue base, or roughly 0.25 USD of EPS.

3. The valuation prices permanent impairment that the fundamentals do not support. At approximately 1.1x EV/Sales and a 4.46% dividend yield, with net cash of 3.1 billion USD, reduced leverage, investment-grade ratings at both agencies, 27% global share, and Morningstar's maintained wide-moat rating, the market is pricing NIKE as a structurally declining wholesaler. A company with a 42.9% gross margin, 749 outlet doors it can rationalise, an 18 billion USD buyback authorisation it has barely used, and a running franchise adding 1 billion USD a year is not that.

Bear case

1. The tariff benefit reverses into a tariff headwind, and FY2027 earnings fall. The 986 million USD IEEPA recovery flattered FY2026 EPS by 0.52 USD. Underlying FY2026 EPS was approximately 1.58 USD. From August 2026 tariff rates rise from 10% to 15% on a cost base serving 44% of revenue. Guidance is "flattish" earnings through Q2 FY2027 — against an underlying base, not a reported one. The arithmetic points to reported FY2027 EPS materially below FY2026's 2.10 USD.

2. Greater China is not a cyclical problem and management has no near-term answer. Two consecutive years of 20%-plus EBIT decline, revenue down 23% over two years, Q4 exiting at -17% revenue and -19% wholesale, Anta having overtaken NIKE on several measures, a broad Chinese consumer shift away from Western brands, and management explicitly guiding no near-term improvement. The stated remedy — locally designed, developed and manufactured product — does not reach retail until Holiday 2027. That is at least five more quarters of decline in what was NIKE's highest-margin geography. And EMEA, at 27% of revenue with Q4 currency-neutral revenue -6%, digital -24% and inventory dollars up low double-digits, now looks the way North America looked one year before its trough.

3. Capital allocation has run out of room. Dividends of 2,400 million USD against underlying net income of approximately 2,300 million USD is a payout ratio above 100%. The buyback has been at zero for three consecutive quarters. Cash and short-term investments have fallen from 13.0 billion USD to 9.0 billion USD in four years. Moody's has flagged constrained cash flow from higher capex and a sizable growing dividend; S&P has a negative outlook. The dividend yield of 4.46% is the primary valuation support — and if the Board is eventually forced to choose between the dividend, the buyback authorisation renewal, and the investment required to fund the turnaround, the equity loses its floor. Compounding this, the executive team executing the plan has changed at CFO, Chief Accounting Officer, Chief Commercial Officer and Chief Technology Officer within twelve months, with the CCO role eliminated and then recreated.

Catalysts and monitorables, next twelve months

Analyst verdict

NIKE in September 2026 is a company whose diagnosis is complete and whose treatment is only partially working. Elliott Hill inherited a business that had traded brand scarcity for digital volume, dismantled its wholesale distribution, and stopped producing must-have product. He has been right about the diagnosis and disciplined about the remedy: 2 billion USD of classic franchise supply withdrawn, wholesale doors rebuilt, the organisation restructured around sport, roughly 2.0 billion USD of debt repaid, and headcount reduced by roughly 6,000 in a year. North America — 44% of revenue — has inflected, with revenue up 5%, EBIT up 14%, and Foot Locker comping positively for the first time in four years. Running has added a billion dollars. That is a real, measurable proof point.

But the proof point is not yet a trend, and the arithmetic outside North America is deteriorating faster than the arithmetic inside it is improving. Greater China has lost 45% of its EBIT in two years with no remedy landing before Holiday 2027. EMEA is showing the precise symptom set — currency-neutral decline, digital collapse, inventory build — that preceded North America's trough. Converse has halved in three years. And the FY2026 result that looked like stabilisation was not: strip the 986 million USD tariff recovery and gross margin fell again and EPS was approximately 1.58 USD, not 2.10 USD, against a tariff rate stepping up to 15%.

The capital allocation position is the tightest constraint. A 2.4 billion USD dividend against roughly 2.3 billion USD of underlying earnings, a buyback at zero for three quarters, and a negative S&P outlook leave little margin for a longer turnaround.

Verdict: a genuine franchise with a credible plan, priced for failure, but not yet earning the right to be re-rated. The November Investor Day is where management must convert a North American proof point into a company-wide, quantified, time-bound commitment. Until then, the burden of proof sits with NIKE.

Prepared from publicly available information as of 12 September 2026. Where sources conflict, both readings are presented. Readers should consult the underlying SEC filings before making any decision.