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.
Since fiscal 2018, through the Consumer Direct Offense and our Triple Double
strategy, we have focused on doubling the impact of innovation, increasing our
speed and agility to market and growing our direct connections with consumers.
In June 2020, we announced a new digitally empowered phase of the Consumer
Direct Offense strategy: Consumer Direct Acceleration. This strategic
acceleration will focus on three specific areas. First, creating the marketplace
of the future through more premium, consistent and seamless consumer experiences
that more closely align with what consumers want and need. This strategy will
lead with NIKE Digital and our owned stores, as well as through select strategic
partners who share our marketplace vision. Second, we will align our product
creation and category organizations around a new consumer construct focused on
Men's, Women's and Kids'. This approach is intended to allow us to create
product that better meets individual consumer needs, including more
specialization of our category approach, while re-aligning and simplifying our
offense to accelerate our largest growth opportunities. In particular, we expect
to reinvest in our Women's and Kids' businesses and also simplify our operating
model across the remainder of the Company to optimize effectiveness. Third, we
will unify investments in data and analytics, demand sensing, insight gathering,
inventory management and other areas against an end-to-end technology foundation
to 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.
As a result of our strategic acceleration, management announced on July 22,
2020, a series of leadership and operating model changes to streamline and speed
up our execution. These changes will result in a net reduction of our global
workforce and we expect to incur pre-tax charges of approximately $315 million,
the majority of which relate to employee termination costs and, to a lesser
extent, stock-based compensation expense. These amounts reflect the continued
evaluation and variability of our original estimate of employee termination
costs and required changes in assumptions used to calculate stock-based
compensation expense. For the first nine months of fiscal 2021, we incurred
pre-tax charges of $248 million and expect all remaining actions to be
substantially complete by the end of fiscal 2021. We expect future annual
wage-related savings will be reinvested to execute against this next phase of
our strategy. For more information related to our organizational realignment and
related costs, see Note 14 - Restructuring within the accompanying Notes to the
Unaudited Condensed Consolidated Financial Statements.
COVID-19 UPDATE
The COVID-19 pandemic continues to create volatility in our business
performance. During the third quarter of fiscal 2021, disruption in the global
supply chain due to container shortages, transportation delays and U.S. port
congestion interrupted the flow of our inventory. Specifically in North America,
this caused higher in-transit inventory levels and a delay of shipments to our
wholesale partners, resulting in lower than expected revenue growth. We expect
the majority of delayed shipments to our wholesale partners from the third
quarter will take place in the fourth quarter of fiscal 2021. Within EMEA,
additional COVID-19 related lockdowns caused mandatory store closures of 45% of
our NIKE-owned stores during the last two months of the third quarter, as well
as closures for our wholesale partner stores, which contributed to the 9%
decline in EMEA's currency-neutral revenues. In Greater China, revenues
increased 42% on a currency-neutral basis as we experienced growth across
wholesale and NIKE Direct, in part reflecting the impacts of COVID-19 in the
prior year.

Our NIKE Direct business continues to fuel our growth as we navigate through the
pandemic, leveraging our digital platforms with our store footprint to connect
directly with the consumer. NIKE Brand digital revenues grew 54% and 71%, on a
currency-neutral basis, for the third quarter and first nine months of fiscal
2021, respectively, with strong double-digit growth across each of our
geographies. During the quarter, we continued to experience a decline in
comparable store sales in EMEA, North America and APLA primarily due to reduced
physical retail traffic, in part resulting from temporary store closures and
safety-related measures in response to COVID-19. As of April 2, 2021,
approximately 85% of our owned stores were open with some operating on reduced
hours.

During the quarter, we continued to reduce discretionary spending while
investing in our digital transformation. As a result, total selling and
administrative expense declined 7% for the third quarter and the first nine
months of fiscal 2021 compared to the same periods in the prior year. However,
we expect Demand creation expense to increase in future periods as we rebuild
our

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investment towards pre-COVID-19 levels. Our liquidity position remains strong
and we ended the third quarter with $12.5 billion of Cash and equivalents and
Short-term investments.

We continue to monitor the ongoing and evolving situation, as well as 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. While our results over the
course of fiscal 2021 have been positive to date, there remains the risk that
COVID-19 could have material adverse impacts on our future revenue growth as
well as our overall profitability and may lead to higher than normal inventory
levels in various markets, adverse impacts on the global supply chain, revised
payment terms with certain of our wholesale customers, higher sales-related
reserves and a volatile effective tax rate driven by changes in the mix of
earnings across the Company's jurisdictions.
THIRD QUARTER OVERVIEW
For the third quarter of fiscal 2021, NIKE, Inc. Revenues increased 3% to $10.4
billion compared to the third quarter of fiscal 2020. On a currency-neutral
basis, Revenues decreased 1%. Net income was $1,449 million and diluted earnings
per common share was $0.90 for the third quarter of fiscal 2021, compared to Net
income of $847 million and diluted earnings per common share of $0.53 for the
third quarter of fiscal 2020.
Income before income taxes increased 86% compared to the third quarter of fiscal
2020, primarily due to the $400 million impairment charge recognized in the
prior year related to our planned transition to a distributor operating model in
Brazil, Argentina, Chile and Uruguay, as well as lower selling and
administrative expense, higher revenues and gross margin expansion. The NIKE
Brand, which represents over 90% of NIKE, Inc. Revenues, increased 2% compared
to the third quarter of fiscal 2020. On a currency-neutral basis, NIKE Brand
revenues decreased 2%, driven by lower revenues in North America, EMEA and APLA,
partially offset by an increase in Greater China. Additionally, NIKE Brand
currency-neutral revenues experienced declines across footwear and apparel, as
well as declines in most key categories, primarily Football (Soccer) and
Running, partially offset by growth in the Jordan Brand. Revenues for Converse
increased 13% and 8% on a reported and currency-neutral basis, respectively, led
by strong digital performance in North America and Europe.
Our effective tax rate was 11.4% for the third quarter of fiscal 2021, compared
to 3.9% for the third quarter of fiscal 2020, primarily due to decreased
benefits from discrete items, such as a modification of the treatment of certain
research and development expenditures recognized in the prior year, a less
favorable impact from stock based compensation, and a shift in the proportion of
earnings taxed in the U.S., in part due to the impact of the COVID-19 pandemic.
During the third quarter of fiscal 2020, we entered into definitive agreements
to sell our NIKE Brand businesses in Brazil, Argentina, Chile and Uruguay and to
shift to a distributor operating model. During the third quarter of fiscal 2021,
the transaction with Grupo SBF S.A. to purchase substantially all of our NIKE
Brand operations in Brazil closed. Additionally, during the third quarter of
fiscal 2021, we mutually agreed with Grupo Axo to terminate the sale and
purchase agreement for the transition of NIKE's businesses in Argentina, Chile
and Uruguay to a distributor partnership. However, as we remain committed to
selling the legal entities in all three countries and granting distribution
rights to third-party distributors, the assets and liabilities of the entities
have remained classified as held-for-sale on our Unaudited Condensed
Consolidated Balance Sheets. For more information see Note 13 - Acquisitions and
Divestitures 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, 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 FEBRUARY 28, FEBRUARY 29, 

                FEBRUARY 28, FEBRUARY 29,
data)                                          2021         2020            % CHANGE           2021         2020            % CHANGE
Revenues                                   $  10,357    $  10,104               3  %       $  32,194    $  31,090               4  %
Cost of sales                                  5,638        5,631               0  %          17,887       17,202               4  %
Gross profit                                   4,719        4,473               5  %          14,307       13,888               3  %
Gross margin                                    45.6  %      44.3  %                            44.4  %      44.7  %
Demand creation expense                          711          870             -18  %           2,117        2,769             -24  %
Operating overhead expense                     2,330        2,413              -3  %           7,166        7,166               0  %

Total selling and administrative expense 3,041 3,283 

    -7  %           9,283        9,935              -7  %
% of revenues                                   29.4  %      32.5  %                            28.8  %      32.0  %
Interest expense (income), net                    64           12               -                199           39               -
Other (income) expense, net                      (22)         297               -                 18          223               -
Income before income taxes                     1,636          881              86  %           4,807        3,691              30  %
Income tax expense                               187           34             450  %             589          362              63  %
Effective tax rate                              11.4  %       3.9  %                            12.3  %       9.8  %
NET INCOME                                 $   1,449    $     847              71  %       $   4,218    $   3,329              27  %

Diluted earnings per common share $ 0.90 $ 0.53

   70  %       $    2.62    $    2.09              25  %


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