When a refund flatters the accounts, reading one off effects properly

The short version

• In the fourth quarter of financial year 2026 a one off tariff refund improved Nike's gross margin.
• Adjusted for that effect it was around 40.2 percent, that is only 0.1 points below the previous quarter.
• Management had previously expected a decline of 0.25 to 0.75 points.

A result that looks unambiguous

Quarterly figures look unambiguous at first glance. Revenue, profit, margin. In fact almost every result contains items that occur only once and distort the comparison with the previous quarter.

Nike provides a current example. In the fourth quarter of financial year 2026 a one off tariff refund improved the gross margin. Adjusted for that effect it was around 40.2 percent, that is only 0.1 points below the previous quarter. Management had previously expected a decline of 0.25 to 0.75 points.

Without the adjustment the margin would look better than the ongoing business allows.

The first place to look is the adjusted figures

They can be spotted in several places. Companies report adjusted figures alongside the official ones, often with the addition adjusted or comparable.

The addition is therefore the first clue. Where it appears, the company has itself stripped something out, and it is worth looking at what exactly.

The second place to look is the cash flow statement

A second place to look is the cash flow statement.

Both places complement each other. The adjusted figures show what the company itself regards as one off. The cash flow statement shows whether money stands behind the reported profit.

Assessment

The Nike case is instructive because the one off effect there exceptionally produced a positive picture, while the actual news was the surprisingly stable adjusted margin.

Anyone who reads only the reported figure draws the wrong conclusion in such cases, and in both directions. Some companies look better than they are, others worse.

My rule of thumb on this is simple. When a margin deviates unexpectedly strongly, it is worth looking first for a one off item and only then for an explanation in the business.

Frequently asked questions

What is a one off effect

An item that influences the result but does not repeat. Typical cases are sales of company units, court rulings, insurance payouts, restructuring costs, back tax payments or tariff refunds. To judge earning power such items have to be stripped out.

How did the effect work out at Nike

In the fourth quarter of financial year 2026 a one off tariff refund improved the gross margin. Adjusted for that effect it was around 40.2 percent and therefore only 0.1 points below the previous quarter, while management had expected a decline of 0.25 to 0.75 points.

Are adjusted figures reliable

They are not regulated by law, every company decides for itself what it strips out. That makes the ongoing business visible and is at the same time open to window dressing. It becomes noticeable when a company strips out special costs every year that evidently do repeat after all.

This analysis is for information only and is not investment advice.