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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                         TO                         .

Commission File No. 1-10635
nikelogoorange.jpg
NIKE, Inc.
(Exact name of Registrant as specified in its charter)
Oregon
93-0584541
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

One Bowerman Drive, Beaverton, Oregon 97005-6453
(Address of principal executive offices and zip code)

(503) 671-6453
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Class B Common Stock
NKE
New York Stock Exchange
(Title of each class)
(Trading symbol)
(Name of each exchange on which registered)
Indicate by check mark:
YES
NO
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
þ
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
if an emerging growth company, if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
þ
As of September 30, 2023, the number of shares of the Registrant's Common Stock outstanding were:
Class A
297,897,252 
Class B
1,224,012,873 
1,521,910,125 



Table of Contents
NIKE, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1.
ITEM 3.
ITEM 4.
PART II - OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 5.
ITEM 6.



Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED AUGUST 31,
(In millions, except per share data)
20232022
Revenues$12,939 $12,687 
Cost of sales7,219 7,072 
Gross profit5,720 5,615 
Demand creation expense1,069 943 
Operating overhead expense3,047 2,977 
Total selling and administrative expense4,116 3,920 
Interest expense (income), net(34)13 
Other (income) expense, net(10)(146)
Income before income taxes
1,648 1,828 
Income tax expense
198 360 
NET INCOME
$1,450 $1,468 
Earnings per common share:
Basic$0.95 $0.94 
Diluted$0.94 $0.93 
Weighted average common shares outstanding:
Basic1,528.4 1,567.1 
Diluted1,543.3 1,585.8 
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
1


Table of Contents
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022
Net income$1,450 $1,468 
Other comprehensive income (loss), net of tax:
Change in net foreign currency translation adjustment36 (226)
Change in net gains (losses) on cash flow hedges(134)555 
Change in net gains (losses) on other3 (11)
Total other comprehensive income (loss), net of tax(95)318 
TOTAL COMPREHENSIVE INCOME$1,355 $1,786 
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
2


Table of Contents
NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 31,MAY 31,
(In millions)
20232023
ASSETS
Current assets:
Cash and equivalents$6,178 $7,441 
Short-term investments2,612 3,234 
Accounts receivable, net4,749 4,131 
Inventories8,698 8,454 
Prepaid expenses and other current assets2,013 1,942 
Total current assets24,250 25,202 
Property, plant and equipment, net5,109 5,081 
Operating lease right-of-use assets, net2,939 2,923 
Identifiable intangible assets, net272 274 
Goodwill281 281 
Deferred income taxes and other assets3,935 3,770 
TOTAL ASSETS$36,786 $37,531 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt$ $ 
Notes payable6 6 
Accounts payable2,738 2,862 
Current portion of operating lease liabilities435 425 
Accrued liabilities4,987 5,723 
Income taxes payable295 240 
Total current liabilities8,461 9,256 
Long-term debt8,929 8,927 
Operating lease liabilities2,807 2,786 
Deferred income taxes and other liabilities2,618 2,558 
Commitments and contingencies (Note 11)
Redeemable preferred stock  
Shareholders' equity:
Common stock at stated value:
Class A convertible — 298 and 305 shares outstanding
  
Class B — 1,226 and 1,227 shares outstanding
3 3 
Capital in excess of stated value12,590 12,412 
Accumulated other comprehensive income (loss)136 231 
Retained earnings1,242 1,358 
Total shareholders' equity13,971 14,004 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$36,786 $37,531 
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
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NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022
Cash provided (used) by operations:
Net income$1,450 $1,468 
Adjustments to reconcile net income to net cash provided (used) by operations:
Depreciation191 169 
Deferred income taxes(68)(43)
Stock-based compensation196 170 
Amortization, impairment and other(5)(9)
Net foreign currency adjustments(7)16 
Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable(621)(415)
(Increase) decrease in inventories(263)(1,363)
(Increase) decrease in prepaid expenses, operating lease right-of-use assets and other current and non-current assets(225)(128)
Increase (decrease) in accounts payable, accrued liabilities, operating lease liabilities and other current and non-current liabilities(714)492 
Cash provided (used) by operations(66)357 
Cash provided (used) by investing activities:
Purchases of short-term investments(1,144)(2,469)
Maturities of short-term investments778 1,432 
Sales of short-term investments1,038 948 
Additions to property, plant and equipment(253)(264)
Other investing activities(1)139 
Cash provided (used) by investing activities418 (214)
Cash provided (used) by financing activities:
Increase (decrease) in notes payable, net
 (1)
Proceeds from exercise of stock options and other stock issuances99 82 
Repurchase of common stock(1,133)(983)
Dividends — common and preferred(524)(480)
Other financing activities(41)(22)
Cash provided (used) by financing activities(1,599)(1,404)
Effect of exchange rate changes on cash and equivalents(16)(87)
Net increase (decrease) in cash and equivalents(1,263)(1,348)
Cash and equivalents, beginning of period7,441 8,574 
CASH AND EQUIVALENTS, END OF PERIOD$6,178 $7,226 
Supplemental disclosure of cash flow information:
Non-cash additions to property, plant and equipment$148 $124 
Dividends declared and not paid519 482 
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
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NIKE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCKCAPITAL IN EXCESS OF STATED VALUEACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)RETAINED EARNINGSTOTAL
CLASS ACLASS B
(In millions, except per share data)
SHARESAMOUNTSHARESAMOUNT
Balance at May 31, 2023305 $ 1,227 $3 $12,412 $231 $1,358 $14,004 
Stock options exercised2 106 106 
Conversion to Class B Common Stock(7)7 — 
Repurchase of Class B Common Stock(10)(85)(1,047)(1,132)
Dividends on common stock ($0.340 per share) and preferred stock $0.10 per share)
(519)(519)
Issuance of shares to employees, net of shares withheld for employee taxes(39)— (39)
Stock-based compensation196 196 
Net income1,450 1,450 
Other comprehensive income (loss)(95)(95)
Balance at August 31, 2023298 $ 1,226 $3 $12,590 $136 $1,242 $13,971 
COMMON STOCKCAPITAL IN EXCESS OF STATED VALUEACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)RETAINED EARNINGSTOTAL
CLASS ACLASS B
(In millions, except per share data)
SHARESAMOUNTSHARESAMOUNT
Balance at May 31, 2022305 $ 1,266 $3 $11,484 $318 $3,476 $15,281 
Stock options exercised2 80 80 
Repurchase of Class B Common Stock(9)(66)(925)(991)
Dividends on common stock ($0.305 per share) and preferred stock ($0.10 per share)
(482)(482)
Issuance of shares to employees, net of shares withheld for employee taxes(20)(2)(22)
Stock-based compensation170 170 
Net income1,468 1,468 
Other comprehensive income (loss)318 318 
Balance at August 31, 2022305 $ 1,259 $3 $11,648 $636 $3,535 $15,822 
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
NOTE 2
NOTE 3
NOTE 4
NOTE 5
NOTE 6
NOTE 7
NOTE 8
NOTE 9
NOTE 10
NOTE 11
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NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the "Company" or "NIKE") and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2023, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S. GAAP"). The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (the "Annual Report"). The results of operations for the three months ended August 31, 2023, are not necessarily indicative of results to be expected for the entire fiscal year.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In September 2022, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. 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 adopted the required guidance in the first quarter of fiscal 2024.
Certain financial institutions offer voluntary supplier finance programs facilitated through a third-party platform that provide participating suppliers the option to finance valid payment obligations from the Company. The Company is not a party to agreements negotiated between participating suppliers and third-party financial institutions. The Company's obligations to its suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in these programs and the Company does not provide guarantees to third parties in connection with these programs. As of August 31, 2023 and May 31, 2023, the Company had $953 million and $834 million, respectively, of outstanding supplier obligations confirmed as valid under these programs. These amounts are included within Accounts payable on the Unaudited Condensed Consolidated Balance Sheets.
NOTE 2 — ACCRUED LIABILITIES
Accrued liabilities included the following:
AUGUST 31,MAY 31,
(Dollars in millions)20232023
Compensation and benefits, excluding taxes$1,133 $1,737 
Sales-related reserves1,003 994 
Dividends payable
526 529 
Import and logistics
439 370 
Endorsement compensation
303 552 
Other1,583 1,541
TOTAL ACCRUED LIABILITIES$4,987 $5,723 
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NOTE 3 — 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. For additional information about the Company's fair value policies, refer to Note 1 — Summary of Significant Accounting Policies within the Annual Report.
The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of August 31, 2023 and May 31, 2023, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:
AUGUST 31, 2023
(Dollars in millions)
ASSETS AT FAIR VALUECASH AND EQUIVALENTSSHORT-TERM INVESTMENTS
Cash$1,432 $1,432 $— 
Level 1:
U.S. Treasury securities2,022 4 2,018 
Level 2:
Commercial paper and bonds549 13 536 
Money market funds4,154 4,154  
Time deposits581 575 6 
U.S. Agency securities52  52 
Total Level 25,336 4,742 594 
TOTAL$8,790 $6,178 $2,612 
MAY 31, 2023
(Dollars in millions)
ASSETS AT FAIR VALUECASH AND EQUIVALENTSSHORT-TERM INVESTMENTS
Cash$1,767 $1,767 $— 
Level 1:
U.S. Treasury securities2,655  2,655 
Level 2:
Commercial paper and bonds543 15 528 
Money market funds5,157 5,157  
Time deposits507 502 5 
U.S. Agency securities46  46 
Total Level 26,253 5,674 579 
TOTAL$10,675 $7,441 $3,234 
As of August 31, 2023, the Company held $1,945 million of available-for-sale debt securities with maturity dates within one year and $667 million with maturity dates greater than one year and less than five years in Short-term investments on the Unaudited Condensed 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 $99 million and $65 million for the three months ended August 31, 2023 and 2022, respectively.
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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:
AUGUST 31, 2023
DERIVATIVE ASSETSDERIVATIVE LIABILITIES
(Dollars in millions)
ASSETS AT FAIR VALUEOTHER CURRENT ASSETSOTHER LONG-TERM ASSETSLIABILITIES AT FAIR VALUEACCRUED LIABILITIESOTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options(1)
$491 $420 $71 $235 $177 $58 
(1)If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $233 million as of August 31, 2023. As of that date, the Company received $7 million of cash collateral from counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of August 31, 2023.
MAY 31, 2023
DERIVATIVE ASSETSDERIVATIVE LIABILITIES
(Dollars in millions)
ASSETS AT FAIR VALUEOTHER CURRENT ASSETSOTHER LONG-TERM ASSETSLIABILITIES AT FAIR VALUEACCRUED LIABILITIESOTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options(1)
$557 $493 $64 $180 $128 $52 
(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 counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of May 31, 2023.
For additional information related to the Company's derivative financial instruments and credit risk, refer to Note 7 — Risk Management and Derivatives.
The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.
FINANCIAL ASSETS AND LIABILITIES NOT RECORDED AT FAIR VALUE
The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company's Long-term debt, including the current portion, was approximately $7,768 million at August 31, 2023 and $7,889 million at May 31, 2023.
The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.
NOTE 4 — INCOME TAXES
The effective tax rate was 12.0% and 19.7% for the three months ended August 31, 2023 and 2022, respectively. The decrease in the Company's effective tax rate was primarily due to the impact of temporary relief provided by the Internal Revenue Service ("IRS") relating to U.S. foreign tax credit regulations. On July 21, 2023, the IRS issued Notice 2023-55 which specifically delayed the application of certain U.S. foreign tax credit regulations that had previously limited the Company's ability to claim credits on certain foreign taxes for the fiscal year ended May 31, 2023. As a result of this new guidance, the Company recognized a one-time tax benefit related to prior year tax positions in the first three months of fiscal 2024.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 that included, 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 was effective for the Company beginning June 1, 2023. Based on the Company's current analysis of the provisions, these tax law changes are not expected to have a material impact on the Company's financial statements for fiscal 2024.
As of August 31, 2023, total gross unrecognized tax benefits, excluding related interest and penalties, were $931 million, $644 million of which would affect the Company's effective tax rate if recognized in future periods. The majority of the total gross unrecognized tax benefits are long-term in nature and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets. As of May 31, 2023, total gross unrecognized tax benefits, excluding related interest and penalties, were $936 million. As of August 31, 2023 and May 31, 2023, accrued interest and penalties related
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to uncertain tax positions were $274 million and $268 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.
The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions. The Company is currently under audit by the U.S. IRS for fiscal years 2017 through 2019. The Company has closed all U.S. federal income tax matters through fiscal 2016, with the exception of certain transfer pricing adjustments.
Tax years after 2011 remain open in certain major foreign jurisdictions. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $20 million within the next 12 months. In January 2019, the European Commission opened a formal investigation to examine whether the Netherlands has breached State Aid rules when granting certain tax rulings to the Company. The Company believes the investigation is without merit. If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to prior periods, and the Company's income taxes related to prior periods in the Netherlands could increase.
NOTE 5 — STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
The NIKE, Inc. Stock Incentive Plan (the "Stock Incentive Plan") provides for the issuance of up to 798 million previously unissued shares of Class B Common Stock in connection with equity awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights and stock awards, including restricted stock and restricted stock units. Restricted stock units include both time-vesting restricted stock units ("RSUs") as well as performance-based restricted stock units ("PSUs"). In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount from the market price under employee stock purchase plans ("ESPPs"). For additional information, refer to Note 9 — Common Stock and Stock-Based Compensation within the Annual Report.
The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable: 
 THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022
Stock options(1)
$76 $75 
ESPPs21 15 
Restricted stock and restricted stock units(1)(2)
99 80 
TOTAL STOCK-BASED COMPENSATION EXPENSE$196 $170 
(1)Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is primarily recorded for employees meeting certain retirement eligibility requirements.
(2)Restricted stock units include RSUs and PSUs.
The income tax benefit related to stock-based compensation expense was $17 million and $20 million for the three months ended August 31, 2023 and 2022, respectively, and reported within Income tax expense.
STOCK OPTIONS
The weighted average fair value per share of stock options granted during the three months ended August 31, 2023 and 2022, computed as of the grant date using the Black-Scholes pricing model, was $34.79 and $32.13, respectively. The weighted average assumptions used to estimate these fair values were as follows:
 THREE MONTHS ENDED AUGUST 31,
20232022
Dividend yield1.1 %0.8 %
Expected volatility29.2 %27.0 %
Weighted average expected life (in years)5.85.8
Risk-free interest rate4.2 %2.7 %
Expected volatilities are based on an analysis of the historical volatility of the Company's common stock, the implied volatility in market-traded options on the Company's common stock with a term greater than one year, as well as other factors. The weighted average expected life of stock options is based on an analysis of historical and expected future exercise patterns. The interest
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rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the stock options.
As of August 31, 2023, the Company had $387 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.4 years.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The weighted average fair value per share of restricted stock and restricted stock units granted for the three months ended August 31, 2023 and 2022, computed as of the grant date, was $106.85 and $127.16, respectively.
As of August 31, 2023, the Company had $676 million of unrecognized compensation costs from restricted stock and restricted stock units, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.3 years.
NOTE 6 — EARNINGS PER SHARE
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share exclude restricted stock, restricted stock units and options, including shares under ESPPs, to purchase an estimated additional 33.7 million and 23.8 million shares of common stock outstanding for the three months ended August 31, 2023 and 2022, respectively, because the awards were assumed to be anti-dilutive.
 THREE MONTHS ENDED AUGUST 31,
(In millions, except per share data)
20232022
Net income available to common stockholders$1,450 $1,468 
Determination of shares:
Weighted average common shares outstanding1,528.4 1,567.1 
Assumed conversion of dilutive stock options and awards14.9 18.7 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING1,543.3 1,585.8 
Earnings per common share:
Basic$0.95 $0.94 
Diluted$0.94 $0.93 
NOTE 7 — RISK MANAGEMENT AND DERIVATIVES
The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. As of and for the three months ended August 31, 2023, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report. For additional information about the Company's derivatives and hedging policies, refer to Note 1 — Summary of Significant Accounting Policies and Note 12 — Risk Management and Derivatives within the Annual Report.
The majority of derivatives outstanding as of August 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. All derivatives are recognized on the Unaudited Condensed Consolidated Balance Sheets at fair value and classified based on the instrument's maturity date.
The following tables present the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets:    
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 DERIVATIVE ASSETS
BALANCE SHEET LOCATIONAUGUST 31,MAY 31,
(Dollars in millions)
20232023
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and optionsPrepaid expenses and other current assets$406 $480 
Foreign exchange forwards and optionsDeferred income taxes and other assets71 64 
Total derivatives formally designated as hedging instruments477 544 
Derivatives not designated as hedging instruments:
Foreign exchange forwards and optionsPrepaid expenses and other current assets14 13 
Total derivatives not designated as hedging instruments
14 13 
TOTAL DERIVATIVE ASSETS$491 $557 
DERIVATIVE LIABILITIES
BALANCE SHEET LOCATIONAUGUST 31,MAY 31,
(Dollars in millions)
20232023
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and optionsAccrued liabilities$142 $93 
Foreign exchange forwards and optionsDeferred income taxes and other liabilities58 52 
Total derivatives formally designated as hedging instruments200 145 
Derivatives not designated as hedging instruments:
Foreign exchange forwards and optionsAccrued liabilities35 35 
Total derivatives not designated as hedging instruments
35 35 
TOTAL DERIVATIVE LIABILITIES$235 $180 

The following tables present the amounts in the Unaudited Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:
THREE MONTHS ENDED AUGUST 31,
20232022
(Dollars in millions)
TOTALAMOUNT OF GAIN (LOSS)
ON CASH FLOW
HEDGE ACTIVITY
TOTALAMOUNT OF GAIN (LOSS)
ON CASH FLOW
HEDGE ACTIVITY
Revenues$12,939 $1 $12,687 $(9)
Cost of sales7,219 86 7,072 109 
Demand creation expense1,069  943 (1)
Other (income) expense, net(10)35 (146)82 
Interest expense (income), net(34)(2)13 (2)







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The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income:

(Dollars in millions)
AMOUNT OF GAIN (LOSS) RECOGNIZED IN OTHER
COMPREHENSIVE INCOME (LOSS) ON DERIVATIVES
(1)
AMOUNT OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE
INCOME (LOSS) INTO INCOME(1)
THREE MONTHS ENDED AUGUST 31,LOCATION OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE INCOME
(LOSS) INTO INCOME
THREE MONTHS ENDED AUGUST 31,
2023202220232022
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options$(18)$25 Revenues$1 $(9)
Foreign exchange forwards and options(2)487 Cost of sales86 109 
Foreign exchange forwards and options (5)Demand creation expense (1)
Foreign exchange forwards and options(10)293 Other (income) expense, net35 82 
Interest rate swaps(2)
  Interest expense (income), net(2)(2)
TOTAL DESIGNATED CASH FLOW HEDGES $(30)$800 $120 $179 
(1)For the three months ended August 31, 2023 and 2022, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
(2)Gains and losses associated with terminated interest rate swaps, which were previously designated as cash flow hedges and recorded in Accumulated other comprehensive income (loss), will be released through Interest expense (income), net over the term of the issued debt.

AMOUNT OF GAIN (LOSS) RECOGNIZED
IN INCOME ON DERIVATIVES
LOCATION OF GAIN (LOSS)
RECOGNIZED IN INCOME
ON DERIVATIVES
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options and embedded derivatives
$(27)$61 Other (income) expense, net
CASH FLOW HEDGES
All changes in fair value of derivatives designated as cash flow hedge instruments are recorded in Accumulated other comprehensive income (loss) until Net income is affected by the variability of cash flows of the hedged transaction. Effective hedge results are classified in the Unaudited Condensed Consolidated Statements of Income in the same manner as the underlying exposure. When it is no longer probable the forecasted hedged transaction will occur in the initially identified time period, hedge accounting is discontinued and the Company accounts for the associated derivative as an undesignated instrument as discussed below. Additionally, the gains and losses associated with derivatives no longer designated as cash flow hedge instruments in Accumulated other comprehensive income (loss) are recognized immediately in Other (income) expense, net, if it is probable the forecasted hedged transaction will not occur by the end of the initially identified time period or within an additional two-month period thereafter. 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 the control or influence of the Company.
The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was approximately $18.3 billion as of August 31, 2023. Approximately $313 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income (loss) as of August 31, 2023, are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts currently outstanding mature. As of August 31, 2023, the maximum term over which the Company hedges exposures to the variability of cash flows for its forecasted transactions was 27 months.
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UNDESIGNATED DERIVATIVE INSTRUMENTS
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the Unaudited Condensed Consolidated Balance Sheets. These undesignated instruments are recorded at fair value as a derivative asset or liability on the Unaudited Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, together with the remeasurement gain or loss from the hedged balance sheet position. The total notional amount of outstanding undesignated derivative instruments was $3.7 billion as of August 31, 2023.
CREDIT RISK
The Company's bilateral credit-related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives per counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could trigger collateral requirements. As of August 31, 2023, the Company was in compliance with all credit risk-related contingent features, and derivative instruments with such features were in a net asset position of approximately $256 million. Accordingly, the Company was not required to post cash collateral as a result of these contingent features. Further, $7 million of collateral was received on the Company's derivative asset balance as of August 31, 2023. The Company considers the impact of the risk of counterparty default to be immaterial.
For additional information related to the Company's derivative financial instruments and collateral, refer to Note 3 — Fair Value Measurements.
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NOTE 8 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in Accumulated other comprehensive income (loss), net of tax, were as follows:
(Dollars in millions)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1)
CASH FLOW HEDGES
NET INVESTMENT HEDGES(1)
OTHERTOTAL
Balance at May 31, 2023$(253)$431 $115 $(62)$231 
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications(2)
36 (23)  13 
Reclassifications to net income of previously deferred (gains) losses(3)
 (111) 3 (108)
Total other comprehensive income (loss)36 (134) 3 (95)
Balance at August 31, 2023$(217)$297 $115 $(59)$136 
(1)The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)Net of tax benefit (expense) of $0 million, $7 million, $0 million, $0 million and $7 million, respectively.
(3)Net of tax (benefit) expense of $0 million, $9 million, $0 million, $(1) million and $8 million, respectively.

(Dollars in millions)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT(1)
CASH FLOW HEDGES
NET INVESTMENT HEDGES(1)
OTHERTOTAL
Balance at May 31, 2022$(520)$779 $115 $(56)$318 
Other comprehensive income (loss):
Other comprehensive gains (losses) before reclassifications(2)
(272)716  (3)441 
Reclassifications to net income of previously deferred (gains) losses(3)
46 (161) (8)(123)
Total other comprehensive income (loss)(226)555  (11)318 
Balance at August 31, 2022$(746)$1,334 $115 $(67)$636 
(1)The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)Net of tax benefit (expense) of $0 million, $(84) million, $0 million, $1 million and $(83) million, respectively.
(3)Net of tax (benefit) expense of $0 million, $18 million, $0 million, $3 million and $21 million, respectively.













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The following table summarizes the reclassifications from Accumulated other comprehensive income (loss) to the Unaudited Condensed Consolidated Statements of Income:
AMOUNT OF GAIN (LOSS) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOMELOCATION OF GAIN (LOSS)
RECLASSIFIED FROM ACCUMULATED
OTHER COMPREHENSIVE INCOME
(LOSS) INTO INCOME
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022
Gains (losses) on foreign currency translation adjustment$ $(46)Other (income) expense, net
Total before tax (46)
Tax (expense) benefit  
Gain (loss) net of tax (46)
Gains (losses) on cash flow hedges:
Foreign exchange forwards and options1 (9)Revenues
Foreign exchange forwards and options86 109 Cost of sales
Foreign exchange forwards and options (1)Demand creation expense
Foreign exchange forwards and options35 82 Other (income) expense, net
Interest rate swaps(2)(2)Interest expense (income), net
Total before tax120 179 
Tax (expense) benefit(9)(18)
Gain (loss) net of tax111 161 
Gains (losses) on other(4)11 Other (income) expense, net
Total before tax(4)11 
Tax (expense) benefit1 (3)
Gain (loss) net of tax(3)8 
Total net gain (loss) reclassified for the period$108 $123 
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NOTE 9 — REVENUES
DISAGGREGATION OF REVENUES
The following tables present the Company's Revenues disaggregated by reportable operating segment, major product line and distribution channel:
THREE MONTHS ENDED AUGUST 31, 2023
(Dollars in millions)
NORTH AMERICAEUROPE, MIDDLE EAST & AFRICAGREATER CHINAASIA PACIFIC & LATIN AMERICAGLOBAL BRAND DIVISIONSTOTAL NIKE BRANDCONVERSECORPORATETOTAL NIKE, INC.
Revenues by:
Footwear$3,733 $2,260 $1,287 $1,141 $— $8,421 $522 $— $8,943 
Apparel1,479 1,137 401 371 — 3,388 20 — 3,408 
Equipment211 213 47 60 — 531 11 — 542 
Other    13 13 35 (2)46 
TOTAL REVENUES$5,423 $3,610 $1,735 $1,572 $13 $12,353 $588 $(2)$12,939 
Revenues by:
Sales to Wholesale Customers$2,772 $2,379 $895 $937 $— $6,983 $329 $— $7,312 
Sales through Direct to Consumer2,651 1,231 840 635 — 5,357 224 — 5,581 
Other    13 13 35 (2)46 
TOTAL REVENUES$5,423 $3,610 $1,735 $1,572 $13 $12,353 $588 $(2)$12,939 

THREE MONTHS ENDED AUGUST 31, 2022
(Dollars in millions)
NORTH AMERICAEUROPE, MIDDLE EAST & AFRICAGREATER CHINAASIA PACIFIC & LATIN AMERICAGLOBAL BRAND DIVISIONSTOTAL NIKE BRANDCONVERSECORPORATETOTAL NIKE, INC.
Revenues by:
Footwear$3,805 $2,012 $1,233 $1,064 $— $8,114 $577 $— $8,691 
Apparel1,494 1,153 374 413 — 3,434 20 — 3,454 
Equipment211 168 49 58 — 486 8 — 494 
Other    14 14 38 (4)48 
TOTAL REVENUES$5,510 $3,333 $1,656 $1,535 $14 $12,048 $643 $(4)$12,687 
Revenues by:
Sales to Wholesale Customers$3,027 $2,203 $839 $914 $— $6,983 $344 $— $7,327 
Sales through Direct to Consumer2,483 1,130 817 621 — 5,051 261 — 5,312 
Other    14 14 38 (4)48 
TOTAL REVENUES$5,510 $3,333 $1,656 $1,535 $14 $12,048 $643 $(4)$12,687 
For the three months ended August 31, 2023 and 2022, Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. Converse Other revenues were primarily attributable to licensing businesses. Corporate revenues primarily consisted 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 the Company's central foreign exchange risk management program.
As of August 31, 2023 and May 31, 2023, the Company did not have any contract assets and had an immaterial amount of contract liabilities recorded in Accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets.
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NOTE 10 — OPERATING SEGMENTS
The Company's 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.
Each NIKE Brand geographic segment operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel and equipment. The Company's reportable operating segments for the NIKE Brand are: North America; Europe, Middle East & Africa ("EMEA"); Greater China; and Asia Pacific & Latin America ("APLA"), and include results for the NIKE and Jordan brands.
The Company's NIKE Direct operations are managed within each NIKE Brand geographic operating segment. Converse is also a reportable segment for the Company and operates in one industry: the design, marketing, licensing and selling of athletic lifestyle sneakers, apparel and accessories.
Global Brand Divisions is included within the NIKE Brand for presentation purposes to align with the way management views the Company. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment. Global Brand Divisions costs represent demand creation and operating overhead expense that include product creation and design expenses centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology.
Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company's headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.
The primary financial measure used by the Company to evaluate performance of individual operating segments is earnings before interest and taxes ("EBIT"), which represents Net income before Interest expense (income), net, and Income tax expense in the Unaudited Condensed Consolidated Statements of Income.
As part of the Company's centrally managed foreign exchange risk management program, standard foreign currency rates are assigned twice per year to each NIKE Brand entity in the Company's geographic operating segments and to Converse. These rates are set approximately nine and twelve months in advance of the future selling seasons to which they relate (specifically, for each currency, one standard rate applies to the fall and holiday selling seasons, and one standard rate applies to the spring and summer selling seasons) based on average market spot rates in the calendar month preceding the date they are established. Inventories and Cost of sales for geographic operating segments and Converse reflect the use of these standard rates to record non-functional currency product purchases in the entity's functional currency. Differences between assigned standard foreign currency rates and actual market rates are included in Corporate, together with foreign currency hedge gains and losses generated from the Company's centrally managed foreign exchange risk management program and other conversion gains and losses.
Accounts receivable, net, Inventories and Property, plant and equipment, net for operating segments are regularly reviewed by management and are therefore provided below.

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 THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022
REVENUES
North America$5,423 $5,510 
Europe, Middle East & Africa3,610 3,333 
Greater China1,735 1,656 
Asia Pacific & Latin America1,572 1,535 
Global Brand Divisions13 14 
Total NIKE Brand12,353 12,048 
Converse588 643 
Corporate(2)(4)
TOTAL NIKE, INC. REVENUES$12,939 $12,687 
EARNINGS BEFORE INTEREST AND TAXES
North America$1,434 $1,377 
Europe, Middle East & Africa930 975 
Greater China525 541 
Asia Pacific & Latin America414 500 
Global Brand Divisions(1,205)(1,187)
Converse167 209 
Corporate(651)(574)
Interest expense (income), net(34)13 
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES$1,648 $1,828 
AUGUST 31,MAY 31,
(Dollars in millions)
20232023
ACCOUNTS RECEIVABLE, NET
North America$1,932 $1,653 
Europe, Middle East & Africa1,562 1,197 
Greater China161 162 
Asia Pacific & Latin America
687 700 
Global Brand Divisions84 96 
Total NIKE Brand4,426 3,808 
Converse240 235 
Corporate83 88 
TOTAL ACCOUNTS RECEIVABLE, NET$4,749 $4,131 
INVENTORIES
North America$3,761 $3,806 
Europe, Middle East & Africa2,220 2,167 
Greater China1,182 973 
Asia Pacific & Latin America
1,072 894 
Global Brand Divisions222 232 
Total NIKE Brand8,457 8,072 
Converse300 305 
Corporate(59)77 
TOTAL INVENTORIES(1)
$8,698 $8,454 
(1)Inventories as of August 31, 2023 and May 31, 2023, were substantially all finished goods.
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AUGUST 31,MAY 31,
(Dollars in millions)
20232023
PROPERTY, PLANT AND EQUIPMENT, NET
North America$792 $794 
Europe, Middle East & Africa1,043 1,009 
Greater China276 292 
Asia Pacific & Latin America
275 279 
Global Brand Divisions889 840 
Total NIKE Brand3,275 3,214 
Converse36 38 
Corporate1,798 1,829 
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET$5,109 $5,081 
NOTE 11 — CONTINGENCIES
In the ordinary course of business, the Company is subject to various legal proceedings, claims and government investigations relating to its business, products and actions of its employees and representatives, including contractual and employment relationships, product liability, antitrust, customs, tax, intellectual property and other matters. The outcome of these legal matters is inherently uncertain, and the Company cannot predict the eventual outcome of currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences relating to those matters. When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter. If one or more legal matters were to be resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial position, operating results and cash flows for that reporting period could be materially adversely affected. In the opinion of management, based on its current knowledge and after consultation with counsel, the Company does not believe any currently pending legal matters will have a material adverse impact on the Company's results of operations, financial position or cash flows, except as described below.
BELGIAN CUSTOMS CLAIM
The Company has received claims for certain years from Belgian Customs and other government authorities for alleged underpaid duties related to products imported beginning in fiscal 2018. The Company disputes these claims and has engaged in the appellate process. The Company has issued bank guarantees in order to appeal the claims. At this time, the Company is unable to estimate the range of loss and cannot predict the final outcome as it could take several years to reach a resolution on this matter. If this matter is ultimately resolved against the Company, the amounts owed, including fines, penalties and other consequences relating to the matter, could have a material adverse effect on the Company's results of operations, financial position and cash flows.
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ITEM 2. 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
NIKE, Inc. Revenues for the first quarter of fiscal 2024 were $12.9 billion, an increase of 2% on both a reported and currency-neutral basis, compared to the first quarter of fiscal 2023
NIKE Direct revenues grew 6% from $5.1 billion for the first quarter of fiscal 2023 to $5.4 billion for the first quarter of fiscal 2024, and represented approximately 43% of total NIKE Brand revenues for the first quarter of fiscal 2024
Gross margin for the first quarter of fiscal 2024 decreased 10 basis points to 44.2%, primarily driven by higher product costs and unfavorable changes in foreign currency exchange rates, largely offset by strategic pricing actions
Inventories as of August 31, 2023, were $8.7 billion, an increase of 3% compared to May 31, 2023, primarily driven by product mix and lower inventory obsolescence reserves
We returned $1.7 billion to our shareholders in the first quarter of fiscal 2024 through share repurchases and dividends
ECONOMIC CONDITIONS AND MARKET DYNAMICS
Consumer Spending: Our growth in Revenues for the first quarter of fiscal 2024 reflects ongoing demand for our products despite ongoing uncertainty in the global economy. We will continue to closely monitor macroeconomic conditions, including the potential impacts of inflation and rising interest rates on consumer behavior.
Inflationary Pressures: Inflationary pressures, including higher product costs, negatively impacted gross margin for the first quarter of fiscal 2024. The strategic pricing actions we have taken more than offset the impact of these higher product costs on gross margin in the first quarter of fiscal 2024.
Supply Chain Conditions: During the first quarter of fiscal 2024 and as of August 31, 2023, our inventory levels were healthy as we continue to experience normalized inventory transit times and flow of seasonal product.
Foreign Currency Impacts: As a global company with significant operations outside the United States, we are exposed to risk arising from changes in foreign currency exchange rates. For additional information, refer to "Foreign Currency Exposures and Hedging Practices".
We continue to be confident in our brand strength. We are focused on scaling a deep, diverse and distinct product portfolio as well as deepening our consumer connections, while carefully managing the health of our most iconic product franchises. However, 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.
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USE OF NON-GAAP FINANCIAL MEASURES
Throughout this Quarterly Report on Form 10-Q, 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 the three months ended August 31, 2023 and 2022 are as follows:
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)20232022
Net income$1,450 $1,468 
Add: Interest expense (income), net(34)13 
Add: Income tax expense198 360 
Earnings before interest and taxes$1,614 $1,841 
EBIT margin: Calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. Our EBIT margin calculation for the three months ended August 31, 2023 and 2022 are as follows:
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)20232022
Numerator
Earnings before interest and taxes$1,614 $1,841 
Denominator
Total NIKE, Inc. Revenues$12,939 $12,687 
EBIT margin
12.5 %14.5 %
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
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions, except per share data)20232022% CHANGE
Revenues$12,939 $12,687 %
Cost of sales7,219 7,072 %
Gross profit5,720 5,615 %
Gross margin44.2 %44.3 %
Demand creation expense1,069 943 13 %
Operating overhead expense3,047 2,977 %
Total selling and administrative expense4,116 3,920 %
% of revenues31.8 %30.9 %
Interest expense (income), net(34)13 — 
Other (income) expense, net(10)(146)— 
Income before income taxes1,648 1,828 -10 %
Income tax expense198 360 -45 %
Effective tax rate12.0 %19.7 %
NET INCOME$1,450 $1,468 -1 %
Diluted earnings per common share$0.94 $0.93 %
CONSOLIDATED OPERATING RESULTS
REVENUES
THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)
20232022% CHANGE
% CHANGE EXCLUDING CURRENCY CHANGES(1)
NIKE, Inc. Revenues:
NIKE Brand Revenues by:
Footwear$8,421 $8,114 %%
Apparel3,388 3,434 -1 %-1 %
Equipment