Nike

  • Nike third quarter results beat analyst   expectations with revenue up 7% to $10 bn and EPS up 9% to $0.87. This was   despite challenging headwinds in both the supply chain and a slowdown in   Chinese economic growth.

  • The group experienced growth in   most of its extensive geographic footprint, as well as in the merchandise   segments, supported by pricing power, resulting in gross profit expansion in   excess of 100 bps.

  • The global strength and demand   for the company’s Nike and Jordan brands in footwear and apparel have led to   some commentators referring to Nike as ‘’the Apple of sportswear’’.

  • · A fairly recent change in the   business model, in terms, of bypassing the middleman, and targeting the   consumer directly via its own stores, selective store partnerships, and   digital channel channels, has been positive for Nike.

  • Sales through digital channels   increased by 17%, resulting in improved margins as well as better management   of inventories.

  • Spending on marketing innovation   and a launch of new products resulted in operating costs climbing by 13%. This   was necessary in terms of its direct-to-consumer strategy, capitalizing on   the growth of sneaker culture amongst the kids and youth markets.

  • The group faced challenges of   higher tax rates of 14% vs 11% in prior years, as well as supply chain delays   with deliveries of up to six weeks. This should ease as workers return to its   Vietnam operations.

  • An opening up of global   economies and the return of team-based sports should, according to   management, result in mid-single digit growth in 2022, aided by strong demand   and an easing of supply chain constraints.

  • The portfolio of brands with various price points ranging from premium brands to affordable footwear and apparel give the group a distinct advantage over its peers. The share price, on a forward PE of 30x at a price of $132 per share, reflects the high quality of the company, and patient investors should look to buy into any weakness at these levels.

Nike