Nike Has the Power

Nike (NYSE: NKE  ) sent a powerful message to Wall Street yesterday. Ignore the economy. Forget about oil prices. Focus on the opportunity, build your brand, and everything else will fall into place.

This is a welcome sentiment amid the widespread moaning of apparel retailers that the consumer isn't spending. CEO Mark Parker brushed away these concerns, saying we should "look through the cyclical pressures ... the premium consumer experience and the power of innovation will always triumph over circumstance."

The company backed up that heady sentiment with a dose of third-quarter results that were off the charts. Analysts were expecting 11% sales growth. The company delivered 16%, helped by 6% currency translation. Overseas revenue grew 24%, with China business gaining nearly 50% leading up to the Beijing Olympics this summer, and earned over $1 billion in sales in the last 12 months in China alone.

Gross margins improved by 90 basis points, better than the prior year in both in-line and off-price transactions. Expense leverage added 80 basis points on the strong sales and a shift in advertising spend to next quarter, to take advantage of integrated marketing programs around the European Football Championships and the Olympics.

Put it all together -- EPS growth of 35% was a slam dunk, beating estimates by more than 13%. For the past three quarters, Nike has smacked the analysts by an average of 17%.

What's on tap for the rest of the year? Orders for delivery next quarter are up 11%, with currency only making up 2% of the gain. I don't see any signs of the bloated inventory levels that are causing headaches at Crocs (Nasdaq: CROX  ) and Columbia Sportswear (Nasdaq: COLM  ) . Worldwide inventory stock for Nike ended the quarter up just 10%, which lagged the top-line pace.

The company has just completed the acquisition of Umbro to gain a larger presence in the global soccer market in advance of the next World Cup and unloaded its Bauer Hockey and Starter brands. And then there's the Olympics. According to management, this is "no time to wait in the weeds." Nike is on the offensive with its biggest marketing campaign ever.

This is not to say Nike has wiped out the competition. Under Armour (NYSE: UA  ) is making a big push into footwear, and Adidas has no intention of yielding an inch of share in the soccer footwear market. But for pure worldwide brand power, I don't see anyone who combines the momentum and confidence of Nike.

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