Nike Inc. (NYSE:NKE)

An analysis of the common-size income statement reveals a significant contraction in overall profitability margins over the observed period. Net income as a percentage of revenues declined from 12.86% in 2021 to 6.70% by 2026, indicating a steady erosion of the bottom line relative to total revenues.

Gross Margin Performance

Gross profit margins experienced a gradual downward trend, decreasing from 44.82% in 2021 to 42.91% in 2026. This contraction is driven by an increase in the cost of sales, which rose from 55.18% to 57.09% of revenues, suggesting rising production costs or pricing pressures.

Operating Expense Analysis

A substantial increase in operating expenditures is observed, primarily driven by selling and administrative expenses. These costs rose from 29.24% of revenues in 2021 to 34.73% in 2026. Specifically, demand creation expenses showed a marked increase, climbing from 6.99% to 10.25%, while operating overhead expenses rose from 22.25% to 24.48%.

Operating Income Compression

The combined impact of declining gross margins and rising operating expenses led to a significant compression of operating income. The operating margin fell from 15.58% in 2021 to 8.18% in 2026. The most acute drop occurred between 2024 and 2025, where operating income fell from 12.29% to 7.99%.

Non-Operating Items and Net Result

A positive trend is noted in net interest positioning, shifting from a net interest expense of -0.59% in 2021 to a net interest income of 0.11% in 2026. This was supported by an increase in interest income, which peaked at 0.87% in 2025. Despite these modest gains in non-operating income, they were insufficient to offset the decline in operating efficiency, resulting in the overall reduction of net income margins.