A Look at Nike's Earnings Report

The sports-apparel firm added that worldwide future orders from December 2009 through April 2010 increased 4% to $7 billion, with the largest strides made in emerging markets. Both Japan and North America showed declines in future orders.

Nike noted that the success comes from "tightly managing the inventory on our books and in the marketplace, we have strengthened our brands, maintained profitability for Nike and our retail partners and positioned ourselves for accelerated growth as consumer confidence returns."

The key to that statement comes in the final words, "as consumer confidence returns." For Nike (and the rest of the retail sector) to be successful, consumer confidence is of utmost importance. The good news for Nike is that it was able to weather the past quarter, although future orders in Japan and North America fell. When the economic situations get better in these countries, we should see future orders increase, leading to higher orders and sales.

In after-hours trading, Nike flirted with the $65 level, which has acted as resistance on many past occasions. Will this earnings beat be enough to vault the shares through this resistance and on toward all-time highs? We shall see. But it has to be a bit comforting that the stock has challenged overhead resistance even though future orders have fallen in America and Japan. Furthermore, Citigroup upped Nike's price target to $75 from $69, so analysts believe that the stock is destined to advance.

Now, for the question everyone wants to know: Nike reiterated its support for Tiger Woods, although the company tried to avert most questions about the adulterous golfer. The company stated, "we all know that he's chosen to step away from the game, and out of respect for his time and space he needs, that he's asked for, we'll respect that and we'll continue to support Tiger and his family as we, of course, look forward to his return."

The company did say that its $650-million golf business took a rather substantial hit during the economic downturn, but it is confident about the growth potential for the segment. Again, as the economic situation turns around, expect spending to pick up in all of Nike's segments.