giofranchi Posted June 10, 2016 Share Posted June 10, 2016 Is there a thread about Nike? I couldn't find one. After an almost 20% decline, I have decided to open a relatively small position. Leaving room to average down if I am early. A 30% ROE is great, NKE has increased EPS at a CAGR of 13% during the last 10 years, and the stock return has been a very impressive 19% annual. Furthermore imo it has still much room to grow globally. Though I don't like its forward P/E of 22 very much, I also think it doesn't expose me to the risk of a steep multiple contraction. Therefore, I expect the return of an investment in NKE today to be not far from its growth in intrinsic value. Cheers, Gio Link to comment Share on other sites More sharing options...
Oreo Posted June 10, 2016 Share Posted June 10, 2016 I think Nike is a great business and will consistently take greater share of household high-street apparel spend as years roll by. The ROCE stats that you cite are consistent with that. But I do worry about some things though: - retail and apparel inventories (at least in the US) are at a cyclical high. Substantial overcapacity. The last time the numbers were there was prior to Lehman - casual, fast-fashion, athleisure and athletic are converging. This will pit NKE in greater competition against folks such as Inditex. All while the size of the total pie (at least in developed markets) stagnates, for the reason I cite above - the brick/mortar distribution channel will continue to gradually lose its significance (disc: I am short some names here, on and off), so NKE will now have to compete for consumer's attention span and wallet increasingly on the internet. But at the same time, Amazon is getting into fashion with its own private label brands. Once AMZN gets it supply chain ready, I see compelling logic in AMZN gradually broadening its private label product offering beyond the basics such as t-shirts towards more complex items with breathable fabrics, etc. The stigma of wearing an AMZN private label brand when out-and-about in the city or lifting weights at the gym will go away. None of this helps NKE. You may get better performance from NKE in the next few quarters as the Dollar weakens, but longer term, I see challenges. Link to comment Share on other sites More sharing options...
LC Posted June 10, 2016 Share Posted June 10, 2016 i own shares but also left room to average down. on the flip side of oreo...they have historical attributes that no other brand can replicate, in terms of past and current sponsorships. i bought a nike gym bag vs. a cheaper adidas or other brand because...well, adidas bags just kind of look tacky compared to the nike swoosh. the challenges oreo mentions regarding competitors and supply chain has always existed in one sense or another over the last 30 years. nike has a superior brand which allows them to command a premium, and i don't think this will change because amazon sells their own sneakers. also, just for the funny factor, here's some feedback from Nike's main rival (underarmor)'s new steph curry shoe: http://sports.yahoo.com/blogs/nba-ball-dont-lie/the-internet-s-roast-of-stephen-curry-s-new-shoes-is-relentless-145549601.html Link to comment Share on other sites More sharing options...
Jurgis Posted June 10, 2016 Share Posted June 10, 2016 Disclosure: I am bad with the brand crap, so... IMO to invest in brand company like Nike, you have to be one of the people who really understand the brand scene, where are things going, what's hot and what's not. I guess people would say: "Wait, but Nike survived and flourished for 35+ years, it has a moat, it has a brand value, why would I need to understand brand scene". And that's been true... so far. ;) And I have no great explanation for why it's been true. Great management and great culture perhaps. But then are we sure that this endures? Is there any other moat beyond management/culture? - Brand name/swoosh - OK, yes, to some extent. - Sports star endorsements - well, everyone does that, not sure NKE is special - Size - yeah, NKE is elephant in the room, so to some extent. NKE has been down to low PEs at least couple times through that 35+ years. IMO if there was a time to buy it, it was then. Buying at high PE is risky unless you are totally sure it will do great in coming years. Caveats: yeah, I missed all those times when NKE was at low PEs. I don't think I bought more than one or two NKE products in my life - maybe crappy sunglasses... Not because of some antipathy - I'm just not a brand person and not sports outfit person. :) Link to comment Share on other sites More sharing options...
ccplz Posted June 11, 2016 Share Posted June 11, 2016 High P/E is okay if the E is abnormally low (actual onetime/non recurring items etc). But I'd be wary about a company when Gio starts a thread about them.. seems like the ultimate contrary indicator. Link to comment Share on other sites More sharing options...
johnny Posted June 12, 2016 Share Posted June 12, 2016 I think a big question to think about is what percentage of that CAGR is essentially price increases. It looks like something around half of the big gains are coming from bumping ASPs up. That's incredible, and it is hard to imagine the next 10 years being like the last 10 years, in terms of 8-10% annual ASP increases on basketball shoes. Then again, maybe the problem is I'm an old man. I remember when I was a youngster, all the adults talking about '$100 sneakers'. Now I'm talkin about $250 sneakers in the same way. I guess its conceivable my kids will be trying to get me to buy them $625 sneakers in 2026, but I'm going to put up one hell of a fight. Link to comment Share on other sites More sharing options...
compounding Posted June 12, 2016 Share Posted June 12, 2016 High P/E is okay if the E is abnormally low (actual onetime/non recurring items etc). But I'd be wary about a company when Gio starts a thread about them.. seems like the ultimate contrary indicator. A non-insightful platitude and an insult. Well played. I would be surprised if you can extrapolate this company's historical ROIC and growth into the future, so maybe that is the longs' variant perception here - although with the steep multiple you are not leavning much room for error. With that in mind I am a little surprised by the relative lack of emphasis on the company's future returns vs the company's past returns in this thread. Link to comment Share on other sites More sharing options...
Jurgis Posted June 13, 2016 Share Posted June 13, 2016 Then again, maybe the problem is I'm an old man. I remember when I was a youngster, all the adults talking about '$100 sneakers'. Now I'm talkin about $250 sneakers in the same way. I guess its conceivable my kids will be trying to get me to buy them $625 sneakers in 2026, but I'm going to put up one hell of a fight. $250 sneakers? Wow. I guess I am way behind in my Mr. Money Moustache ways. Haven't paid more than $80 for shoes recently and I think most would be in $40 range. Brand stuff too. DSW for the win. I saw some Nikes there too for reasonable prices I think, but don't remember details. Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted June 13, 2016 Share Posted June 13, 2016 It's been a long term holding for me. Some highlights: One of the best CEOs in the World runs the company with plenty of strategic input from founder Phil Knight. Parker was Fortune magazine's Business Person of the year last year. http://fortune.com/2015/11/12/nike-ceo-mark-parker/ Of Forbes 100 highest paid athletes 50 of them are Nike sponsored athletes. Lots of patents! Imagine if they can start manufacturing shoes in the U.S. using FlyKnit technology and a glued on shoe sole! http://www.digitaltrends.com/cool-tech/nike-patents-3d-printed-shoe-technology/ Self Lacing Shoes will be a hot seller http://news.nike.com/news/hyperadapt-adaptive-lacing Link to comment Share on other sites More sharing options...
TheAiGuy Posted June 13, 2016 Share Posted June 13, 2016 - the brick/mortar distribution channel will continue to gradually lose its significance (disc: I am short some names here, on and off), so NKE will now have to compete for consumer's attention span and wallet increasingly on the internet. But at the same time, Amazon is getting into fashion with its own private label brands. Once AMZN gets it supply chain ready, I see compelling logic in AMZN gradually broadening its private label product offering beyond the basics such as t-shirts towards more complex items with breathable fabrics, etc. The stigma of wearing an AMZN private label brand when out-and-about in the city or lifting weights at the gym will go away. None of this helps NKE. Nike's done well recently with their direct to consumer (DTC) business. If you read their annual reports and investor meeting transcripts, it's a big focus for them to own their go-to-market channel, via both stores and online. It looks like the margins are higher on DTC and it's been growing pretty rapidly over the last few years (I haven't paid that much attention to the quarterly results, but DTC grew ~30% in FY 2015 and made up ~23% of Nike brand revenue). It's certainly unclear how Nike will be effected by the shift to online, but there are many examples of success smaller brands that are online only (Everlane, M.Gemi, Bonobos, +others). There is a need to own your own customer base and not depend on a third party for that relationship for this strategy to work, and Nike seems reasonably positioned. Management thinks that their DTC efforts and online mobile apps are a big part of that strategy. Nike doesn't really strike me as a company that has every really dependent on footlocker, for example, but the other way around. You know, caveat emptor Link to comment Share on other sites More sharing options...
TheAiGuy Posted June 13, 2016 Share Posted June 13, 2016 Oh, and take a look at the tax rate -- the P/E looks a lot worse on a pretax basis. Link to comment Share on other sites More sharing options...
LongTermView Posted June 13, 2016 Share Posted June 13, 2016 It looks like Under Armour's Curry Two "Chef" shoe is not a threat to Nike: http://www.wsj.com/articles/under-armours-new-steph-curry-chef-shoe-gets-cooked-1465581322 Link to comment Share on other sites More sharing options...
roughlyright Posted June 15, 2016 Share Posted June 15, 2016 A good article about Nike's CEO, Mark Parker. http://www.surfacemag.com/articles/mark-parker-nike Link to comment Share on other sites More sharing options...
KCLarkin Posted August 15, 2016 Share Posted August 15, 2016 If you are interested in Nike, you must read Phil Knight's "Shoe Dog:" https://www.amazon.com/Shoe-Dog-Memoir-Creator-Nike-ebook/dp/B0176M1A44/ref=sr_1_1?s=books&ie=UTF8&qid=1471271883&sr=1-1&keywords=shoe+dog#nav-subnav Link to comment Share on other sites More sharing options...
LC Posted June 30, 2017 Share Posted June 30, 2017 Earnings out: https://seekingalpha.com/article/4085009-nikes-nke-ceo-mark-parker-q4-2017-results-earnings-call-transcript?part=single NIKE, Inc. revenues grew 6% to $34.4 billion on a reported basis. On a currency neutral basis, NIKE, Inc. revenues grew 8%. Gross margin declined 160 basis points to 44.6%. Earnings per share rose 16% to $2.51 and we delivered ROIC of nearly 35%. Also they announced a pilot program with Amazon. The market seemed to like it, but I am not so sure. There is always a tug-of-war for power in the relationship between manufacturer/distributer. Is moving to Amazon a sign of weakness? Will Amazon begin to squeeze them like they have a reputation of doing? Or is it simply responding to where their customers shop? It is a small pilot and it sounds like they will have a lot of control over how the products are presented, which is obviously important for their brand and also to maintain their negotiating position vs. Amazon. Link to comment Share on other sites More sharing options...
LongTermView Posted August 5, 2017 Share Posted August 5, 2017 Is anyone going to the annual meeting in September? The annual meeting of shareholders of NIKE, Inc., an Oregon corporation, will be held on Thursday, September 21, 2017, at 10:00 A.M., at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon Link to comment Share on other sites More sharing options...
sleepydragon Posted August 6, 2017 Share Posted August 6, 2017 http://deadline.com/2017/03/bumblebee-movie-travis-knight-director-kubo-and-the-two-strings-1202034882/ Link to comment Share on other sites More sharing options...
SlowAppreciation Posted December 15, 2018 Share Posted December 15, 2018 https://www.nytimes.com/2018/12/12/sports/nba-basketball-shoes-puma-nike.html?action=click&module=MoreInSection&pgtype=Article®ion=Footer&contentCollection=Pro%20Basketball Link to comment Share on other sites More sharing options...
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