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Jan 5, 2021

Peloton Makes a Bet on US Manufacturing
Image Shown: Shares of Peloton Interactive surged higher during 2020. The firm recently announced it would acquire an exercise equipment manufacturer based in the US. As demand for Peloton’s products has been incredibly strong of late, the firm has had trouble keeping up, which in turn has led to delayed deliveries of its “premium” exercise bikes. This acquisition is expected to help alleviate those concerns. The exercise bike and digitally-oriented exercise training service provider Peloton Interactive announced it was acquiring Precor, an exercise equipment manufacturer, for $420 million in cash (before closing adjustments) on December 21. Peloton aims to complete the transaction by early 2021 (calendar year), and by the end of 2021, the goal is to begin producing Peloton products in the US. This transaction will provide Peloton with 625,000 square feet of US manufacturing capacity split between a complex in Whitsett, North Carolina and Woodinville, Washington. Peloton aims to build up a US manufacturing base to better meet domestic demand while reducing its logistics costs, given that transporting heavy exercise equipment can be a difficult task.

Dec 18, 2020

Omni-Channel Strategy at Dick’s Sporting Goods Makes It a Long-Term Dividend Growth Idea
Image Source: Dick’s Sporting Goods Inc – Third Quarter of 2020 Earnings Infographic. The ongoing coronavirus (‘COVID-19’) pandemic, due to the desire of households to socially distance, has seen a meaningful amount of consumer spending shift to e-commerce platforms. Retailers that invested heavily in their online operations, while also bulking up their omni-channel sales capabilities, were in a much better position when the pandemic hit than those that had to rely largely on their physical footprint. Over the past year, “contactless” delivery options have become much more popular. That includes fulfillment options such as curbside pickup and in-store pickup (usually in specially designated areas), where consumers purchase goods online and then travel to the relevant physical store location to acquire those products. Demand for home delivery services has surged as well. On November 27, we added Dick’s Sporting Goods to the Dividend Growth Newsletter portfolio to gain exposure to a high-quality retailer with strong omni-channel sales operations, and the rise of e-commerce more broadly. In this note, let's focus on Dick’s Sporting Goods’ operational improvements and e-commerce strategy.

Nov 25, 2020

Dick’s Sporting Goods’ 2%+ Dividend Yield Is Solid
Dick’s Sporting Goods put up impressive third-quarter results that showed strong sales performance across both e-commerce and brick-and-mortar. E-commerce/digital/online sales continue to soar across the broader retail arena. Dick’s Sporting Goods’ gross and merchandising margins were healthy during its third quarter, and its inventory is clean as the sporting goods retailer heads into the all-important holiday season. We’re big fans of Dick’s Sporting Goods’ tremendous free cash flow generation and its balance sheet health. For dividend growth investors, Dick’s Sporting Goods offers a compelling combination of a 2%+ dividend yield and an impressive 3.2 Dividend Cushion ratio at the time of this writing.

Jul 6, 2020

Lululemon Athletica Buys MIRROR
Image Source: Lululemon Athletica Inc – First Quarter Fiscal 2020 Quarterly Financial Supplements. On June 29, Lululemon Athletica announced it was acquiring home fitness company MIRROR for $500 million in cash. MIRROR sells ~$1,500 (before taxes and installation fees) screens that come with a camera and speaker system that allow users to participate in at-home workouts assisted by trainers/videos. That offering comes with a $39 per month digital subscription which allows the user (or users, up to six people per household) to access on-demand and live workout sessions, and additionally, personal training sessions cost up to $40 each.

Jun 29, 2020

Nike Doubles Down on Its Digital Strategy
Image Shown: Shares of Nike sold off moderately on June 26 after reporting its full-year earnings for fiscal 2020 (period ended May 31, 2020), though please note shares of NKE have rebounded sharply from their March 2020 lows. Over the past year shares of Nike are still up ~15% as of this writing, outpacing the 4% gain seen at the S&P 500 (SPY) before taking dividend considerations into account. Nike is performing well operationally as its digital strategy has helped mitigate some of the headwinds created by the ongoing pandemic. The retailer’s strong balance sheet provides ample support to ride out the storm while being able to maintain its current dividend policy. Shares of NKE yield ~1.1% as of this writing, and we give Nike an “EXCELLENT” Dividend Safety rating due to its rock-solid Dividend Cushion ratio of 3.4. Please note these forward-looking indicators factor in double-digit per share payout growth over the coming fiscal years. We give Nike an “EXCELLENT” Dividend Growth rating as well.

Jun 16, 2020

Lululemon Supported by Strong Digital Sales
Image Source: Lululemon Athletica Inc – Third Quarter Fiscal 2019 Earnings Infographic. On June 11, Lululemon Athletica reported first quarter fiscal 2020 earnings (period ended May 3, 2020) that missed consensus top- and bottom-line estimates. The company’s strong digital sales were offset by the negative impact of containment efforts to stop the spread of coronavirus (‘COVID-19’), namely store closures (both company-owned and third-party retail locations). Shares of LULU are still up comfortably year-to-date as of this writing, in large part due to its pristine balance sheet and past investments in its digital infrastructure and digital sales channels. We covered these two aspects of its business model and why that would be a source of strength during these challenging times back in March 2020 (link here).

May 15, 2020

Under Armour Potentially Faces a Serious Liquidity Crunch
Image Shown: Under Armour Inc may face a serious liquidity crunch if its creditors don’t extend the maturity length of the borrowings under its revolving credit facility. On May 11, Under Armour reported earnings for the first quarter of 2020 with its GAAP revenues declining by 23% year-over-year, and management attributed ~1500 basis points of that decline to the ongoing coronavirus (‘COVID-19’) pandemic. On the flip side, Under Armour’s GAAP gross margins improved by ~110 basis points year-over-year due to reduced pricing discounts, though COVID-19 weighed against the company’s performance in this area as well. Under Armour reported a GAAP net loss of $590 million in the first quarter of 2020 due to rising operating expenses (with an eye towards marketing spend) and major impairment and restructuring charges. Without the impairment and restructuring charges, Under Armour still reported a non-GAAP adjusted net loss of $152 million. All in all, it was a tough quarter, and it’s only going to get worse (at least in the short-term).

Dec 14, 2016

Around Retail: Aspirational Brands Battle Consumer Perception
Aspirational and luxury brand makers continue to wrestle with a difficult operating environment and other market threats. We’ll go around the horn in retail, identifying pockets of weakness and strength.

Nov 24, 2015

Value Opportunities Not To Be Found In Footwear Market
The shoe doesn't fit just yet...

Jun 26, 2015

Nike Is Just Too Pricey of a Stock
Everybody loves Nike, and that’s why its equity is trading at too high of a price. We think there are better values elsewhere.