Nike Inc. (NYSE:NKE)

The financial analysis of the quarterly data reveals several notable trends in profitability, cost management, and expense patterns over the examined periods.

Gross Profit Margin

The gross profit margin, expressed as a percentage of revenues, generally fluctuates between the mid-40% range, with a low point observed in May 2020 at approximately 37.27%, likely influenced by external economic factors during that period. Subsequently, the gross profit margin recovered and stabilized around the mid-40% range through to mid-2024. However, a declining trend is noticeable toward the latest quarters, with values decreasing from around 45.36% in late 2023 to approximately 42.18% by August 2025, indicating some pressure on cost of sales or changes in product mix.

Cost of Sales

The cost of sales shows an inverse pattern to gross profit, ranging mostly between approximately 54% and 60% of revenues. A marked increase in cost of sales was evident in May 2020, peaking at about 62.73% of revenues. This elevated level recedes but again escalates slightly in recent periods, reaching levels close to or above 58% by mid-2025. This pattern suggests challenges in managing production or procurement costs consistently.

Operating Expenses

Operating overhead and selling and administrative expenses together constitute a significant portion of revenues. The combined selling and administrative expenses remain relatively stable at approximately 30-35% of revenues, though there is a notable spike in May 2020, likely associated with increased costs due to exceptional circumstances. Operating overhead expenses are generally stable but exhibit increases in some periods, such as May 2020 (around 37.51%) and into 2025, indicating possible expansion or inefficiencies in overhead control.

Demand Creation Expense

Demand creation expenses fluctuate between approximately 6.4% and 11% of revenues. The lowest point is observed around August and November 2020, after which the expense averages near 8-10%. An upward trend in these expenses occurs in later periods, rising to around 10-11% by mid-2025, which could reflect heightened marketing or promotional activities aiming to support revenues amid competitive pressures.

Operating Income

Operating income as a percentage of revenues exhibits considerable volatility. It declined sharply into negative territory during May 2020 at approximately -13.27%, reflecting the exceptional pressures of that quarter. This was followed by a strong recovery, reaching peaks around 17% by August 2021. However, a declining trend in operating income is observable after early 2023, with percentages falling to below 3% in some recent periods, suggesting tightening operating margins and increased expense burdens.

Interest and Other Income (Expense), Net

Interest expense trends downward over time, improving from consistent negative values in the range of -0.1% to -0.8% toward slight positive values in recent quarters, indicating improved interest income or reduced debt-related costs. Other income remains relatively minor but positive overall, with occasional quarters showing small negative values, contributing modestly but variably to overall profitability.

Income Before Income Taxes and Net Income

Income before income taxes mirrors operating income trends, with a pronounced dip in May 2020 (-12.74%), followed by recovery and fluctuating between approximately 11% and 17% in most quarters until early 2023. Thereafter, a downward trajectory appears, with recent income before taxes declining sharply to below 3% in some quarters of 2025. Net income follows a similar pattern, albeit consistently slightly lower due to tax impacts. Notably, net income experienced a steep drop into negative during May 2020 but rebounded strongly thereafter. The later trend indicates a potential erosion of net profitability margins, decreasing to around 6% or lower by mid-2025.

Income Tax Expense

Income tax expense fluctuates mostly between -1% and -3% of revenues, with exceptional positive tax expense values in limited quarters, suggesting tax benefits or credits impacting net outcomes. The variability suggests the company’s tax liability is sensitive to pre-tax earnings volatility and other tax planning factors.

In summary, the data reflects significant operational stresses during mid-2020, with recovery thereafter. However, in recent quarters, profitability metrics have shown signs of contraction, driven by rising costs of sales, increasing demand creation and operating expenses, and resulting in diminished operating and net income margins. The trends suggest a need for management focus on cost control and efficiency to sustain earnings performance amid ongoing pressures.