Athletic footwear giant Nike (NYSE:NKE) reported fiscal 2010 second quarter earnings of 76 cents a share, a 5% decline from the year ago period. Revenues were down 4% year over year to $4.4 billion. Underlying this rather uneventful quarter is the strength that Nike's decades of innovation has brought not only to footwear, but every other piece of athletic apparel.

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All About the Brand
Nike has cultivated a reputation of being a brand that represents peak performance. As such the company has to remain at the forefront of innovative products. By doing so, Nike convinces its customers that its products deserve premium pricing. The greatest athletes in the world continue to endorse Nike products and that formula has been a huge success for the company since the days of Michael Jordan. To illustrate the value in Nike's focus on innovation, consider that this $30 billion company has managed to increase book value by 10% in the past year. Factor in the announced $3 billion share buyback and you have other levers of value creation. (For more, see Competitive Advantage Counts.)

Growth Abroad
Despite the recession, Nike continues to execute. Although the quarter was rather flat, the company reported that future orders were up by 4% compared to the similar period last year. However, like many other companies across all industries, Nike is experiencing its strongest growth abroad. Future orders in the U.S. are reported to be down 4% while in the emerging markets, future orders are up 27%, excluding currency changes. (For more, check out Going International.)

In a Class by Itself
While it's easy to compare Nike to other athletic companies, very few companies possess the innovative strength that Nike commands. Smaller rival Under Armour (NYSE:UA) is mainly known for its quality athletic apparel and certainly doesn't have the depth that Nike has. Yet Under Armour shares trade for 33 times earnings against Nike's 20 P/E ratio. While it may be easier to grow as $1.3 billion company versus a $30 billion company, you're only as good as the products you can continue to make. Nike continues to demonstrate it's at the forefront of the innovation. It would not be a far fetched idea to compare Nike to names like Apple (NASDAQ:AAPL) or Research in Motion (NASDAQ:RIMM) in terms of how successful innovation can continue to create long-term value. (For related reading, check out Which Is Better: Dominance Or Innovation?)

Moving Forward
Nike continues on despite the economic turmoil. It has successfully positioned its products as a must have for athletes and serious active lifestyle, a move that has taken years and billions of dollars to cultivate. It's likely that continued focus on cutting edge innovation will continue to take the company far.

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Tickers in this Article: NKE, AAPL, UA, RIMM

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