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Nike Inc. (NYSE:NKE) posted strong fiscal 2011 second-quarter earnings of 94 cents per share, reflecting a growth of 24% from the year-ago earnings of 76 cents. Earnings for the quarter also surpassed the Zacks Consensus Estimate of 88 cents. Healthy top line growth coupled with higher gross margin and effective inventory management were the key highlights of the quarter.

Quarterly Details
Despite macroeconomic headwinds, Nike’s total revenue grew 10% to $4,842 million from $4,405 million in the prior-year quarter. The company continued to benefit from its strategy of consistently focusing on innovative products that provide an edge over its rivals. Revenue for the quarter outpaced the Zacks Consensus Estimate of $4,806 million.

During the quarter, Nike witnessed revenue growth across all geographic regions, except Japan and Western Europe. In Japan and Western Europe, revenue plunged 14% and 7%, respectively. Revenue growth was primarily led by emerging markets (namely, Brazil and India), which rose 24% year over year, followed by growth in China, North America, and Central and Eastern Europe of 20%, 14% and 7%, respectively.

Nike’s quarterly gross profit grew 12% year over year to $2,193 million, while gross margin expanded 80 basis points to 45.3%. The solid growth was due primarily to better product margins, favorable profitability from Direct-to-Consumer operations and profitable close-out sales. Global inventories grew 8% year over year to $2,348 million.

Nike ended the quarter with cash and cash equivalents of $1,768 million compared with a cash balance of $2,035 million in the year-ago period. The company repurchased 3.5 million shares for about $280 million, in the reported quarter, as part of its four-year, $5 billion program approved in September 2008.

Future Orders
Nike reported an 11% year-over-year increase in future orders scheduled for delivery from December 2010 through April 2011, reaching $7.7 billion. Future orders takes into account orders that are scheduled for delivery in the coming season and are a widely used metric to gauge the performance of retailers.

Headquartered near Beaverton, Oregon, Nike is the world's leading supplier of athletic shoes and apparel, and a major manufacturer of sports equipment.

Considering the apprehensions about erratic consumer spending and stiff competiton across the globe from Adidas, Puma and Deckers Outdoor Corp. (NYSE:DECK), we are compelled to hold on to the 'Neutral' recommendation in the long run.

With the expectation that the stock will outperform the broader U.S.equity market over the next one-to-three months, Nike currently has a Zacks #2 Rank (Buy) rating.

Source: Nike Beats on Strong Top Line