NEW YORK (TheStreet) -- Nike (NKE - Get Report), the world's leading manufacturer of athletic footwear, apparel and equipment, delivered good quarterly results with strong direct-to-consumer sales growth. In the meantime, its rival Under Armour (UA - Get Report) has also impressed investors with a blowout performance. And in the coming quarter, Nike will likely continue posting strong numbers for direct-to-consumer sales.
Is Nike a slam dunk, then?
Investors should remain cautious, as Nike is still struggling to rein in its expenses. Moreover, the business's performance in China and other emerging markets is far from satisfactory. The company has not reported any growth in combined revenues from these two regions in the first six months of the current fiscal year.Nike's shares have risen by nearly 10% in the last six months, to $72.67. Its price-to-earnings ratio is 24.8, making Nike considerably cheaper than Under Armour by that metric. Growing the Top and Bottom Line In its recent quarterly results, Nike posted an 8% year-over-year increase in revenues to $6.43 billion, which was slightly below market expectations of $6.44 billion. The company's net income rose by a massive 40% from last year to $537 million, or 59 cents per share, just above market expectations of 58 cents per share. However, this enormous increase in profits was largely due to the $137 million in losses related to discontinued operations that were included in the prior year's results. Considering just the income from continuing operations, Nike's profits are up a modest 3%. The business benefited from an increase in sales of higher-margin products, as Nike's gross margin increased by 140 basis points to 43.9%. The firm's margins also improved due to lower input costs and 20% growth in comparable-store sales in direct-to-consumer stores. Moreover, Nike's total global future orders are up 12%, which shows a bright outlook. Orders were up 8% in the previous quarter and 6% a year ago. The business's future orders indicate expected growth in sales of athletic footwear and apparel between December 2013 and April 2014.