Company DCF analysis file
NIKE DCF Analysis
NIKE’s DCF needs a funded channel-recovery case, rather than a margin extrapolation from a nearly unchanged revenue total. Wholesale and Direct have different collection and cost patterns. Product costs, demand creation, inventory and tariff-refund timing must be reconciled before treating accounting profit as recurring investor cash.
Read gross profit together with demand creation and overhead
Fiscal years ended May 31, 2025 and May 31, 2026; consolidated NIKE, Inc. Later Q1 FY2027 is a separate reporting period. Amounts use the monetary scale stated in each table caption. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2025 | FY2026 |
|---|---|---|
| Revenue | 46,309 | 46,398 |
| Cost of sales | 26,519 | 26,487 |
| Gross profit | 19,790 | 19,911 |
| Demand creation | 4,689 | 4,754 |
| Operating overhead | 11,399 | 11,360 |
| Selected core operating subtotal: derived | 3,702 | 3,797 |
| Net income | 3,219 | 3,108 |
| Gross margin: derived | 42.7% | 42.9% |
The selected subtotal deducts demand creation and overhead from gross profit. It excludes net interest and the other income/expense line and is not the issuer’s EBIT definition. Keep that definition explicit before using it as a candidate operating base for a DCF.
Reported gross profit includes the filing’s tariff-refund accounting benefit. A receivable recognized at the reporting date and its later collection are distinct from current customer receipts. Do not extrapolate the benefit as a permanent product margin or add the same refund to cash twice.
Reconcile channels without adding Direct’s components again
The annual channel table gives the following FY2026 revenue population. NIKE Direct already includes its own digital and store sales.
| Population | Revenue |
|---|---|
| NIKE Brand wholesale | 27,453 |
| NIKE Direct | 17,720 |
| Global Brand Divisions | 49 |
| Converse | 1,174 |
| Corporate | 2 |
| NIKE, Inc. | 46,398 |
A wholesale increase and Direct decline can leave total sales little changed while altering gross margin, selling cost and receivable timing. Forecast sell-through, promotion and replenishment by channel before assigning a recovery margin. Adding digital revenue to the Direct total would overstate the population.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2026 |
|---|---|
| Selected core operating subtotal | 3,797 |
| Other income and net interest income | 103 |
| Income tax | -792 |
| Net income: subtotal | 3,108 |
| Depreciation / amortization | 747 |
| Other non-cash / reconciliation | 691 |
| Operating assets and liabilities | -1,678 |
| Operating cash: subtotal | 2,868 |
| Property additions | -684 |
| After property additions: derived | 2,184 |
Other non-cash reconciliation groups deferred tax, share compensation, impairments/other and currency adjustments. Operating balances include lease-related and non-current movements along with receivables, inventory and payables. They cannot be labeled purely as wholesale customer-collection pressure.
The year-end receivable included $684 million of outstanding tariff refunds, with substantially all remaining amounts collected after year-end. Preserve the reporting-date and collection-date distinction. The displayed FY2026 cash does not automatically gain that receivable, and this page does not turn it into a normalized cash adjustment.
Test product margin with the channel and funding case intact
Illustration: improve gross margin by one percentage point on fixed FY2026 revenue, holding demand creation and overhead fixed. This isolates a product-cost change; it is not guidance about pricing, tariff recovery or a demonstrated channel turnaround.
| Measure | Historical basis | Illustrative case |
|---|---|---|
| Revenue | 46,398 | 46,398 |
| Cost of sales | 26,487 | 26,023.0 |
| Gross profit | 19,911 | 20,375.0 |
| Selected core operating subtotal | 3,797 | 4,261.0 |
The exact pre-tax operating improvement is $463.98 million, displayed to one decimal. A credible operating case still needs full-price demand, controlled inventory and supporting brand investment. Carry taxes, channel collections and supplier payments through the scenario before treating the improvement as a cash benefit.
Keep interim reporting separate from the annual basis
Q1 FY2027 covers 2026-06-01 through 2026-08-31 and was released 2026-10-01. Revenue was $11,213 million in this quarter. Source: official Q1 FY2027 results.
This first quarter belongs to FY2027 even though it falls within calendar 2026. Keep it separate from the two complete years above. The forward case needs its own channel and inventory bridge, with tariff-refund timing kept outside ordinary customer cash assumptions.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Revenue and cost | Forecast wholesale and Direct demand, net selling price, promotion and product costs together. |
| Brand support | Retain demand creation and overhead needed for the proposed product pipeline and distribution mix. |
| Cash conversion | Separate customer receivables and inventory from tariff refunds and other special balances. |
| Reinvestment | Deduct physical and channel investment and operating funding once, with a consistent lease convention. |
| Valuation | Use an explicit operating tax case and a funded terminal recovery, then reconcile valuation-date capital costs, claims and dilution. |
A conventional enterprise bridge begins with operating earnings after assumed operating tax, adjusts non-cash allocations and deducts reinvestment and changes in operating funding. The defined subtotal here still needs a valuation classification check; starting from operating cash requires a financing and tax bridge. A higher terminal margin should follow a sustainable channel and product case, rather than perpetuating a reporting-period refund effect.
The NIKE company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
Company analysis