Nike's Winning Ways: Fool by Numbers

On Dec. 19, sportswear giant Nike (NYSE: NKE  ) released second-quarter 2008 earnings for the period ended Nov. 30.

• If there is one nit to pick with these results, it would be this: Earnings growth isn't keeping up with sales growth, so the margins are getting slimmer.
• On the other hand, free cash flow now outstrips net income, just the way Fools like it.
• Nike has few true rivals in the sportswear market. German powerhouse adidas AG (OTC BB: ADDYY.PK) is a four-star CAPS stock, with a 97% approval rating versus Nike's 93% -- but it's an illiquid Pink Sheets issue here in the States.

(Figures in millions, except per-share data)

Income Statement Highlights

	Q2 2008	Q2 2007	Change
Sales	$4,340	$3,822	13.5%
Net Profit	$359	$326	10.4%
EPS	$0.71	$0.64	10.9%
Diluted Shares	506.2	507.3	(0.2%)

Get back to basics with the income statement.

Margin Checkup

	Q2 2008	Q2 2007	Change*
Gross	44.3%	43.4%	0.9
Operating	11.3%	11.3%	(0.0)
Net	8.3%	8.5%	(0.2)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q2 2008	Q2 2007	Change
Cash + ST Invest.	$3,072	$1,907	61.0%
Accounts Rec.	$2,617	$2,376	10.2%
Inventory	$2,224	$2,167	2.6%

Liabilities	Q2 2008	Q2 2007	Change
Accounts Payable	$1,054	$880	19.7%
Long-Term Debt	$436	$384	13.8%

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q2 2008	Q2 2007	Change
Free Cash Flow	$511	$227	125.1%

Free cash flow is a Fool's best friend, even when we only have one part of the equation.

Competitive Context

	Market Cap (billions)	Trailing	CAPS Rating
Nike	$33.17	20.09	****
Crocs (:CROX)	$3.43	23	**
Under Armour (NYSE:UA)	$2.14	46.2	***
Columbia Sportswear (NASDAQ:COLM)	$1.63	11.9	****
Nautilus (NYSE:NLS)	$.19	64.5	**

Using the latest reported numbers from Yahoo! Finance and Motley Fool CAPS.

Keep your partners close and the competition in your vest pocket.

Related Foolishness:

• Dueling Fools: Crocs
• Under Armour's Taxing Quarter
• Why Real Men Can't Make Money in the Market
• Foolish Fundamentals: Inventory

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