NIKE, Inc.: Form 10-Q for the period ended Feb 29, 2024

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.

The Consumer Direct Acceleration strategy, which launched in July 2020, has driven revenue growth and millions of new connections with our consumers, and shifted the mix of our business toward our owned stores and digital platforms. To holistically serve all of our consumers across the marketplace, we expect to continue to invest in our NIKE Direct operations while also increasing investment to elevate and differentiate our brand experience within our 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 also remain focused on accelerating our pace of innovation and maximizing the impact of our storytelling.

We continue to invest in a global Enterprise Resource Planning Platform, data and analytics, demand sensing, insight gathering and other areas to create an end-to-end technology foundation. We believe this approach will accelerate growth and unlock more efficiency for our business, while driving speed and responsiveness as we serve consumers globally across the marketplace.

QUARTERLY FINANCIAL HIGHLIGHTS

• NIKE, Inc. Revenues for the third quarter of fiscal 2024 were $12.43 billion compared to $12.39 billion for the third quarter of fiscal 2023
• NIKE Direct revenues were $5.4 billion for the third quarter of fiscal 2024 compared to $5.3 billion for the third quarter of fiscal 2023, and represented approximately 45% of total NIKE Brand revenues
• Gross margin for the third quarter of fiscal 2024 increased 150 basis points to 44.8%, primarily driven by strategic pricing actions and lower ocean freight rates and logistics costs, partially offset by higher product input costs and restructuring charges
• Inventories as of February 29, 2024, were $7.7 billion, a decrease of 9% compared to May 31, 2023, primarily driven by a decrease in units
• We returned approximately $1.4 billion to our shareholders in the third quarter of fiscal 2024 through share repurchases and dividends

ECONOMIC CONDITIONS AND MARKET DYNAMICS

• Consumer Spending: During the third quarter of fiscal 2024, consumers continued to spend more cautiously and promotional activity remained high across our industry. In this environment, we continue to experience lower digital traffic and moderation in our revenue growth. We will continue to monitor macroeconomic conditions, including the potential impacts of inflation and higher interest rates on consumer behavior.
• Cost Inflationary Pressures: Inflationary pressures, including higher product input costs, continued to negatively impact our gross margin. These negative impacts on gross margin were more than offset by strategic pricing actions we have taken through the third quarter of fiscal 2024, as well as improvements in ocean freight rates and logistics costs we started to realize at the beginning of the second quarter of fiscal 2024.
• Supply Chain Conditions: During the first nine months of fiscal 2024 and as of February 29, 2024, our inventory levels were healthy and reflected our proactive actions taken to manage our inventory supply. In addition, we continued 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".

The operating environment could remain volatile in the fourth quarter of fiscal 2024, and the risk exists that the worsening of macroeconomic conditions could have a material adverse impact on our revenue growth as well as overall profitability. We continue to be confident in our brand strength and deep consumer connections. We will also continue to focus on driving gross margin expansion and disciplined cost control while managing the health of our most iconic franchises.

RECENT DEVELOPMENTS

In December 2023, we announced an enterprise initiative designed to accelerate our future growth. As part of this initiative, we are taking steps to streamline the organization. These changes will result in a net reduction of our global workforce. We expect a majority of the future annual wage savings from these actions will be reinvested in consumer facing activities to drive greater impact for our consumers, sports dimensions and the total marketplace.

As of February 29, 2024, we expect to recognize pre-tax charges of approximately $450 million, primarily associated with employee severance costs and accelerated stock-based compensation expense, the majority of which will be recognized by the end of fiscal 2024. The related cash payments are expected to take place through the first half of fiscal 2025. The expected pre-tax charges are estimates and subject to a number of assumptions. Actual results may differ from current estimates.

During the third quarter of fiscal 2024, we incurred pre-tax charges of $403 million, primarily associated with employee severance costs and accelerated stock-based compensation expense. For more information, refer to Note 14 — Restructuring within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

CONSOLIDATED OPERATING RESULTS

REVENUES

(Dollars in millions)

(1) The percent change excluding currency changes represents a non-GAAP financial measure. For additional 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.

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

• NIKE, Inc. Revenues for the third quarter of fiscal 2024 were $12.43 billion compared to $12.39 billion for the third quarter of fiscal 2023. On a currency-neutral basis, NIKE, Inc. revenues were flat, as higher revenues in North America and Greater China, which each increased NIKE, Inc. Revenues by approximately 1 percentage point, were offset by lower revenues in Europe, Middle East & Africa ("EMEA") and Converse, which each reduced NIKE, Inc. Revenues by approximately 1 percentage point.
• NIKE Brand revenues, which represented over 90% of NIKE, Inc. Revenues, increased 2% on a reported and currency-neutral basis. The increase, on a currency-neutral basis, was due to higher revenues in Men's, Kids', Women's and the Jordan Brand.
• NIKE Brand footwear revenues increased 3% on a currency-neutral basis due to higher revenues in Men's, Women's, Kids' and the Jordan Brand. Unit sales of footwear increased 2%, while higher average selling price ("ASP") per pair contributed approximately 1 percentage point of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, partially offset by lower NIKE Direct ASP.
• NIKE Brand apparel revenues decreased 3% on a currency-neutral basis due to lower revenues in Men's and Women's, partially offset by higher revenues in Kids'. Unit sales of apparel decreased 8%, while higher ASP per unit contributed approximately 5 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price, off-price and NIKE Direct ASPs.
• NIKE Brand wholesale revenues increased 3% compared to the third quarter of fiscal 2023, on a reported and currency-neutral basis. The increase, on a currency-neutral basis, was driven by higher revenues in Greater China, North America and Asia Pacific & Latin America ("APLA"), partially offset by lower revenues in EMEA.
• NIKE Direct revenues were $5.4 billion in the third quarter of fiscal 2024, compared to $5.3 billion for the third quarter of fiscal 2023. On a currency-neutral basis, NIKE Direct revenues were flat, driven by comparable store sales growth of 3% and the addition of new stores, offset by NIKE Brand Digital sales declines of 4%. For additional information regarding comparable store sales, including the definition, see "Comparable Store Sales". NIKE Brand Digital sales were $3.0 billion for the third quarter of fiscal 2024 compared to $3.1 billion for the third quarter of fiscal 2023. Within NIKE Direct revenues, there were certain reclassifications made between NIKE-owned retail stores and NIKE Brand Digital in the prior period to conform to current period presentation. The reclassifications did not have a material impact on our Unaudited Condensed Consolidated Financial Statements.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

• NIKE, Inc. Revenues were $38.8 billion for the first nine months of fiscal 2024, which increased 1% compared to the first nine months of fiscal 2023 on a reported and currency-neutral basis. The increase, on a currency-neutral basis, was driven by higher revenues in Greater China and APLA, which each contributed approximately 1 percentage point to NIKE, Inc. Revenues. Lower revenues for Converse reduced NIKE, Inc. Revenues by approximately 1 percentage point.
• NIKE Brand revenues, which represented over 90% of NIKE, Inc. Revenues, increased 2% on a reported and currency-neutral basis. The increase, on a currency-neutral basis, was primarily due to higher revenues in the Jordan Brand, partially offset by lower revenues in Men's and Kids'.
• NIKE Brand footwear revenues increased 2% on a currency-neutral basis, primarily due to higher revenues in the Jordan Brand and Women's, partially offset by lower revenues in Kids'. Unit sales of footwear decreased 2%, while higher ASP per pair contributed approximately 4 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.
• NIKE Brand apparel revenues decreased 2% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's. Unit sales of apparel decreased 12%, while higher ASP per unit contributed approximately 10 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs.
• NIKE Brand wholesale revenues were flat compared to the first nine months of fiscal 2023, on a reported and currency-neutral basis, as higher revenues in Greater China and APLA were offset by lower revenues in North America and EMEA.
• NIKE Direct revenues increased 4%, on a reported basis, from $15.8 billion for the first nine months of fiscal 2023 to $16.5 billion for the first nine months of fiscal 2024. On a currency-neutral basis, NIKE Direct revenues increased 4%, primarily driven by comparable store sales growth of 6% and the addition of new stores. NIKE Brand Digital sales were $9.4 billion for the first nine months of fiscal 2024 compared to $9.3 billion for the first nine months of fiscal 2023. Within NIKE Direct revenues, there were certain reclassifications made between NIKE-owned retail stores and NIKE Brand Digital in the prior period to conform to current period presentation. The reclassifications did not have a material impact on our Unaudited Condensed Consolidated Financial Statements.

GROSS MARGIN

(Dollars in millions)

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

For the third quarter of fiscal 2024, our consolidated gross margin was 150 basis points higher than the prior year due to:

• Higher NIKE Brand full-price ASP, net of discounts, on a wholesale equivalent basis (increasing gross margin approximately 180 basis points), primarily due to strategic pricing actions;
• Lower NIKE Brand product costs, on a wholesale equivalent basis (increasing gross margin approximately 50 basis points), primarily due to lower ocean freight rates and logistics costs, partially offset by higher product input costs;
• Lower other costs, including warehousing costs (increasing gross margin approximately 50 basis points); and
• Favorable changes in net foreign currency exchange rates, including hedges (increasing gross margin approximately 10 basis points).

This was partially offset by:

• Lower margin in our NIKE Direct business (decreasing gross margin approximately 50 basis points);
• Lower off-price margin, on a wholesale equivalent basis (decreasing gross margin approximately 40 basis points); and
• Restructuring charges (decreasing gross margin approximately 50 basis points).

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

For the first nine months of fiscal 2024, our consolidated gross margin was 100 basis points higher than the prior year due to:

• Higher NIKE Brand full-price ASP, net of discounts, on a wholesale equivalent basis (increasing gross margin approximately 270 basis points), primarily due to strategic pricing actions; and
• Lower other costs (increasing gross margin approximately 10 basis points).

This was partially offset by:

• Higher NIKE Brand product costs, on a wholesale equivalent basis (decreasing gross margin approximately 60 basis points), primarily due to higher product input costs largely offset by lower ocean freight rates and logistics costs; and
• Unfavorable changes in net foreign currency exchange rates, including hedges (decreasing gross margin approximately 50 basis points); and
• Lower off-price margin, on a wholesale equivalent basis (decreasing gross margin approximately 30 basis points);
• Restructuring charges (decreasing gross margin approximately 20 basis points); and
• Lower margin in our NIKE Direct business (decreasing gross margin approximately 20 basis points).

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

(Dollars in millions)

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

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

Demand creation expense increased 10% reflecting an increase in marketing expense, primarily due to higher advertising and marketing expense and higher sports marketing expense. Changes in foreign currency exchange rates did not have a material impact on Demand creation expense.

Operating overhead expense increased 6% primarily due to restructuring charges, partially offset by lower wage-related expenses and technology spend. Changes in foreign currency exchange rates did not have a material impact on Operating overhead expense.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

Demand creation expense increased 8% reflecting an increase in marketing expense, primarily due to higher advertising and marketing expense, higher sports marketing expense and higher digital marketing. Changes in foreign currency exchange rates did not have a material impact on Demand creation expense.

Operating overhead expense increased 3% primarily due to restructuring charges, partially offset by lower technology spend and wage-related expenses. Changes in foreign currency exchange rates did not have a material impact on Operating overhead expense.

For more information related to our organizational realignment and related costs, refer to Note 14 — Restructuring within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

OTHER (INCOME) EXPENSE, NET

(Dollars in millions)

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.

For the third quarter of fiscal 2024, Other (income) expense, net decreased from $58 million of other income, net, to $16 million of other income, net, primarily due to goodwill impairment in the current year and a net unfavorable change in foreign currency conversion gains and losses, including hedges.

For the first nine months of fiscal 2024, Other (income) expense, net decreased from $283 million of other income, net, to $101 million of other income, net, primarily due to a net unfavorable change in foreign currency conversion gains and losses, including hedges, as well as net favorable settlements of legal matters in the prior year and goodwill impairment in the current year. These items were partially offset by the loss recognized in the prior year upon completion of the sale of our entities in Argentina and Uruguay to a third-party distributor.

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 a favorable impact of $16 million and an unfavorable impact of $86 million on our Income before income taxes for the third quarter and first nine months of fiscal 2024.

INCOME TAXES

Our effective tax rate was 16.5% for the third quarter of fiscal 2024, substantially consistent with 16.0% for the third quarter of fiscal 2023.

Our effective tax rate was 15.6% for the first nine months of fiscal 2024, compared to 18.5% for the first nine months of fiscal 2023, primarily due to one-time benefits provided by the delay of the effective date of certain U.S. foreign tax credit regulations and a reduction in accrued withholding taxes on undistributed foreign earnings.

For additional information, refer to Note 5 — Income Taxes within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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 Unaudited Condensed Consolidated Statements of Income. Total NIKE, Inc. EBIT for the three and nine months ended February 29, 2024 and February 28, 2023 are as follows:

(Dollars in millions)

EBIT margin: Calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. Our EBIT margin calculation for the three and nine months ended February 29, 2024 and February 28, 2023 are as follows:

(Dollars in millions)

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.

OPERATING SEGMENTS

As discussed in Note 11 — Operating Segments in the accompanying Notes to the Unaudited Condensed 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:

(Dollars in millions)

(1) The percent change excluding currency changes represents a non-GAAP financial measure. For additional 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.

The primary financial measure used by the Company to evaluate performance of individual operating segments is EBIT. As discussed in Note 11 — Operating Segments in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements, certain corporate costs are not included in EBIT of our operating segments.

The breakdown of EBIT is as follows:

(Dollars in millions)

(1) Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT margin represent non-GAAP financial measures. For additional information, see "Use of Non-GAAP Financial Measures".

NORTH AMERICA

(Dollars in millions)

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

• North America revenues increased 3% on a currency-neutral basis due to higher revenues in Kids', Men's, Women's and the Jordan Brand. Wholesale revenues increased 5%. NIKE Direct revenues increased 2%, driven by comparable store sales growth of 1% and the addition of new stores, as well as digital sales growth of 1%.
• Footwear revenues increased 4% on a currency-neutral basis, primarily due to higher revenues in Kids', Women's and Men's. Unit sales of footwear increased 7%, while lower ASP per pair reduced footwear revenues by approximately 3 percentage points. Lower ASP per pair was primarily due to a lower mix of NIKE Direct sales and lower NIKE Direct ASP.
• Apparel revenues decreased 1% on a currency-neutral basis due to lower revenues in the Jordan Brand and Men's, largely offset by higher revenues in Kids' and Women's. Unit sales of apparel decreased 5%, 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 NIKE Direct ASPs, partially offset by a lower mix of NIKE Direct sales.

Reported EBIT increased 18% reflecting higher revenues and the following:

• Gross margin expansion of 290 basis points primarily due to higher full-price ASP, net of discounts, largely due to strategic pricing actions and lower discounts, as well as lower product costs, reflecting lower ocean freight rates and logistics costs, partially offset by higher product input costs.
• Selling and administrative expense was flat as higher demand creation expense was offset by lower operating overhead expense. The increase in demand creation expense was primarily due to higher advertising and marketing expense and higher sports marketing expense. The decrease in operating overhead expense was primarily due to lower wage-related expenses.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

• North America revenues decreased 1% on a currency-neutral basis due to lower revenues in Men's, Women's and Kids', partially offset by higher revenues in the Jordan Brand. Wholesale revenues decreased 5%, reflecting our proactive decisions to prioritize marketplace health in the current year coupled with our liquidation of excess inventory in the prior year. NIKE Direct revenues increased 4%, driven by comparable sales growth of 3% and the addition of new stores, as well as digital sales growth of 2%.
• Footwear revenues decreased 1% on a currency-neutral basis due to lower revenues in Men's, Kids' and Women's, partially offset by higher revenues in the Jordan Brand. Unit sales of footwear decreased 8%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.
• Apparel revenues decreased 1% on a currency-neutral basis due to lower revenues in Men's, Women's and the Jordan Brand, partially offset by higher revenues in Kids'. Unit sales of apparel decreased 10%, while higher ASP per unit contributed approximately 9 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs.

Reported EBIT increased 7% reflecting lower revenues and the following:

• Gross margin expansion of 250 basis points primarily due to higher full-price ASP, net of discounts, largely due to strategic pricing actions and lower discounts. This was partially offset by higher product costs, reflecting higher product input costs, partially offset by lower ocean freight rates and logistics costs.
• Selling and administrative expense increase of 2% driven by higher operating overhead expense and demand creation expense. The increase in operating overhead expense was primarily due to higher other administrative costs, partially offset by lower wage-related expenses. Demand creation expense increased primarily due to higher digital marketing.

EUROPE, MIDDLE EAST & AFRICA

(Dollars in millions)

34

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

• EMEA revenues decreased 4% on a currency-neutral basis, primarily due to lower revenues in Women's, Men's and Kids'. Wholesale revenues decreased 5%. NIKE Direct revenues decreased 4%, driven by digital sales declines of 10%, reflecting reduced digital traffic, partially offset by comparable store sales growth of 6% and the addition of new stores.
• Footwear revenues decreased 3% on a currency-neutral basis, primarily due to lower revenues in Kids' and Women's. Unit sales of footwear decreased 9%, while higher ASP per pair contributed approximately 6 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.
• Apparel revenues decreased 10% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's. Unit sales of apparel decreased 19%, while higher ASP per unit contributed approximately 9 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs.

Reported EBIT decreased 6% reflecting lower revenues and the following:

• Gross margin was flat, as lower product costs, reflecting lower ocean freight rates and logistics costs, and higher full-price ASP, net of discounts, primarily due to strategic pricing actions, were offset by unfavorable changes in standard foreign currency exchange rates, lower margin in NIKE Direct and lower off-price margins.
• Selling and administrative expense increase of 1% driven by higher demand creation expense, partially offset by lower operating overhead expense. The increase in demand creation expense was primarily due to higher advertising and marketing expense. The decrease in operating overhead expense was primarily due to lower other administrative costs and wage-related expenses, largely offset by unfavorable changes in foreign currency exchange rates.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

• EMEA revenues were flat on a currency-neutral basis, primarily due to lower revenues in Kids' and Women's, partially offset by higher revenues in Men's. Wholesale revenues decreased 2%. NIKE Direct revenues increased 3%, driven by comparable store sales growth of 10% and the addition of new stores, partially offset by digital sales declines of 1%.
• Footwear revenues increased 3% on a currency-neutral basis, primarily due to higher revenues in Men's, partially offset by Kids'. Unit sales of footwear decreased 4%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP and a higher mix of NIKE Direct sales.
• Apparel revenues decreased 8% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's. Unit sales of apparel decreased 19%, while higher ASP per unit contributed approximately 11 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs.

Reported EBIT decreased 6% reflecting higher revenues and the following:

• Gross margin contraction of 150 basis points largely due to unfavorable changes in standard foreign currency exchange rates, partially offset by higher full-price ASP, net of discounts, primarily due to strategic pricing actions and lower product costs, reflecting ocean freight rates and logistics costs.
• Selling and administrative expense increase of 6% driven by higher operating overhead expense and demand creation expense. Operating overhead expense increased primarily due to unfavorable changes in foreign currency exchange rates, higher wage-related expenses and higher other administrative costs. Demand creation expense increased primarily due to higher sports marketing expense and unfavorable changes in foreign currency exchange rates.

GREATER CHINA

(Dollars in millions)

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

• Greater China revenues increased 6% on a currency-neutral basis due to higher revenues in Men's, Women's, Kids' and the Jordan Brand. Wholesale revenues increased 12%. NIKE Direct revenues decreased 1% due to digital sales declines of 13%, reflecting reduced digital traffic, partially offset by comparable store sales growth of 1% and growth in non-comparable store sales.
• Footwear revenues increased 5% on a currency-neutral basis due to higher revenues in Men's, Women's, Kids' and the Jordan Brand. Unit sales of footwear increased 9%, while lower ASP per pair reduced footwear revenues by approximately 4 percentage points. Lower ASP per pair was primarily due to lower NIKE Direct ASP.
• Apparel revenues increased 10% on a currency-neutral basis, primarily due to higher revenues in Men's. Unit sales of apparel increased 10%, while ASP per unit was flat, as higher NIKE Direct ASP was offset by lower off-price and full-price ASPs.

Reported EBIT increased 3% reflecting higher revenues and the following:

• Gross margin contraction of approximately 180 basis points, largely due to unfavorable changes in standard foreign currency exchange rates, lower off-price margins and higher product costs. This was partially offset by higher full-price ASP, net of discounts, primarily due to strategic pricing actions.
• Selling and administrative expense decrease of 4% primarily due to lower operating overhead expense. Operating overhead expense decreased due to lower other administrative costs, favorable changes in foreign currency exchange rates and lower wage-related expenses.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

• Greater China revenues increased 8% on a currency-neutral basis due to higher revenues in Men's, Women's, the Jordan Brand and Kids'. Wholesale revenues increased 15%. NIKE Direct revenues increased 1% due to comparable store sales growth of 5% and growth in non-comparable store sales, partially offset by digital sales declines of 11%, reflecting reduced digital traffic.
• Footwear revenues increased 6% on a currency-neutral basis due to higher revenues in Men's, the Jordan Brand, Women's and Kids'. Unit sales of footwear increased 7%, while lower ASP per pair reduced footwear revenues by approximately 1 percentage point. Lower ASP per pair was primarily due to lower NIKE Direct ASP, partially offset by higher full-price ASP.
• Apparel revenues increased 16% on a currency-neutral basis, primarily due to higher revenues in Men's and Women's. Unit sales of apparel increased 6%, while higher ASP per unit contributed approximately 10 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher NIKE Direct, full-price and off-price ASPs as well as a higher mix of full-price sales.

Reported EBIT was flat reflecting higher revenues and the following:

• Gross margin contraction of approximately 70 basis points, primarily due to unfavorable changes in standard foreign currency exchange rates and lower off-price margins, partially offset by higher full-price ASP, net of discounts, largely due to strategic pricing actions, partially offset by product mix.
• Selling and administrative expense increase of 3% primarily due to higher operating overhead and demand creation expense. Operating overhead expense increased primarily due to higher 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.

ASIA PACIFIC & LATIN AMERICA

(Dollars in millions)

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 from closing these transactions are included within Corporate and are not reflected in the Asia Pacific & Latin America operating segment results. This completed the transition of our NIKE Brand businesses within our Central and South America ("CASA") marketplace, which now reflects a full distributor operating model.

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

• APLA revenues increased 4% on a currency-neutral basis due to higher revenues across most territories, led by CASA, Mexico, Japan and Southeast Asia & India, partially offset by lower revenues in the Pacific territory. Revenues increased due to overall growth in Women's, Men's, Kids' and the Jordan Brand. Wholesale revenues increased 3%. NIKE Direct revenues increased 4%, driven by comparable store sales growth of 12% and the addition of new stores, partially offset by digital sales declines of 6%, reflecting reduced digital traffic.
• Footwear revenues increased 5% on a currency-neutral basis due to higher revenues in Women's, Men's, Kids' and the Jordan Brand. Unit sales of footwear increased 4%, while higher ASP per pair contributed approximately 1 percentage point of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, a higher mix of NIKE Direct sales and higher off-price ASP, partially offset by lower NIKE Direct ASP.
• Apparel revenues decreased 3% on a currency-neutral basis, primarily due to lower revenues in Men's, partially offset by higher revenues in the Jordan Brand. Unit sales of apparel decreased 6%, while higher ASP per unit contributed approximately 3 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher off-price ASP, higher full-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

Reported EBIT decreased 3% reflecting higher revenues and the following:

• Gross margin contraction of approximately 190 basis points primarily due to unfavorable changes in standard foreign currency exchange rates and lower margin in NIKE Direct. 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 increase of 2% due to higher demand creation and operating overhead expense. Demand creation expense increased primarily due to higher retail brand presentation expense and digital marketing, partially offset by lower advertising and marketing expense. Operating overhead expense increased primarily due to other administrative costs, partially offset by lower wage-related expenses.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

• APLA revenues increased 6% on a currency-neutral basis due to higher revenues across most territories, led by Southeast Asia & India, Japan and Mexico. Within our CASA territory, the transition of our Chile, Argentina and Uruguay entities to a third-party distributor operating model did not have a material impact on APLA revenues. Revenues increased due to overall growth in Men's, Women's, the Jordan Brand and Kids'. Wholesale revenues increased 4%. NIKE Direct revenues increased 7%, driven by comparable store sales growth of 12% and the addition of new stores, as well as digital sales growth of 2%.
• Footwear revenues increased 9% on a currency-neutral basis due to higher revenues in Men's, Women's, the Jordan Brand and Kids'. Unit sales of footwear increased 7%, while higher ASP per pair contributed approximately 2 percentage points of footwear revenue growth. Higher ASP per pair was primarily due to higher full-price ASP, a higher mix of NIKE Direct sales and higher off-price ASP, partially offset by lower NIKE Direct ASP.
• Apparel revenues decreased 4% on a currency-neutral basis, primarily due to lower revenues in Men's and Women's. Unit sales of apparel decreased 11%, while higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth. Higher ASP per unit was primarily due to higher full-price ASP, off-price ASP and a higher mix of NIKE Direct sales, partially offset by lower NIKE Direct ASP.

Reported EBIT decreased 4% reflecting higher revenues and the following:

• Gross margin contraction of approximately 270 basis points primarily due to unfavorable changes in standard foreign currency exchange rates, lower margin in NIKE Direct and higher product costs, reflecting higher product input costs. This was partially offset by higher full-price ASP, net of discounts, primarily due to product mix and strategic pricing actions.
• Selling and administrative expense increase of 9% due to higher demand creation and operating overhead expense. Demand creation expense increased primarily due to higher digital marketing and sports marketing expense. Operating overhead expense increased primarily due to higher other administrative costs.

GLOBAL BRAND DIVISIONS

(Dollars in millions)

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.

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

Global Brand Divisions' loss before interest and taxes increased 3% in part due to higher demand creation expense, partially offset by lower operating overhead expense. The increase in demand creation expense was primarily due to increased advertising and marketing expense. Lower operating overhead expense was primarily due to lower technology spend and wage-related costs.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

Global Brand Divisions' loss before interest and taxes was flat primarily as lower operating overhead expense was offset by higher demand creation expense. Lower operating overhead expense was primarily due to lower technology spend, wage-related expenses and other administrative costs. The increase in demand creation expense was primarily due to higher advertising and marketing expense.

CONVERSE

(Dollars in millions)

(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.

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

• Converse revenues decreased 20% on a currency-neutral basis driven by revenue declines in North America, Western Europe, and Asia. Combined unit sales within the wholesale and direct to consumer channels decreased 17%, driven primarily by a decrease in wholesale, while ASP decreased 3% driven by increased promotional activity in direct to consumer.
• Wholesale revenues decreased 22% on a currency-neutral basis, driven by declines in North America, Western Europe and Asia.
• Direct to consumer revenues decreased 20% on a currency-neutral basis driven by declines in North America and Western Europe due to reduced traffic.

Reported EBIT decreased 40% reflecting lower revenues and the following:

• Gross margin contraction of approximately 140 basis points due to lower margin in direct to consumer, unfavorable changes in standard foreign currency exchange rates, and increased logistics costs, slightly offset by lower product input costs and ocean freight rates.
• Selling and administrative expense decrease of 1% due to lower operating overhead expense, largely offset by higher demand creation expense. Operating overhead expense decreased primarily as a result of lower wage-related expenses, while demand creation expense increased as a result of higher advertising and marketing costs.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

• Converse revenues decreased 14% on a currency-neutral basis as revenue declines in North America and Western Europe were partially offset by growth in Asia. Combined unit sales within the wholesale and direct to consumer channels decreased 12% and ASP decreased 2%, reflecting promotional activity in direct to consumer.
• Wholesale revenues decreased 14% on a currency-neutral basis, as declines in North America and Western Europe were partially offset by growth in Asia.
• Direct to consumer revenues decreased 14% on a currency-neutral basis driven by declines in North America and Western Europe due to reduced traffic.

Reported EBIT decreased 28% reflecting lower revenues and the following:

• Gross margin contraction of approximately 160 basis points due to unfavorable changes in standard foreign currency exchange rates, higher other costs, and lower margin in direct to consumer, slightly offset by lower product input costs and ocean freight rates.
• Selling and administrative expense decrease of 3% due to lower operating overhead expense. Operating overhead expense decreased primarily as a result of lower wage-related expenses.

CORPORATE

(Dollars in millions)

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.

THIRD QUARTER OF FISCAL 2024 COMPARED TO THIRD QUARTER OF FISCAL 2023

Corporate's loss before interest and taxes increased $178 million for the third quarter of fiscal 2024, primarily due to the following:

• an unfavorable change of $403 million related to restructuring charges, $340 million reported as a component of consolidated Operating overhead expense and $63 million reported as a component of consolidated gross margin;
• an unfavorable change of $4 million primarily 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;
• a favorable change of $167 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; and
• a favorable change of $57 million primarily related to lower wage-related expenses, partially offset by increased professional services, reported as a component of consolidated Operating overhead expense.

FIRST NINE MONTHS OF FISCAL 2024 COMPARED TO FIRST NINE MONTHS OF FISCAL 2023

Corporate's loss before interest and taxes increased $46 million for the first nine months of fiscal 2024, primarily due to the following:

• an unfavorable change of $403 million related to restructuring charges, $340 million reported as a component of consolidated Operating overhead expense and $63 million reported as a component of consolidated gross margin;
• an unfavorable change of $88 million primarily related to the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, as well as net favorable settlements of legal matters in the prior year, partially offset by the loss recognized in the prior year upon completion of the sale of our entities in Argentina and Uruguay to a third-party distributor, reported as a component of consolidated Other (income) expense, net;
• an unfavorable change of $25 million primarily related to increased professional services, partially offset by lower wage-related expenses, reported as a component of consolidated Operating overhead expense; and
• a favorable change of $484 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.

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. 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 Unaudited Condensed 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. As of and for the three and nine months ended February 29, 2024, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (the "Annual Report").

Refer to Note 3 — Fair Value Measurements and Note 8 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end. For additional information about our Foreign Currency Exposures and Hedging Practices, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within the Annual Report.

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 — Product purchases denominated in currencies other than the functional currency of the transacting entity and factory input costs from the foreign currency adjustments program with certain factories.
• 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 monetary 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 Unaudited Condensed 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.

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 within our Unaudited Condensed Consolidated Statements of Income 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. The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $16 million and a benefit of approximately $88 million for the three and nine months ended February 29, 2024, respectively, and a detriment of approximately $549 million and $2,504 million for the three and nine months ended February 28, 2023, respectively. The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a benefit of approximately $20 million and $84 million for the three and nine months ended February 29, 2024, respectively, and a detriment of approximately $160 million and $729 million for the three and nine months ended February 28, 2023, 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 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 a favorable impact of approximately $16 million and an unfavorable impact of approximately $86 million on our Income before income taxes for the three and nine months ended February 29, 2024, respectively.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $4,810 million for the first nine months of fiscal 2024 compared to $3,588 million for the first nine months of fiscal 2023. Net income, adjusted for non-cash items, generated $5,096 million of operating cash inflow for the first nine months of fiscal 2024, compared to $4,805 million for the first nine months of fiscal 2023. The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $286 million for the first nine months of fiscal 2024 compared to a decrease of $1,217 million for the first nine months of fiscal 2023. The favorable net change in working capital was primarily impacted by favorable changes to Inventories due to reduced inventory purchases and improved lead times in the current period.

Cash provided (used) by investing activities was an inflow of $1,184 million for the first nine months of fiscal 2024, compared to an inflow of $137 million for the first nine months of fiscal 2023, primarily driven by the net change in short-term investments (including sales, maturities and purchases). For the first nine months of fiscal 2024, the net change in short-term investments resulted in a cash inflow of $1,792 million compared to a cash inflow of $775 million for the first nine months of fiscal 2023.

Cash provided (used) by financing activities was an outflow of $4,468 million for the first nine months of fiscal 2024 compared to $5,266 million for the first nine months of fiscal 2023. The decreased outflow was driven by lower share repurchases of $3,214 million in the first nine months of fiscal 2024 compared to $4,101 million in the first nine months of fiscal 2023, partially offset by higher dividend payments of $1,609 million in the first nine months of fiscal 2024 compared to $1,488 million in the first nine months of fiscal 2023.

During the first nine months of fiscal 2024, we repurchased a total of 30.3 million shares of NIKE's Class B Common Stock for $3,206 million (an average price of $105.70 per share) under the four-year, $18 billion share repurchase plan authorized by the Board of Directors in June 2022. As of February 29, 2024, we have repurchased 73.8 million shares at a cost of approximately $8.0 billion (an average price of $108.46 per share) under this $18 billion share repurchase program. We continue to expect funding of share repurchases will come from operating cash flows and excess cash. 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.

As of February 29, 2024, our committed credit facilities were unchanged from the information previously reported within the Annual Report. We currently have long-term debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively. Any changes to these ratings could result in interest rate and facility fee changes. As of February 29, 2024, we were in full compliance with the covenants under our facilities and believe it is unlikely we will fail to meet any of the covenants in the foreseeable future. As of February 29, 2024 and May 31, 2023, no amounts were outstanding under our committed credit facilities.

On March 8, 2024, subsequent to the end of the third quarter of fiscal 2024, 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 an option to increase borrowings up to $1.5 billion in total with lender approval. The facility matures on March 7, 2025, with an option to extend the maturity date an additional 364 days. This facility replaces the prior $1 billion 364-day credit facility agreement entered into on March 10, 2023, which matured on March 8, 2024. Refer to Note 4 – Short-term Borrowings and Credit Lines for more information.

Liquidity is also provided by our $3 billion commercial paper program. As of and for the three months ended February 29, 2024, we did not have any borrowings outstanding under our $3 billion program. We may issue commercial paper or other debt securities depending on general corporate needs.

To date, in fiscal 2024, 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 February 29, 2024, we had Cash and equivalents and Short-term investments totaling $10.6 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 February 29, 2024, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 69 days.

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.

CONTRACTUAL OBLIGATIONS

As a result of renewals of, and additions to, outstanding endorsement contracts, cash payments due under these contracts have increased from what was reported within our Annual Report.

Obligations under endorsement contracts as of February 29, 2024, and significant contracts entered into through the date of this report were $9.9 billion, with $1.6 billion payable within 12 months.

Other than the changes reported above, there have been no significant changes to the material cash requirements reported within our Annual Report.

OFF-BALANCE SHEET ARRANGEMENTS

As of February 29, 2024, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources.

NEW ACCOUNTING PRONOUNCEMENTS

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

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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.

We believe the assumptions and judgments involved in the accounting estimates described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Annual Report have the greatest potential impact on our financial statements, so we consider these to be our critical accounting estimates. Actual results could differ from these estimates. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

There have been no material changes from the information previously reported under Part II, Item 7A within our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the "Exchange Act") reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We carry out a variety of ongoing procedures, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of February 29, 2024.

We are continuing several transformation initiatives to centralize and simplify our business processes and systems. These are long-term initiatives, which we believe will enhance our internal control over financial reporting due to increased automation and further integration of related processes. We will continue to monitor our internal control over financial reporting for effectiveness throughout these transformation initiatives.

There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND ANALYST REPORTS

Certain written and oral statements, other than purely historic information, including estimates, projections, statements relating to NIKE's business plans, objectives and expected operating or financial results and the assumptions upon which those statements are based, made or incorporated by reference from time to time by NIKE or its representatives in this report, other reports, filings with the SEC, press releases, conferences or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Exchange Act. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result" or words or phrases of similar meaning. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by NIKE with the SEC, including reports filed on Forms 8-K, 10-Q and 10-K, and include, among others, the following: risks relating to the enterprise initiative, including the risk that NIKE is not able to identify opportunities to deliver anticipated cost savings, risks related to the preliminary nature of the estimate of the charges to be incurred in connection with the enterprise initiative, which is subject to change as NIKE refines the estimate over time, risks related to any delays in the timing for implementing the initiative or potential disruptions to NIKE's business or operations as it executes on the initiative, and other factors that may cause NIKE to be unable to achieve the expected benefits of the initiative; the size and growth of the overall athletic or leisure footwear, apparel and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic or leisure footwear, apparel and equipment for consumers and endorsers; NIKE's ability to successfully innovate and compete in various categories; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products and sports; seasonal and geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products and the various market factors described above; international, national and local political, civil, economic and market conditions, including high, and increases in, inflation and interest rates; our ability to execute on our sustainability strategy and achieve our sustainability-related goals and targets, including sustainable product offerings; difficulties in implementing, operating and maintaining NIKE's increasingly complex information technology systems and controls, including, without limitation, the systems related to demand and supply planning and inventory control; interruptions in data and information technology systems; consumer data security; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance orders may not be indicative of future revenues due to changes in shipment timing, the changing mix of orders with shorter lead times, and discounts, order cancellations and returns; the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE's products; increases in the cost of materials, labor and energy used to manufacture products; new product development and introduction; the ability to secure and protect trademarks, patents and other intellectual property; product performance and quality; customer service; adverse publicity and an inability to maintain NIKE's reputation and brand image, including without limitation, through social media or in connection with brand damaging events; the loss of significant customers or suppliers; dependence on distributors and licensees; business disruptions; increased costs of freight and transportation to meet delivery deadlines; increases in borrowing costs due to any decline in NIKE's debt ratings; changes in business strategy or development plans; general risks associated with doing business outside of the United States, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, sanctions, political and economic instability, conflicts and terrorism; the potential impact of new and existing laws, regulations or policy, including, without limitation, tariffs, import/export, trade, wage and hour or labor and immigration regulations or policies; changes in government regulations; the impact of, including business and legal developments relating to, climate change, extreme weather conditions and natural disasters; litigation, regulatory proceedings, sanctions or any other claims asserted against NIKE; the ability to attract and retain qualified employees, and any negative public perception with respect to key personnel or our corporate culture, values or purpose; the effects of NIKE's decision to invest in or divest of businesses or capabilities; health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic; and other factors referenced or incorporated by reference in this report and other reports.

Investors should also be aware that while NIKE does, from time to time, communicate with securities analysts, it is against NIKE's policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that NIKE agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, NIKE has a policy against confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of NIKE.

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2023.