Teenagers continue to rank Nike as their favorite sportswear and apparel brand, but there’s been a “rebalancing towards Adidas”, according to the results of Piper Jaffray’s 36th bi-annual Taking Stock with Teens survey (8,600 teens across 48 states, average age 16); Vans and Lululemon have also gained significant ground on Phil Knight’s business. As a footwear company Nike remains dominant (though its competitors continue to take mindshare) within the demographic; the 41% mindshare NKE posted was more than twice as great as 2nd place Vans (19%, all-time high, #1 amongst upper-income females), Adidas placed 3rd with 14%, while Converse (NKE subsidiary) came in 4th with 5%. Nike isn’t as popular in the clothing category (22% mindshare, down from 25%), but it remains the most popular brand with teens; no other company posted mindshare higher than 9% (American Eagle). Nike.com was reported to be the 2nd “most preferred shopping website”, behind only Amazon.
Howie Long-Short: In late September, NKE reported both sales growth (+10% to $9.95 billion) and an increase in profitability (+15% to $1.1 billion) for fiscal Q1, but news that gross margins failed to meet expectations and a disappointing growth forecast for Q2 has sent the share price spiraling. Shares are down -13.5% since the company reported, they’ll open at $73.35 on Wednesday 10.24.18.
Among the positives, domestic business “returned to strong, sustainable growth” (for a 2nd straight quarter) and digital sales grew +36% YoY. Moving forward, the company anticipates growth coming from millennials, women and its DTC business; the results of the Piper Jaffray survey would seem to indicate NKE is doing a good job within all 3 segments/channels.
Oppenheimer recently raised its rating on the company to outperform ($90 price target), citing “a technical revolution (that) is underway at Nike”. Analyst Brian Nagel opined that investors have yet to realize how the “power of digital will enhance most all aspects of Nike’s business model, including consumer connections, product innovation and manufacturing.” A rebound of the “broader athletic group” and a growing global sportswear market were the other reasons cited in the note.
Fan Marino: 90s fashion and streetwear remain in fashion, so brands like Supreme, Champion and Off-White also performed well in the Piper Jaffray Survey.
J.R. Smith is apparently a fan of Supreme, he got a tattoo of their logo on his right leg during the off-season. However, NBA bylaws prohibiting the display of commercial logos or corporate insignias on player bodies (or hair) will prevent Smith from serving as a walking advertisement within league games; the NBA has told Smith he’s required to cover up the tattoo or he’ll be fined. There seems to be some ambiguity in the rule though, as several active players are in apparent violation but continue to play without issue; Marcin Gortat (Jumpman logo), Carmelo Anthony (Warner Brothers) and Kyrie Irving (Friends, the TV show) are among those that may need to cover their ink in ’18-’19.
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