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Nike: Just Do It, DTC

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Even though Nike reported higher than expected third-quarter profits, its stock has been trending down since that earning call. The primary reason for the decline is sales growth, which was hurt by widespread port congestion in the United States and ongoing store closures in Europe. Although the global health crisis still leaves an overhang of uncertainty, Nike said it anticipates lockdowns will start to ease in Europe in April, and delivery windows will slowly improve in North America through the remainder of the year. But what got me so hyped about Nike is its direct-to-consumer (DTC) business which grew 20% YoY, to $4B putting Nike is on track to sell $16B DTC – more than a 40% of all Nike brand revenue. Online sales are fueling this growth. They surged by another 59% in this quarter after the 82% in the last quarter, enabling Nike to book $1B in sales online in North America for the first time. This is super impressive. As mentioned in a  previous article , Nike's ability to th...
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Just Do It, A lot more direct

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Nike shares jumped more than 35% since the beginning of the year. Nike is a pandemic winner and has been delivering impressive results, fueled by online sales that jumped more than 82% in the last quarter. Nike's ability to thrive during a period when physical visits to retail stores has collapsed is down to its investment in its direct-to-consumer (DTC) business. Per Statista , in 2010 about $2.5B Nike-brand products were sold directly to consumers. A decade later they sold almost $12.5B DTC – more than a third of all Nike brand revenue. The upside of DTC is alluring – it allows you to cut out the middleman (wholesale retailers) and, in theory, capture a higher profit margin for your business. But for Nike, it has been less about capturing higher margins and more about owning and controlling the full customer experience. What kind of company is Nike? They started with shoes, but their product line has extended far beyond that. They are certainly a marketing company, one of the bes...
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SPAC: Why many unicorns won't hop on the SPAC wagon

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2020 has certainly been the year of blank check acquisition companies - or SPACs.  That's how Nikola- the sexy electric truck shop-, Utz - the iconic snacks company- and Virgin Galactic went public earlier in the year. Plus, it's also how electric vehicle makers Fisker, Canoo, and Lordstown Motors announced they will go public. Plus Plus, famous investor Bill Ackman recently took his SPAC (Pershing Square Tontine) public in the largest-ever blank-check IPO (it raised A whopping $4B). The objective is to buy a mature unicorn. Ackman actually said Pershing might buy a “mature unicorn” 6 times in the filing. However not all private companies are psyched about merging with SPACs to go public. Airbnb reportedly turned down an offer to merge with Bill Ackman's SPAC, saying it prefers going public via traditional. Airbnb isn't alone. Snowflake, Slack, Shopify and BigCommerce are other flashy SPACs that declined the backdoor to going public and opted for the front door through...
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The business of calm

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Last week was a long one. The stress of the election coupled with the pandemic has a lot of us looking for ways to relieve anxiety and invest in wellness from the comfort of home. Increasingly, many are resorting to mental health and meditation apps. Calm, a meditation app, topped Apple's health and fitness category on Election Day — and other mindfulness apps like Headspace weren't far behind.  Why are these apps popular? The anxiety-inducing times, along with poor access to mental healthcare and high smart phone penetration are big contributing factors. However, these are not the only ones. For me, the biggest factor is that the companies making these apps have finally figured out that they are content creators and not just app makers. The features that were available through these apps 5 years ago were a lot more rudimentary compared to what we have today, and so was the content. These apps have heavily invested in improving their content. It's telling that the biggest a...
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Bad signs for the epic market rally

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In the previous post, I discussed reasons that the stock market is rising despite the economic devastation of the pandemic. In this post, I’ll discuss ominous signs from the market rally: Top 1% account for most of the gains: The market is very top-heavy. 1% of the stocks in the S&P 500 - Alphabet, Amazon, Apple, Facebook and Microsoft - account for more than a fifth of the S&P 500’s market value. While those tech giants have gained around 40 percent so far this year, the 495 other stocks in the index have collectively lost a few percentage points. This is bad because the US workforce is concentrated in the other 99% of the stocks. Insider selling is booming: Some leaders of corporate America are skeptical about the sustainability of this rally and are rushing to cash out. According to CNN Business and TrimTabs Investment Research, insiders have dumped more than $50 billion worth of shares since the start of May. The same source also notes that August is on track to be the thi...
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