What happened

Shares of Nike (NKE -0.06%) were surging today after the sneaker king posted better-than-expected results in its fiscal first-quarter earnings report, topping modest expectations.

As of 10:32 a.m. ET, the stock was up 7.4%.

So what

Nike's numbers weren't particularly impressive, but they came at a time when much of the global economy is struggling with inflation and consumer spending on discretionary goods has been weak in the U.S.

The sportswear giant had also telegraphed plans to tighten inventory to support higher prices. As a result, revenue in the quarter rose 2% to $12.9 billion, in line with the company's guidance, but that was slightly below the analyst consensus.

Sales rose in all regions except for North America, but investors had expected stronger growth in China, where revenue was up 12% on a currency-neutral basis, as China reopens from Covid lockdowns.

Revenue from Nike Direct, a strategic priority, rose 6% to $5.4 billion, and wholesale revenue was flat at $7 billion.

The company reduced its inventory by 10% to $8.7 billion as it continues to recover from the supply chain constraints of a year ago, and gross margin was down just 10 basis points to 44.2%, better than its guidance. Selling, general, and administrative (SG&A) expenses also grew by less than expected, up 5% to $4.1 billion.

With the help of a lower tax rate, generally accepted accounting principles (GAAP) earnings per share were up 1% to $0.94, which was well ahead of estimates at $0.70.

CFO Matthew Friend said, "Our first-quarter results demonstrated the impact of staying on the offense over the past fiscal year. With a healthy marketplace and another quarter of brand and business momentum, we are strengthening our foundation for sustainable, profitable, long-term growth."

Now what

For the full year, Nike expects mid-single-digit revenue growth and said that includes 4 percentage points of headwinds due to accelerated liquidation and higher wholesale sell-in last year.

For the second quarter, it said revenue would be up slightly from a year ago. 

Overall, the results show Nike is faring well in a difficult environment. The pop in the stock seems a bit surprising, but it's understandable in the broader context of the stock's struggles this year. Shares are still down 46% from their 2021 peak, but today's gains show investors seem to think the business is normalizing and the worst of the sell-off is over.