NKE

China Exports Suffer in June

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Yet another bearish story came out of China Wednesday morning, this time dealing with negative trade data (shown right). Exports for the month of June dropped 3.1% year-over-year versus a consensus expectation of 4% growth. This compares to anemic 1% growth in May. Imports also fell 0.7% year-over-year compared to a consensus expectation of 8%. Without question, we think it’s safe to say growth slowed in China during May and June. (Image Source: The Wall Street Journal). Though these figures were decidedly bearish regarding the health of economic activity in China, Alcoa (click ticker for report: ) provided bullish commentary on the region just yesterday. In fact, management at Alcoa believes China will drive the lion’s share of global growth … Read more

China News Flow Remains Bearish

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Earlier this week, the HSBC China Manufacturing PMI was released for the month of June, coming in at 48.2—marginally below the flash PMI of 48.3 we saw earlier in the month (and signaling further contraction). Image Source: Markit, HSBC It seems as though the economic decline in China is worsening, with HSBC noting that job-cutting intensified during the month, registering the most job losses since the Great Recession in 2009. We continue to see several structural issues with the nation, including potential excesses in the “shadow banking system” and increasing labor costs that could make the country a relatively less attractive market for global manufacturers. The cost of Chinese real estate remains in nosebleed territory, perhaps foreshadowing signs (or symptons) of the … Read more

North America Remains Nike’s MVP

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Thursday afternoon, athletic apparel goliath Nike (click ticker for report: ) announced strong fourth-quarter results. Revenue increased 7% year-over-year to $6.7 billion, modestly exceeding consensus expectations. Earnings per share surged 27% year-over-year to $0.76 per share due mostly to increased margins, better than consensus estimates. For the full year, free cash flow totaled $2.4 billion on $25 billion of sales. A few items struck us as the prevailing stories in Nike’s fourth quarter and fiscal year 2013. First, the sustained success of Nike’s North American business is incredible. Revenue in Nike’s “mature” segment increased 12% year-over-year during the fourth quarter to $2.7 billion. For the full-year, revenue in North America increased 18% year-over-year to $10.4 billion—the first time the company … Read more

Lululemon’s CEO Departure: Sell-off Justified?

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Luxury athletic apparel maker Lululemon (click ticker for report: ) announced strong first-quarter results Monday that were obscured by the announcement of CEO Christine Day’s departure. We doubt anyone on the Street saw this announcement coming (as evidenced by the large sell-off), and we are a bit surprised at the timing. Although the company has had some quality control issues during the past few months, and we’ve seen the firm chase demand (not have enough inventory), we don’t think Day was at all forced out. She’s presided over a boom in the company’s revenue and profitability over the past five and a half years. Still, Day’s “personal reasons” for leaving come at a strange intersection. Many growth investors believe Day … Read more

What Did We Learn About Apple from the All Things D Conference?

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During the past few weeks, Apple (click ticker for report: ) has re-entered the market’s collective psyche in a big way. First, CEO Tim Cook was grilled by congress over how the company skirts US income taxes. While Apple broke no laws, the company still got targeted for its complex tax avoidance structure. We think this news couldn’t be any less material, especially since literally thousands of other companies use similar tactics. In our view, Apple was singled out because it’s one of the largest companies in the world. The hearing is nothing more than a silly sideshow, and we doubt it will amount to anything more than a few weeks of headlines. On the other hand, Cook spoke on … Read more

Tiffany Leaps A Low Hurdle

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Aspirational retailer Tiffany (click ticker for report: ) announced better-than-expected results for the first quarter of fiscal year 2014 fiscal year Tuesday morning. Global sales increased 9% year-over-year (13% ex-currency) to $895 million, exceeding consensus estimates. Earnings per share were also better than anticipated after Tiffany tempered first quarter expectations, as earnings were 10% higher year-over-year at $0.70 per share on a non-GAAP basis. While the firm didn’t give out free cash flow during the quarter, it did give full-year free cash flow guidance of $300 million. The company’s previous fears of margin deterioration did come true, as gross margins declined 110 basis points year-over-year to 56.2%. Management cited product mix as the major driver behind the weakness as consumers … Read more

Why Finish Line Is Running After a Weak Fourth Quarter

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Shares of athletic footwear retailer Finish Line (click ticker for report: ) are soaring today after the firm announced lackluster fourth quarter results. Revenue fell slightly on a reported basis, though when adjusted to reflect a comparable selling period, revenue ticked up 4% compared to a year ago—still slightly below expectations. Earnings per share fell 6% year-over-year to $0.76, but were up about 3% when excluding the extra week of fiscal year 2012’s fourth quarter. Same-store sales increased just 0.7% year-over-year, driven by a 21% increase in digital sales. We were disappointed in the huge divergence between Finish Line and rival Footlocker (click ticker for report: ), which posted same-store sales growth of 7.9% in its fourth quarter. Footlocker’s superior … Read more

Nike’s Fundamental Momentum Accelerates

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Athletic apparel giant Nike (click ticker for report: ) announced fantastic third quarter results Thursday afternoon. Revenue from continuing operations grew 9% year-over-year to $6.2 billion, just a touch short of consensus expectations. Earnings from continuing operations jumped 20% year-over-year to $0.73 per share, easily exceeding consensus estimates as the company rid itself of the less-profitable Umbro and Cole Haan units. On the cost side, Nike’s gross margins grew 30 basis points year-over-year to 44.2%, as the firm lapped higher input costs and benefitted from higher pricing. Gross margins would have been even stronger if it weren’t for high discounting in China and continued weakness in Europe. SG&A remained relatively flat year-over-year at 30.1% of sales as increases in operating … Read more

Transparency Issues Not a Long-Term Concern for Lululemon

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Shares of lululemon (click ticker for report: ) have been on a wild ride after the firm announced it had some issues with the sheerness of a batch of its black luon pants. Every possible pun regarding the situation has been made, so we’ll spare you from any comedic efforts, but the company had to recall an entire batch of pants for being “too see-through.” Regardless, lululemon reported a fantastic fourth quarter marked by strong revenue and earnings growth. Revenue exceeded consensus expectations, surging 31% year-over-year to $485 million. Earnings were a penny above consensus estimates, growing 47% year-over-year to $0.75 per share. Revenue growth is clearly slowing on a percentage basis as the company deals with the law of … Read more