A refund in the base year: reading Nike's fiscal 2027 guidance from the filings

Sources: NIKE, Inc., Form 8-K filed 1 October 2026, accession 0000320187-26-000184, Items 2.02, 2.05 and 9.01, with Exhibit 99.1; Form 10-K for the fiscal year ended 31 May 2026, filed 15 July 2026, accession 0000320187-26-000088; Form 8-K filed 5 March 2026, accession 0000320187-26-000017, Item 2.05. All read directly from sec.gov. Figures marked as computed are arithmetic performed here on filed inputs, with the basis of each numerator and denominator stated beside it. Where two bases exist, both are given rather than one.

The short answer

The quarter is close to flat on the lines that matter and the filing says so. Pre-tax income was $921 million against $922 million, a change of nothing, and EBIT margin improved to 8.1 per cent from 7.7 per cent. The guidance is the part that moved, and the gap between $1.25 at the midpoint and the $2.10 reported last year is being read as the size of the deterioration. Three filed facts change that reading. The base year carries a tariff credit that cuts both ways. The dividend already consumes most or all of free cash flow, which is why the repurchase line is near zero. And the restructuring meant to fix the cost base has booked less than half of its disclosed charges.

1. What was filed on 1 October, and what the coverage carried

The 8-K is short and carries two substantive items. Item 2.02 furnishes the earnings release as Exhibit 99.1, which reports net income of $712 million against $727 million, down 2 per cent, on revenues of $11,213 million. Item 2.05, the one worth reading, is a costs-associated-with-exit-or-disposal disclosure for a programme the company calls Pace. It states that the board approved steps expected to result in pre-tax charges of approximately $1.0 billion, which is in addition to approximately $0.3 billion of severance costs recognized in fiscal 2026, that The Company expects approximately $0.3 billion to be recognized in fiscal 2027, with the remainder expected to be recognized through fiscal 2031. and that It is estimated that the majority of the charges will result in future cash expenditures. It also states that The Company expects the program to deliver approximately $2.5 billion in cumulative savings through fiscal 2031. and, in the sentence that governs how that number should be read, that The savings estimate is stated before the expected pre-tax charges described above and any future reinvestment.. Among the initiatives it lists are the establishment of a new campus in India and realigning the Company’s operating model into three geographies, which is a change to the reporting structure the segment tables above are built on.

The reporting was accurate on what it covered. CNBC, under Laya Neelakandan, published at 12:00 p.m. Eastern on 1 October 2026, carried the revenue figure, the China decline, the guidance range, the $2.5 billion of savings, the fifteen cents of restructuring expense and the fact that layoffs begin in 2027. It also supplied a detail the 8-K does not: the three geographies are to be the Americas, Asia Pacific and Greater China, and Europe, the Middle East and Africa. The Motley Fool, under Eric Volkman, published on 2 October 2026, set the $1.15 to $1.35 range against fiscal 2026's $2.10 per share. That is the right comparison to make. It is simply built on a base year that needs reading first.

2. A plan that was $300 million in March

Pace did not begin on 1 October. A Form 8-K filed on 5 March 2026 carried an Item 2.05 stating that management had approved organisational changes expected to result in pre-tax charges of approximately $300 million for the nine months ended February 28, 2026, primarily severance, and substantially all recognised in the third quarter of fiscal year 2026. That filing also contained the sentence that mattered most and attracted no attention: The Company continues to evaluate opportunities and may take additional actions which could lead to additional charges in future quarters.

It did. Note 18 of the 10-K filed four months later states that In fiscal 2026, the Company recognized $ 385 million of estimated employee severance costs related to organizational changes, of which $231 million was classified within operating overhead expense and $154 million within cost of sales. $385 million against an estimate of $300 million is $85 million more, or 28.3 per cent, computed. Then on 1 October the same programme acquired a further $1.0 billion of approved charges running to fiscal 2031.

Read as a sequence rather than three separate announcements, the disclosed cost of one reorganisation moved from about $300 million to about $1.385 billion in seven months. Nothing about that is irregular. Severance is recognised when a future related expense is probable and reasonably estimable, which is what Note 18 says, and an estimate that grows as a programme is scoped is the normal behaviour of that standard. The useful observation is about reading: the March filing disclosed a floor and said so in plain words, and the floor was read as a total.

The second half of the Item 2.05 disclosure is the part that has not happened yet. Of the $1.0 billion approved, about $0.3 billion is expected in fiscal 2027, leaving about $0.7 billion, or 70 per cent, to be recognised between fiscal 2028 and fiscal 2031. The filing adds that the majority will result in future cash expenditures. The cash lag is already visible in the year that has closed: of the $385 million charged in fiscal 2026, $142 million was paid in cash, 36.9 per cent, and $243 million remained in accrued liabilities at 31 May 2026. Note 18 states it plainly: During fiscal 2026, the Company made cash payments related to employee severance costs of $ 142 million. The charge and the cash are different events in different years, and the balance sheet is where the difference waits.

The savings figure needs the same care. $2.5 billion of cumulative savings through fiscal 2031 is stated, in the filing's own words, before the charges and before any future reinvestment. Set against the $1.385 billion of charges now disclosed, the arithmetic leaves about $1.115 billion before a reinvestment figure the filing does not quantify. That is not a criticism of the programme. It is a statement that the headline number and the net number are different numbers, and only one of them has been published.

3. The item in the base year, and why subtracting it would be wrong

This is the finding that changes the comparison everyone is making, and it does not point the way it first appears to.

On 20 February 2026 the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act were unauthorised. The 10-K states that in the fourth quarter of fiscal 2026 the company deemed recovery probable and that the Company recognized a benefit of $ 986 million in Cost of sales within the Consolidated Statements of Income for the recovery of IEEPA tariffs paid, of which $965 million was classified within North America and $21 million within Converse. On its own, $986 million is 25.3 per cent of fiscal 2026 pre-tax income of $3,900 million and 213 basis points of the reported gross margin of 42.91 per cent, computed. A reader who stopped there would subtract about $0.53 per diluted share from the $2.10 base and conclude that fiscal 2026 really earned about $1.57, making the guided fall far smaller than it looks.

That subtraction would be wrong, and the filing says why in the same sentence. The credit largely offsetting the impact of the IEEPA tariffs recognized during fiscal 2026. The tariffs were paid during fiscal 2026 and recovered in fiscal 2026. The year contains a cost and a roughly equal recovery, so the annual total is close to clean already, and removing one side of a two-sided item while leaving the other in place would overstate the adjustment by about as much as it corrects.

What survives is subtler and still useful. The cost accrued across the year and the credit landed in a single quarter, so fiscal 2026's annual total is close to clean while its quarterly shape is not. The fourth quarter carries the whole credit and the first three carry the cost. The filings do not disclose the tariff cost by quarter, so the size of that distortion cannot be computed here, and this file does not estimate it. Anyone building quarterly comparisons against fiscal 2026 is building them on a distribution that the annual figures conceal.

The cash consequence, by contrast, is fully quantified. At 31 May 2026 the Company received $ 302 million and recorded $ 684 million of outstanding IEEPA tariff receivables reflected within Accounts receivable, net, and Subsequent to May 31, 2026, the Company received substantially all of the remaining IEEPA tariff receivable.. So $684 million of the credit was income in fiscal 2026 and cash in fiscal 2027. That is why the cash flow statement shows the receivable movement at $1,207 million for fiscal 2026 against $257 million the year before: set the tariff receivable aside and the remaining movement is $523 million, computed, which is still twice the prior year but a different order of magnitude. And it is why the fiscal 2026 free cash flow figure has to be stated on two bases rather than one, which section 4 does.

4. The dividend met the cash flow, and the buyback moved

Three lines from one statement tell this part. Operating cash flow was $7,429 million in fiscal 2024, $3,698 million in fiscal 2025 and $2,868 million in fiscal 2026, a fall of 61.4 per cent across the two years, computed. Dividends paid rose in every one of those years, $2,169 million, $2,300 million, $2,407 million, and rose again in the first quarter of fiscal 2027, where the release states approximately $610 million returned through dividends, up 3 per cent. Repurchases of common stock went $4,250 million, $2,985 million, $146 million.

The 10-K is explicit about the last of those, and the language is the company's own: We paused repurchases under this program during the first quarter of fiscal 2026, and no shares were repurchased during the quarter ended 31 May 2026. Fiscal 2026's repurchases were 1.8 million shares for $122.4 million at an average of $67.63 per share. Across the programme since June 2022 the company had bought 124.4 million shares at an average of $97.57 for about $12.1 billion, with approximately $5.9 billion of the Company’s Class B Common Stock remains available for repurchase. In June 2026 the Board of Directors reapproved the current program to continue without a fixed expiration date and without increasing the aggregate amount authorized for repurchase. The authorisation is open and almost entirely unused.

Those two averages have to be compared carefully. Both are dollars per share paid under the same programme, so the basis matches, but the cumulative $97.57 covers four years of purchases and the fiscal 2026 $67.63 covers 1.8 million shares, 30.7 per cent lower. The filing records the pause and the prices. It states no reason for either, and none is supplied here, because a filing does not disclose intent.

What the filings do support is the arithmetic of the squeeze. Free cash flow for fiscal 2026, computed as operating cash flow less additions to property, plant and equipment, was $2,184 million as filed. Dividends of $2,407 million are 110.2 per cent of that. Add back the $684 million of tariff receivable collected after the year end, which belongs to the same credit that raised fiscal 2026 income, and free cash flow becomes $2,868 million and dividends are 83.9 per cent of it. Both bases are stated because the item is a timing difference and presenting either alone would mislead. On either basis the dividend absorbs the large majority of free cash flow, and that is the condition under which a buyback becomes the variable that moves.

Two further figures from the same statement complete the picture, and they are about the share count rather than the cash. Stock-based compensation in fiscal 2026 was $715 million, 4.9 times the repurchase figure, computed. With the buyback at $146 million there is nothing offsetting the issuance, and the direction of the share count has changed: basic weighted average shares in the first quarter were 1,483.6 million against 1,476.6 million, a rise of 7.0 million. Separately, and visible only on the fiscal 2026 balance sheet, retained earnings is a deficit of $155 million, against a deficit of $727 million a year earlier. Shareholders' equity of $14,865 million is almost entirely capital in excess of stated value at $15,158 million. Cumulative distributions and repurchases have exceeded cumulative retained profit, which is an ordinary outcome of a long and large buyback and is worth knowing before reading an equity line.

5. What the guidance range implies for the rest of the year

The guidance is two sentences and both are arithmetic once the first quarter is known. Revenues are expected to decline high-single digits in fiscal 2027, and the first quarter declined 4.3 per cent, computed on the filed dollar figures. Holding fiscal 2026 revenues of $46,398 million as the base, a 7 per cent full-year decline implies the remaining nine months fall about 7.9 per cent and a 9 per cent decline implies about 10.6 per cent, computed. The range therefore implies the rate of decline roughly doubles from here. Whether it does is a forecast, and this file makes none.

Earnings per share behaves the same way, and the release states the measure precisely: Adjusted Diluted earnings per share** is expected to be in the range of $1.15 to $1.35, which excludes approximately $0.15 of restructuring expenses related to Pace for fiscal 2027. Adjusted guidance of $$1.15 to $$1.35 excludes about $0.15 of Pace restructuring expense, so it is close to a like-for-like comparison with the first quarter's $0.48, which precedes the programme the board approved on 1 October. Subtracting, the remaining nine months are guided to produce $0.67 to $0.87, which is $0.22 to $0.29 a quarter against $0.48 in the first. Put as a share of the year, the first quarter is 35.6 to 41.7 per cent of the guided total. In fiscal 2026 the first quarter was 23.3 per cent of the reported year, or about 31.2 per cent if the tariff credit alone is removed from the full year. Both comparators point the same way, and both are shown because the second is not a clean base.

One caution, stated rather than buried. The fourth quarter of fiscal 2026 carries the whole tariff credit, so the fiscal 2026 columns are affected by the quarterly distribution described in section 3 as well as by the credit. The chart illustrates direction and is a poor instrument for precision, and the filings do not contain what would make it precise.

6. The channel shift has a working capital bill

The 10-K describes one of the actions under way as Repositioning NIKE Brand Digital as a full-price platform and reinvesting in wholesale distribution. Revenue recognition in the same document explains what that does to the balance sheet, in two sentences nobody puts together: payment is generally required within 90 days or less of shipment to or receipt by the wholesale customer, while Payment is due at the time of sale for retail store and digital commerce transactions.

A dollar moved from direct to wholesale is a dollar that waits up to ninety days instead of arriving at the till. The first quarter shows it. Revenues fell 4.3 per cent and accounts receivable rose 5.6 per cent to $5,242 million from $4,962 million. Days sales outstanding, computed as receivables over quarterly revenues times the 92 days both quarters contain, went from 39.0 days to 43.0 days, 4.1 days longer. NIKE Direct fell to 37.8 per cent of NIKE Brand revenue from 39.7 per cent, 191 basis points. North America is the clearest case: wholesale rose $245 million and direct fell $138 million, which nets to the $107 million the segment actually grew.

Two balance sheet lines sit alongside that and deserve naming. Accounts payable fell 9 per cent to $3,420 million, and Note 19 of the 10-K discloses that at 31 May 2026 the Company had approximately $ 1.1 billion, $ 1.1 billion and $ 0.8 billion, respectively, of confirmed outstanding supplier obligations under voluntary supplier finance programmes. Against accounts payable of $3,600 million at that same date, 30.6 per cent of the payable balance was confirmed under those programmes, computed on two figures from the same balance sheet date. Both legs of that ratio are 31 May 2026 figures; the quarterly payable balance is a different date and is not mixed with it. Separately, income taxes payable fell from $706 million to $178 million, a $528 million reduction, which the release attributes to foreign tax audit settlements recognised in the current year and which also explains the effective tax rate rising to 22.7 per cent from 21.1 per cent.

7. Greater China stopped being the most profitable geography

The segment tables carry a reversal that the revenue percentages hide. A year ago Greater China earned the highest EBIT margin of the four geographies, $377 million of EBIT on $1,512 million of revenue, or 24.93 per cent. In the first quarter of fiscal 2027 it earns the lowest, $248 million on $1,180 million, or 21.02 per cent, a fall of 392 basis points, while the other three sit between 22.15 per cent and 22.92 per cent. Revenue fell $332 million and EBIT fell $129 million, so the decline reached profit faster than it reached sales.

Both sides of each ratio are segment-level figures from the same exhibit, so the comparison is on one basis. EBIT is a measure the company defines and publishes by segment rather than a GAAP subtotal, which the exhibit states, and it is used here because it is what the company provides at segment level. The 10-K adds, for fiscal 2027, that We expect negative impacts from Greater China and Converse to continue throughout fiscal 2027.

Converse is the smaller version of the same pattern and is worth one paragraph because of what is not on the balance sheet. Revenue fell 28 per cent to $263 million and EBIT fell 36 per cent to $25 million, taking the margin to 9.51 per cent from 10.66 per cent. Converse is 2.35 per cent of consolidated revenue, computed. Goodwill of $240 million and identifiable intangible assets of $259 million were unchanged year on year on the quarterly balance sheet, and the 10-K states that There were no accumulated impairment losses as of May 31, 2026 and 2025. The annual impairment test is performed in the fourth quarter of each fiscal year. The standards also require a test when events indicate the carrying amount may not be recoverable, and a 28 per cent revenue decline is the kind of fact they contemplate. No conclusion is drawn here: the carrying values are small, the filings record no impairment, and whether one is required is a judgement the company and its auditors make with information this file does not have.

8. What the filings do not say, and what runs the other way

A file that only pointed one way would be the wrong reading of a company whose pre-tax income was flat and whose margin improved. Five things run the other way or are not knowable, and they belong here rather than in a footnote.

Three things to take back to a smaller company

Sources

Questions this file answers

Is fiscal 2026's $2.10 per share inflated by the tariff refund?

Not in the way a single subtraction would suggest, and this is the most important point in this file. The 10-K states the $986 million credit largely offset the impact of the IEEPA tariffs recognised during fiscal 2026, so the cost and the recovery are both inside that year and the annual total is close to clean already. Removing the credit alone would take about $0.53 per diluted share out of the base and overstate the adjustment. What is distorted is the quarterly shape rather than the annual total, because the cost accrued across the year and the credit landed in the fourth quarter. The filings do not disclose the tariff cost by quarter, so that distortion is not quantified here.

Did the dividend exceed free cash flow in fiscal 2026?

On the figures as filed, yes. Operating cash flow was $2,868 million and additions to property, plant and equipment were $684 million, giving free cash flow of $2,184 million computed, against dividends paid of $2,407 million, which is 110.2 per cent. On a basis that adds the $684 million of IEEPA tariff receivable collected after the year end, free cash flow is $2,868 million and dividends are 83.9 per cent. Both bases are stated because the item is a timing difference. On either basis the dividend absorbs the large majority of free cash flow.

How much has the repurchase programme actually slowed?

Repurchase of common stock in the cash flow statement was $4,250 million in fiscal 2024, $2,985 million in fiscal 2025 and $146 million in fiscal 2026. The 10-K states repurchases were paused during the first quarter of fiscal 2026 and that no shares were repurchased in the quarter ended 31 May 2026. Fiscal 2026 was 1.8 million shares for $122 million at an average of $67.63 per share, against a programme average of $97.57 across 124.4 million shares. About $5.9 billion of the authorisation remains available and in June 2026 the board reapproved the programme without a fixed expiration date and without increasing the amount authorised.

Why did receivables rise while revenue fell?

The 10-K describes reinvesting in wholesale distribution and repositioning NIKE Brand Digital as a full-price platform. Its revenue recognition policy states that wholesale payment is generally required within 90 days or less of shipment or receipt, while payment is due at the time of sale for retail store and digital commerce transactions. Days sales outstanding computed on a 92 day quarter went from 39.0 days to 43.0 days.

What does the guidance range imply for the remaining nine months?

Holding fiscal 2026 revenues of $46,398 million as the base, a 7 per cent full-year decline implies the remaining nine months fall about 7.9 per cent and a 9 per cent decline implies about 10.6 per cent, computed, against 4.3 per cent in the first quarter. On earnings, adjusted guidance of $1.15 to $1.35 less the first quarter's $0.48 leaves $0.67 to $0.87 for three quarters, which is $0.22 to $0.29 a quarter. This is arithmetic on the company's own range and is not a forecast.