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-owned
retail stores and through digital platforms (which we refer to collectively as
our "NIKE Direct" operations), to retail accounts and to a mix of independent
distributors, licensees and sales representatives in virtually 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 Offense, we
are focusing on our Triple Double strategy, with the objective of doubling the
impact of innovation, increasing our speed and agility to market and growing our
direct connections with consumers.
COVID-19 UPDATE
A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in
December 2019, and subsequently declared a pandemic by the World Health
Organization. To date, COVID-19 has surfaced in nearly all regions around the
world and resulted in travel restrictions and business slowdowns or shutdowns in
affected areas. As a result, COVID-19 has impacted our business globally,
including through store closures or reduced operating hours and decreased retail
traffic. In particular, the outbreak and preventive measures taken to help curb
the spread had material adverse impacts on our operations and business results
in Greater China during the third quarter of fiscal 2020, following the
temporary closure of, or reduced operating hours in, approximately 75 percent of
NIKE-owned and partner stores within the region. Similarly, subsequent to the
end of the third quarter of fiscal 2020, nearly all NIKE-owned stores outside of
Greater China and Korea are closed to reduce the spread of COVID-19 and at this
time we cannot reasonably estimate the length of time these closures will remain
in effect. Certain of our wholesale partners have also closed stores, or reduced
operating hours, resulting in lower than expected sales and a slowing of receipt
of shipments of product from NIKE. Furthermore, even after reopening there can
be no assurance as to the time required to regain operations and sales at prior
levels.
COVID-19 has also impacted our distribution centers and our third-party
manufacturing partners and other vendors, including through the effects of
facility closures, reductions in operating hours, labor shortages, and real time
changes in operating procedures to accommodate social distancing guidelines and
additional cleaning and disinfection procedures.
In response to the outbreak and business disruption, first and foremost, we have
prioritized the health and safety of our employees and we have closed our
stores. However, our digital commerce remains open, supported by the employees
in the distribution centers. During the third quarter of fiscal 2020 digital
remained our fastest growing channel, growing 36% on a currency-neutral basis
with each of our Geographies and Converse exceeding 30% of digital revenue
growth in the quarter. Additionally, as of early April 2020, approximately
95 percent of NIKE-owned and partner stores in Greater China are open. We are
beginning to see our Greater China business recover with continued strong
digital demand and retail store traffic increasing on a week-over-week basis. In
North America and EMEA, digital commerce continues to experience strong demand
versus the prior year.
We continue to monitor the rapidly evolving situation and guidance from
international and domestic authorities, including federal, state and local
public health authorities and may take additional actions based on their
recommendations. In these circumstances, there may be developments outside our
control requiring us to adjust our operating plan. As such, given the dynamic
nature of this situation, the Company cannot reasonably estimate the impacts of
COVID-19 on our financial condition, results of operations or cash flows in the
future. However, we do expect that it will have a material adverse impact on our
future revenue growth as well as our overall profitability and may lead to
higher than normal inventory levels and revised payment terms with certain of
our wholesale customers, higher sales-related reserves, factory cancellation
costs and a volatile effective tax rate driven by changes in the mix of earnings
across the Company's jurisdictions.
THIRD QUARTER OVERVIEW
As we continue to execute against the Consumer Direct Offense, we are focused on
optimizing country operating models across our global portfolio and we remain
committed to investing in our most significant growth opportunities. During the
third quarter of fiscal 2020, we announced our intention to sell our NIKE Brand
businesses in Brazil, Argentina, Chile and Uruguay to strategic third-party
distributors in an effort to more personally serve consumers in these respective
marketplaces while driving sustainable, profitable growth. These transactions
are expected to close in the first half of fiscal 2021. As a result of this
decision, the related assets and liabilities of these entities were classified
as held-for-sale on the Unaudited Condensed Consolidated Balance Sheets as of
February 29, 2020. Additionally, we recognized a non-recurring impairment charge
of $400 million, within Other (income) expense, net on the Unaudited Condensed
Consolidated Statements of Income, classified within Corporate. This

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charge was primarily due to the anticipated release of non-cash cumulative
foreign currency translation losses, and could fluctuate due to changes in
exchange rates up to the date of close. In future quarters, as we shift from a
wholesale and direct to consumer operating model to a distributor operating
model within these countries, we expect consolidated NIKE, Inc. and APLA revenue
growth will be reduced due to differences in commercial terms. However, we
expect the future operating model to have a favorable impact on our overall
profitability as we reduce selling and administrative expenses, as well as
lessen exposure to foreign exchange rate volatility.
On October 29, 2019, we signed a definitive agreement to sell the assets and
liabilities of our wholly owned subsidiary brand, Hurley. The transaction closed
on December 6, 2019, and the impacts of the divestiture are not considered
material to the Company.
For the third quarter of fiscal 2020, NIKE, Inc. Revenues increased 5% to $10.1
billion compared to the third quarter of fiscal 2019. On a currency-neutral
basis, Revenues increased 7%. Net income was $847 million and diluted earnings
per common share was $0.53 for the third quarter of fiscal 2020, compared to Net
income of $1,101 million and diluted earnings per common share of $0.68 for the
third quarter of fiscal 2019.
Income before income taxes decreased 32% compared to the third quarter of fiscal
2019, as revenue growth was offset by the $400 million non-recurring impairment
charge related to our transition to a distributor model in Brazil, Argentina,
Chile and Uruguay, a decline in gross margin, as well as higher selling and
administrative expense. The NIKE Brand, which represents over 90% of NIKE, Inc.
Revenues, delivered 5% revenue growth. On a currency-neutral basis, NIKE Brand
revenues grew 6%, driven by higher revenues in EMEA, North America and APLA,
offset by declines in Greater China as a result of the impacts from COVID-19.
Additionally, NIKE Brand revenues experienced growth across footwear and
apparel, as well as in nearly all key categories, primarily Sportswear and the
Jordan Brand. Revenues for Converse increased 9% and 11% on a reported and
currency-neutral basis, respectively, mainly driven by double-digit growth in
Europe, as well as through digital globally.
Our effective tax rate was 3.9% for the third quarter of fiscal 2020 compared to
14.7% for the third quarter of fiscal 2019, primarily due to the proportion of
income earned in the U.S. and discrete items including a more favorable impact
from stock-based compensation, as well as benefits related to a modification of
the treatment of certain research and development expenditures.
Diluted earnings per common share reflects a 1% decline in the weighted average
diluted common shares outstanding, driven by our share repurchase program.
While foreign currency markets remain volatile, in part due to geopolitical
dynamics leading to a stronger U.S. Dollar, we continue to see opportunities to
drive future growth and profitability. We remain committed to effectively
managing our business to achieve our financial goals over the long-term by
executing against the operational strategies outlined above.
USE OF NON-GAAP FINANCIAL MEASURES
Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial
measures, including references to wholesale equivalent revenues,
currency-neutral revenues as well as Total NIKE Brand earnings before interest
and taxes (EBIT) and Total NIKE, Inc. EBIT, which should be considered in
addition to, and not in lieu of, the financial measures calculated and presented
in accordance with accounting principles generally accepted in the United States
of America ("U.S. GAAP"). 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.
Currency-neutral revenues are calculated using actual exchange rates in use
during the comparative prior year period to enhance the visibility of the
underlying business trends excluding the impact of translation arising from
foreign currency exchange rate fluctuations. EBIT is calculated as Net Income
before Interest expense (income), net and Income tax expense in the Unaudited
Condensed Consolidated Statements of Income.
Management uses these non-GAAP financial 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. However, references to
wholesale equivalent revenues, currency-neutral revenues and EBIT 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 non-GAAP measures used by other companies.

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RESULTS OF OPERATIONS
                                             THREE MONTHS ENDED                                     NINE MONTHS ENDED
(Dollars in millions, except
per share data)               FEBRUARY 29, 2020   FEBRUARY 28, 2019  % CHANGE       FEBRUARY 29, 2020   FEBRUARY 28, 2019  % CHANGE
Revenues                     $          10,104   $           9,611          5  %   $          31,090   $          28,933          7  %
Cost of sales                            5,631               5,272          7  %              17,202              16,092          7  %
Gross profit                             4,473               4,339          3  %              13,888              12,841          8  %
Gross margin                              44.3 %              45.1 %                            44.7 %              44.4 %
Demand creation expense                    870                 865          1  %               2,769               2,739          1  %
Operating overhead expense               2,413               2,226          8  %               7,166               6,557          9  %
Total selling and                        3,283               3,091          6  %               9,935               9,296          7  %
administrative expense
% of revenues                             32.5 %              32.2 %                            32.0 %              32.1 %
Interest expense (income),                  12                  12          -                     39                  37          -

net


Other (income) expense, net                297                 (55 )        -                    223                 (50 )        -
Income before income taxes                 881               1,291        -32  %               3,691               3,558          4  %
Income tax expense                          34                 190        -82  %                 362                 518        -30  %
Effective tax rate                         3.9 %              14.7 %                             9.8 %              14.6 %
NET INCOME                   $             847   $           1,101        -23  %   $           3,329   $           3,040         10  %
Diluted earnings per common  $            0.53   $            0.68        -22  %   $            2.09   $            1.87         12  %
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