What’s Going On Here?Nike slam-dunked competition-shaking results on Tuesday, and the crowd (or, uh, markets) went wild. What Does This Mean?Supercharged interest rates have been, like, totally killing Nike’s vibe this year: it’s a growth stock, after all, so higher rates tamper down the value of the firm’s future earnings. But it looks like Nike’s got its swag back: the footwear giant’s out-of-sight results revealed that sales were 17% higher than the same time last year (tweet this), and extra-profitable online sales were up an immense 25%. Even Nike’s Chinese sales rebounded, despite the country reeling from the effects of lingering lockdowns. Markets said “nice one, Nike”, and met the results with a gaggle of high fives. Why Should I Care?For markets: Trends change, but quality lasts.
“Quality investing” is basically what it says on the tin: investors buy good-looking businesses that are strong enough to ward off competitors in their growing industries. Sounds solid, but that’s the problem: businesses like that are honey to investors, and all that buzz can mean their share prices end up overhyped from time to time. Remember too, that even so-called quality businesses lose their sneaked-up footing sometimes – and when they do, investors can lose their overpriced shirts as well. The best ones, though, can ride out the speedbumps with style, and Nike’s results could well land the firm in that limited-edition batch.
The bigger picture: No discounts here.
Nike’s results will be a beacon of hope for struggling retailers right now. See, budget-squeezed shoppers have been cutting down on nice-to-haves, so stores have been relying on holiday discounts to shift their stock – a recipe for worse-for-wear profit margins. Nike, though, has managed to bring its (albeit growing) inventory down to below peak levels, and – most importantly – full-priced kit is flying out the doors. Layer on record-breaking Black Friday and Cyber Monday sales, and Nike’s feeling pretty rad about what’s to come. | 