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Sports footwear and apparel maker NIKE, (NKE- Free Nike Stock Report) which is also a Dow-30 member, has reported financial results for its fiscal third quarter (ended February 28th). Earnings bested both our and Wall Street's expectations by a handsome margin, but the revenue figure was a bit below consensus. Investors chose to focus on the top-line shortfall in the trading hours following the release, and the stock was down more than 6% on the news.

On the revenue line, total sales came in at $8.43 billion for the three-month interim, about $40 million below the consensus call. The actual number was not as dreary as the commentary provided along with it. Basically, competition in North America, the company's largest market, is increasing dramatically. Notably, Germany's Adidas is making a push into this area, and the early indications are that this move is set to take a bite out of NIKE's market share. In that vein, NIKE expects to tighten the supply of products it releases in North America. A rash of closures and bankruptcies in the sporting goods retailer world likely played into this decision as well. Clearly, having less available products in its top market will pinch revenues going forward, and this did not sit well with the investment community. Regardless of the unfavorable backdrop, sales in North America grew 3% in the February term, a decent showing, though top-line momentum has slowed some. Meanwhile, although worldwide future orders, a gauge of wholesale orders set to ship in the next six months, dropped 4%, management signaled it was anticipating mid-single-digit sales growth in the current quarter.

Clearly, the shift to online shopping that is hurting almost every retailer is being felt at NIKE, as well. Too, the promotional environment that is rampant online is not ideal for a company like NIKE, but adjustments are being made. On the conference call tied to this earnings release, management announced what is already being referred to as its new ``triple double'' business plan. To wit, a triple double is a basketball term for when a player reaches double digits in points, rebounds, and assists in a single game. The name is apropos because basketball, and the NBA more specifically, is one area where the footwear competition is heating up. NIKE has LeBron James as its pitchman, while Under Armour boasts Steph Curry, and Adidas has James Harden. All three are having MVP-type seasons and their exposure has been maximized. Anyway, the ``triple double'' plan calls for a doubling of the speed at which it creates new products, how fast it gets them to market, and its interactions with consumers. Benefits of this should be felt most on the vital North American front where a shift to casual styles of footwear and white sneakers has been damaging to NIKE. A closer relationship with its buyers can help in this regard.

In terms of earnings, share net clocked in at $0.68 for the February interim, a full $0.15 ahead of our expectation, which was more bullish than most. Bears have been quick to point out that the quality of this outperformance was not great, and it is hard to argue that statement, as earnings were helped by a noticeably lower tax rate, aided by more foreign sales, as well as a sizable share-repurchase program. Still, we are adding a dime to our full-year fiscal 2017 earnings estimate, which now stands at $2.45 a share, to reflect the strong February tally.

After peaking just north of $68 a share in 2015, NKE shares were down more than 18% in 2016. This year, the equity had a nice run-up in price through much of the calendar first quarter, but pulled back modestly after today's news was disclosed. Still, we like the blue chip as a total return play for the stretch to 2020-2022. Finances are strong and that should support ample dividend hikes well into next decade. Quality names should survive the retail exodus that appears to be in full swing of late, and NIKE tops the list in terms of quality, as evidenced by its rank for Safety (1: Highest) and perfect scores for Price Growth Persistence and Earnings Predictability.

About The Company:NIKE, Inc. designs, develops, and markets footwear, apparel, equipment, accessories, and services. It sells products to retail accounts, through NIKE-owned retail stores and the Internet, and through a mix of independent distributors and licensees in approximately 190 countries. Subsidiary brands include Converse casual sneakers and Hurley lifestyle apparel and accessories.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.