Thursday Dec.22, 2022

👟 Nike tackles inventory woes

Fresh workout threads (Mattia Pistoia/Getty Images)

Hey Snackers,

Come for the bathroom selfies, stay for the food. Some restaurants are courting diners with quirky restrooms — think: a disco, funky art, and psychedelic themes. Please seat yourself.

Stocks rallied yesterday after better-than-expected earnings from consumer-spending bellwethers Nike and FedEx. Meanwhile, consumer confidence rose to its highest level since April.

Sneaks

Nike posts slam-dunk earnings as strong demand helps counter inventory woes — and reveals a bright spot for consumer spending

Flyin’ like an eagle… Nike’s stock jumped 13% yesterday after the sneaker icon posted fire earnings results. Nike’s revenue grew 17%, to $13B+, in the quarter ending in November, as more shoppers splurged on the swoosh. Now execs expect annual revenue to grow in the “low teens,” to notch a slight improvement over last quarter’s forecast. Plus:

On sale: Nike saw record traffic on Black Friday and Cyber Monday, with some European markets seeing shopping demand jump 75% from last year.
Good fit: Nike’s North American sales popped 39%, helping offset lower demand (and a 3% sales dip) in China, Nike’s third-largest market.
Overstocked: Nike’s inventories are still 43% higher than a year ago, but the company says it’s finally passed its oversupply peak. It's been a long time coming.

Checking the back room… for another pair of high-tops. Like many retailers, Nike’s had to manage overstock, supply-chain disruptions, and the threat of a consumer-buying slowdown. With retail inventories in the US up 17% from last year, Nike and its rivals have ramped up discounts to move extra merch. While promos can shrink profit margins, for the right brand it can also boost demand. Case in point: Nike’s cheaper price tags sparked record growth for its digi-membership program, while its wholesale division (think: Foot Locker, Finish Line) saw a 19% sales jump.

A step in the right direction… As the world's largest athletic-apparel company, Nike is a bellwether not only for retailers but also the economy. For rival brands, Nike’s strong earnings could be a sign that while inventories are still high, there may be greater demand for their products in the near future. For investors, it suggests that even as recession fears loom, the consumer’s still willing to splurge on the right brand (and price tag).

What else we’re Snackin’

Score: The NFL is said to be nearing a deal with YouTube TV for its Sunday Ticket rights. It would be the latest partnership between media giants and pro-sports leagues, as both groups look to boost their streaming presence.
Crop: US farm income is on pace to hit a near 50-year high, thanks to higher prices on commodities like wheat and eggs. Now farmers could see an earnings jump of 14% — or about $20B more in revenue — from last year.
Check: Citadel and other big hedge funds are reportedly planning to return some profits to their clients, even amid a turbulent year for stocks. While the S&P 500 is down nearly 19% this year, Citadel’s flagship fund is up 32%.

Thursday

Earnings expected from Paychex and CarMax

ID: 2651542

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The issue is that 1) this 400,000 number isn’t new. Back in July of 2023, the Financial Times reported that Apple planned to make fewer than 400,000 units in 2024, reducing its initial projections of 1M units, citing two people close to Apple and, the Chinese contract manufacturer assembling the device. 2) It's unclear who was estimating 700,000-800,000 Vision Pros in the first place, but it appears that it was Ming-Chi Kuo himself?

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Profits jumped 23% to $359M.

Chipotle has quietly cruised higher over the last year. It’s up 63%, compared to the 24.5% gain for the S&P 500 over the 12 months through Wednesday’s close. Not bad for a rice-and-beans based business model.

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Despite terrible earnings numbers last night — declining vehicle sales, disappointing revenue and profit, enormous spending — Tesla stock is up more than 10% as of midday. That’s a welcome move for the car company, that’s been among the worst performers this year in the S&P 500.

Why the about face?

While Reuters reported earlier this month that Tesla is no longer making its long-awaited $25,000 mass-market car — news sent the stock, already suffering from headwinds across the EV industry, down even further— Tesla reported during its earnings that it’s going to make cheaper cars than it currently has.

Before the second half of next year, Tesla said it will release “more affordable models” that “will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So rather than release the $25,000 Model 2, Tesla is incorporating some of that technology into its existing models. UBS called it the Franken-3Y2.