Here's What Nike's Latest Results Really Mean

(Source: Nike)

Global athletic footwear, apparel, and accessories manufacturer Nike (NYSE: NKE  )  recently reported fourth-quarter and full-year earnings. The results were most impressive, sending shares up more than 3% in pre-market trading.

Most importantly, the company's strong performance indicates that Nike is still an industry leader in terms of innovation, which will help to keep aggressive competitors like Under Armour (NYSE: UA  ) at bay in the near future.

Strong earnings
All around, Nike's results impressed. On a year-over-year basis, the company's fourth-quarter revenue grew 11% to $7.4 billion, driven by 13% growth in Nike- brand revenue and 15% growth in Converse-brand revenue on a constant currency basis.

For the quarter, net income increased only 1% to $698 million, while diluted earning per share increased 3% to $0.78. Results were affected by dramatically increased spending for marketing during the World Cup, and the company's selling and administrative expenses rose 21% in the quarter to $2.4 billion. Still, EPS results beat the consensus analyst estimate, according to Yahoo! Finance, which called for $0.75.

For the year, Nike's total revenue grew 10% to $27.8 billion. Nike-brand revenue grew 11% to $26.1 billion, and Converse-brand revenue grew 15% to $1.7 billion on a constant currency basis.

Nike President and Chief Executive Officer Mark Parker explained:

These results demonstrate the energy and excitement Nike brings to the market. Our ability to relentlessly innovate for consumers drove our growth in FY 14 and will continue to fuel it for years to come. And as we grow, we remain focused on managing all areas of our business to drive sustainable, profitable growth for our shareholders.

World Cup fever
Nike has one of the strongest presences at the 2014 World Cup thanks to a heavy marketing campaign that began months in advance. The company created new products, including the revolutionary Magista soccer boot, and supported them with robust advertising to actively target both new and existing consumers the world over.

While the large World Cup presence certainly did not come cheap, the results for Nike are measurable. The company reported that future orders from June through November totaled $13.3 billion, up 11% from last year.

However, what can't be as easily measured is the brand recognition that a stage as large as the World Cup provides Nike. The company's innovative products will be on display in front of the whole world for the month-long soccer tournament. This reinforces Nike's image as an industry leader and one of the premiere athletic outfitters in the world.

Nike will need this brand awareness going forward, especially as smaller and more aggressive industry competitors like Under Armour continue grow at much faster rates. In its most recent quarter, Under Armour grew net revenues 36% and diluted EPS a staggering 71%. Additionally, management raised full-year guidance to reflect the company's strong momentum.

Although Under Armour's presence on the global stage is still very small at the current time compared to Nike's, the company is beginning to branch out in meaningful ways. Most recently, it signed a multi-year deal with Cruz Azul, a professional Mexican soccer club, as well as a deal with Rugby Canada to become the club's official technical partner.

Foolish bottom line
Nike's recent results indicate that the company is still positioned to lead the athletic footwear, apparel, and accessories space in the near future. Perhaps most significant is that the company's large investment in the World Cup is paying off.

While competitors like Under Armour appear to offer more robust growth going forward, Nike is still one of the best and safest growth picks in the entire retail space and should be considered by all long-term investors.

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Philip Saglimbeni

Philip is an avid investor and writer. He contributes to The Motley Fool and Seeking Alpha. You can follow Philip on Twitter @philsags.

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