As sports enthusiasts well know, losing streaks can drag on and on. Just ask apparel- and footwear-competitor Nike
Nike's fiscal 2010 second-quarter revenue totaled $4.4 billion, down 4% year over year, although sales were firmer than in the previous quarter. Earnings per share were similarly weak, as they dropped by 5% to $0.76.
This time around, however, Nike offered up a consolation prize. Compared to double-digit declines in prior quarters, wholesale orders for future delivery rose by 4% in real dollars. And on a constant-currency basis, orders fell by so little that a home-team ref would've looked the other way. Accordingly, management expects mid-single-digit sales growth for the next two quarters, good enough to backstop full-year revenue at "a modest decline."
But that forecast underplays management's enthusiasm for the company's future. Regardless of when a consumer recovery takes hold, the Nike folks see a leaner, more focused operation that continues to drive profitability and out-innovate the competition.
On that note, the company has achieved big-time success with the Lunar Glide running shoe and Pro Combat line of protective base layer apparel. What's more, the Nike, Jordan, and Converse brands have all recently picked up U.S. market share.
There's potentially more good news on the way, too. Upcoming launches include a fresh take on the Nike Air concept, along with new soccer products. Underpinning Nike's every move is a bulked-up balance sheet, which, thanks to strict cost and inventory controls, was flush with $8 per share in cash and equivalents at quarter's end.
A final highlight comes in the form of North American online sales, which shot up by 23%, a performance that echoed the same consumer trends that have been powering results at Internet retailing powerhouse Amazon.com
Of course, we can't round out the quarterly analysis without teeing off on the endorsement subject. Unlike now-former corporate sponsors PepsiCo
However, one Credit Suisse
Trading at a moderately optimistic fiscal-2011 price-to-earnings ratio of 15.8, Nike shares don't exactly need the EPS boost to bring long-term investors on board. The earnings increase would, however, cushion the blow should a weaker-than-expected global economy hip-check a consumer recovery.
Fool contributor Mike Pienciak doesn't own shares of any company mentioned in this article. Amazon.com is a Motley Fool Stock Advisor recommendation. Accenture and Wal-Mart are Inside Value selections. PepsiCo is an Income Investor recommendation. The Fool's disclosure policy always plays fair, even at away games.