Shares of iconic footwear retailer NIKE (NKE Free NIKE Stock Report) were down slightly even after the company announced fiscal second-quarter results (years end May 31st) that outdistanced expectations in terms of both sales and earnings. It appears like some profit taking is at hand, although North American numbers may get some of the blame (more color below). NKE shares had been up in 11 of the 12 trading days heading into this earnings announcement, and a string of record-high quotations was the result.

Revenue during the three-month period clocked in at $10.3 billion, up 10% year over year and ahead of our $10.1 billion call and the Wall Street consensus, which was a hair lower. Management was quick to point out that strong growth was evident across all geographies. Notably, the Jordan brand had its first ever billion-dollar quarter in terms of receipts. New innovation and a spike in interest in the basketball-focused label, especially with women and particularly overseas. Separately, digital sales were up 38%, thanks to the boost at the start of the holiday season. North American sales surged 70% on Black Friday. However, the North American segment overall was a bit of a disappointment. The expectation was for sales of $4.0 billion, but that number came in at $3.8 billion, up 5.3%, slightly below the targeted figure.

From an earnings perspective, share net came in at $0.70., an impressive leap from the $0.52 in the second fiscal quarter last year, and handsomely above our $0.58 estimate. In response, we are adding $0.15 to our full fiscal-year earnings call, which now climbs to $3.15 a share. Conversely, gross margins rose by just 20 basis points to an even 44.0%. The number being floated heading into the earnings report was 44.1%. Tariffs placed on the company's footwear led to higher product prices and weighed on profitability. Initial tariff fears called for significantly more damage, so all in all, most parties have to be fairly pleased with the results. One more note on the tariff situation: Greater China is one of NIKE's best growth opportunities going forward. Despite trade wars and civil unrest in Hong Kong, the push to gain market share there for the Swoosh continues in earnest.

Other items of importance for subscribers to watch include a CEO transition to John Donahoe in 2020. Long-time chief executive Mark Parker will move to executive chairman. The switch is to facilitate a sharpened focus on digital growth. Mr. Donahoe was previously the CEO of eBay (EBAY).

Changing lanes, one troublesome development is the Oregon Project situation. A November article in The New York Times called attention to alleged abuse toward women that took place at NIKE's Oregon Project. An investigation has been launched, but employees marched in protest earlier this month in defense of the treatment of women at the company.

So with all this in mind, is NIKE stock worth initiating a position in? At this time we would say no. Trading near all-time highs, capital appreciation potential for the stretch to 2022-2024 is subpar. Also, the higher quote reduces the dividend yield, which is now less than half of the Value Line median. Awaiting a more favorable entry point seems like the prudent move here at this time. That said, current holders will probably want to maintain their positions.

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.