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Nike’s Weak Earnings Growth, Markdowns, and Lofty Inventory Levels Still Telling of a Struggling Consumer

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  Image Source: Valuentum By Brian Nelson, CFA The health of the consumer continues to be one of the biggest questions heading into 2023. Many consumers are working through the excess savings garnered via COVID-19 stimulus (and many market observers expect this savings to run out by mid-2023) and credit card debt is on the rise. Inflation is taking a bite out of consumer discretionary spending as more and more of consumer financial capacity is being allocated to necessities including food and grocery items. Food at home costs have soared, and many have had to cut back in other areas. Nike’s (NKE) second-quarter fiscal 2023 results, released December 20, showed a very discerning consumer that is looking to drive a … Read more

Apple iPhone Supply Disruptions Not Likely to Hurt Markets with Overall Holiday Sales Reportedly Strong

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Image: Holiday sales are expected to expand ~2.5% in 2022 over very strong growth in 2021 and 2020. Image Source: Adobe By Brian Nelson, CFA Tesla (TSLA) CEO Elon Musk and Apple (AAPL) CEO Tim Cook seemingly have worked out a plan for Apple to keep advertising on the Twitter platform after what looked to be a temporary pause by the iPhone maker. Though the news is immaterial to our thesis on Apple in any respect, it was good to see the two tech giants work whatever differences they had out. Certainly, a fallout between Musk and Cook would not be a good thing for the tech sector and innovation, more broadly, as the two wield large influences across Silicon … Read more

Target’s Holiday Outlook Sends Mixed Messages; Big Sales Data Week Ahead

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Image Source: Valuentum “Nearly all of the slowdown was driven by our discretionary categories, Apparel, Home and Hardlines, as our guests became increasingly cautious in their spending in those categories at both Target and throughout the industry more broadly. So far in the month of November, trends have been largely consistent with what we were seeing at the end of October, in terms of our comp trends, the mix of sales between frequency and discretionary businesses and the focus on promotions by our guests.” – Target’s 3Q Conference Call By Brian Nelson, CFA After Walmart (WMT) reported its third-quarter earnings November 15, “Walmart Is Back on Track; Markets Looking Healthier,” we thought things were looking a bit better across the … Read more

Announcing Valuentum’s Customer Appreciation Day Winners!

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In no particular order — the five winners… As a Chief Investment Strategist that oversees a significant amount of assets, it is vital to have unbiased research that we can lean on for decision making. Brian and the Valuentum team help provide a disciplined and fundamental approach to stock analysis without the typical Wall Street bias or conflicts of interest. The value we get on a monthly basis for having this detailed thought analysis and wise long-term thinking greatly outweighs the cost. We are very happy to have them on our short list of management we trust.  – Stephen H. (October 2022) —– I’d like you to know what my takeaways are from your research: 1) Be wary of capital … Read more

Nike’s Fundamental Backdrop Speaks of Serious Impending Global Recession

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Image Source: Raul Gonzalez By Brian Nelson, CFA In a rapidly declining market as we have been witnessing the past many months, it becomes a relative “game.” Taking on outsize risk to drive positive returns is a quick way to the poor house. There are too many things working against the market for it to pull sustainably higher before year’s end, and we think investors are better off playing defense than attacking the bear. Things are bad out there, and they are likely going to get worse, “Things Are Bad Out There.” It is perfectly reasonable and understandable to have been bullish during the first half of this year, as we were, to at least give the market some breathing … Read more

Dividend Growth Idea Dick’s Sporting Goods Beats Estimates, Raises Guidance

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Image Shown: Shares of Dick’s Sporting Goods Inc have been on a nice upward climb of late. The sporting goods retailer raised its full-year guidance for fiscal 2022 during its fiscal second quarter earnings report. By Callum Turcan On August 23, Dick’s Sporting Goods Inc (DKS) reported second quarter earnings for fiscal 2022 (period ended July 30, 2022) that beat both consensus top- and bottom-line estimates. The sporting goods retailer also raised its full-year guidance for fiscal 2022 in conjunction with the report, after previously lowering its guidance during its fiscal first quarter earnings update in May 2022. We continue to like Dick’s Sporting Goods as an idea in the Dividend Growth Newsletter portfolio. Shares of DKS yield ~1.8% as … Read more

Nike’s Gross Margin Falls, Inventory Leaps in Fourth Quarter Fiscal 2022

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Image Source: Valuentum By Valuentum Analysts Very few other companies, if any other, have built such deep, personal connections with the consumer as Nike, Inc. (NKE) has, let alone the tremendous brand strength, and its endorsement deal with LeBron James gives it yet another top-notch globally marketable superstar. Nike’s annual free cash flows averaged ~$4.0 billion from fiscal 2019-2021, versus its ~$1.6 billion in dividend obligations in fiscal 2021, and it had a solid net cash position on the books at the end of fiscal 2022. The sustained strength seen at its digital and direct-to-consumer operations supports Nike’s outlook. Nike’s Dividend Cushion ratio is impressive; however, its ~1.1% dividend yield is relatively modest. From its namesake to Jordan Brand to … Read more

Lululemon Firing on All Cylinders; Shares Recovering

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Image Shown: Shares of Lululemon Athletica Inc are recovering in the wake of the company’s recent earnings report. By Callum Turcan On March 29, Lululemon Athletica Inc (LULU) reported fourth quarter earnings for fiscal 2021 (period ended January 30, 2022) that matched consensus top-line estimates and beat consensus bottom-line estimates. Lululemon also announced it had initiated a new $1.0 billion stock buyback program after completing its previous program in the first quarter of fiscal 2022. The company issued favorable guidance for fiscal 2022 during its latest earnings update, which helped drive shares of LULU sharply higher during normal trading hours on March 30. Shares of LULU are up more than 20% during the past 52 weeks through the time of … Read more

Nike Holding Its Own Against Major Exogenous Shocks

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Image Shown: Shares of Nike Inc are on an upward climb again after dropping significantly from November 2021 to March 2022. By Callum Turcan On March 21, Nike Inc (NKE) reported its third quarter earnings for fiscal 2022 (period ended February 28, 2022) that beat both top- and bottom-line estimates. Shares of Nike are trading around ~$135 as of this writing, near our fair value estimate of $139 per share, after dropping significantly from November 2021 to March 2022. The company’s stock shot up initially after its latest earnings report was made public as Nike indicated it was getting a better handle on its supply chain issues, which have made keeping up with robust consumer demand quite difficult of late. … Read more

Don’t Throw the Baby Out with the Bathwater

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Image: Erica Nicol Takeaways: Junk tech should continue to collapse, but the stylistic area of large cap growth and big cap tech should remain resilient. Moderately elevated levels of inflation coupled with interest rates hovering at all-time lows isn’t a terrible combination. In fact, it’s not bad at all. The markets are digesting the huge gains of the past few years so far in 2022, and the excesses in ARKK funds, crypto, SPACs, and meme stocks are being rid from the system. Our best ideas are “outperforming” the very benchmarks that are outperforming everyone else. The BIN portfolio is down 6.4% and the DGN portfolio is down 3.2% year to date. The SPY is down 7.8%, while the average investor … Read more