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Nike Nails It

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Nike (NYSE: NKE  ) may have just joined the Dow Jones Industrial Average earlier this week, but that doesn't mean its growth days are in the past.

The $66 billion athletic apparel behemoth kicked off earnings season yesterday after the market close, and investors are being rewarded today with a 5% pop as of this writing.

When all was said and done in Nike's fiscal 2014 first quarter, revenue rose 8% to $7 billion. That includes a 7% rise for the Nike brand to $6.5 billion, and an even more impressive 16% gain to $494 million for its Converse offerings. As fellow Fool Asit Sharma reminded us in July, Nike acquired Converse in 2003 for just $305 million, or more than 38% less than the brand's quarterly revenue today.

Better yet, gross margin increased 120 basis points to 44.9%, benefiting from lower material costs, a shift in sales toward higher-margin products, and lower discounts and growth in Nike's direct-to-consumer business. As a result, those revenue gains and margin improvements translated to net income of $780 million, an increase of 33% over the same year-ago period.

Alongside all that, diluted earnings per share increased 37% to $0.86, thanks to Nike using $526 million in cash during the quarter to repurchase a total of 8.4 million shares. Even so, Nike was left with a whopping $5.6 billion in cash on its balance sheet, or an increase of $2.3 billion over this time last year. That results from the sale of its Umbro and Cole Haan businesses in 2012, as well as the $1 billion bond issue in April with which it took advantage of historically low interest rates.

What's more, Nike once again showed masterful control over its inventories, which grew 6% to $3.5 billion, or 8% when you account for changes in foreign currency exchange rates. That's in line with Nike's futures orders for the current quarter, which rose 8% over last year (10% after foreign currency changes), and will help Nike support future growth.

To put that into perspective, compare it to up-and-coming athletic apparel specialist Under Armour (NYSE: UA  ) , whose quarterly inventories grew 29% last quarter despite expected forward revenue growth of "just" 22% to 23%. Even so, shares of Under Armour traded up about 12% on that earnings beat in July, thanks in part to the fact that the company's discrepancy between inventory and sales growth has narrowed significantly from the harrowing gaps seen in 2011.

To be fair, Under Armour was only founded in 1996 and is still experiencing growing pains. Nike, for its part, has been in the game since 1964, so we expect the veteran business would have honed its processes by now.

Of course, this contrast is exactly what makes choosing between the two companies so difficult. On one hand, you have the fast growth and youthful inexperience of Under Armour, and on the other you've got the steady (albeit still impressive) gains from dividend-paying Dow inductee Nike.

In the end, though, any way you slice it, Nike's numbers are incredibly impressive, so investors looking for a solid long-term business firing on all cylinders need look no further.

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