Welcome to Blue Room's Weekend Update. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.

Two thousand

two hundred

and twenty four

years ago

. . . 

And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid. 

And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all people. For unto you this day in the city of David a Saviour, which is Christ the Lord. 

And this shall be a sign unto you: Ye shall find the babe wrapped in swaddling clothes, lying in a manger. And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, Glory to God in the highest, and on earth peace, good will toward men. 

The Gospel of Luke, Chapter 2, Verses 1 to 14

In approximately 1 A.D. (anno Domini), wise men from the east bringing gifts of gold, frankincense and myrrh. Two thousand years later, the new masters of the universe are trading bitcoin, ethereum and other digital assets. 

Fiscal Q2 2022 Earnings Expectations (via Bloomberg)

• Revenue: $11.256 billion (+0.12% YoY)

• GAAP Net Income: $1.025 billion 

• GAAP Diluted EPS: $0.63

Fiscal Q2 2022 Actual Performance

• Revenue: $11.357 billion ~ beat expectations ~ (+1% YoY)

• GAAP Net Income: $1.337 billion ~ beat expectations ~ 

• GAAP Diluted EPS: $0.83 ~ beat expectations ~

Fiscal Q3 2022 Guidance

• Revenue: Expected to grow “low single digits” due to ongoing impacts from loss production from COVID related disruptions in Vietnam

• Gross margin: Raising GM guidance to expand 150 bps vs. prior year

• Inventory: Expecting to continue benefiting from exceptional demand against the backdrop of lean marketplace inventory

• Full price realization will remain above long term target with lower channel markdowns

  • Still expect product costs to rise in 2H22 doe to higher macro input costs

  • Supply chain costs for FY increase vs. last quarter estimate, greater impact in 2H

  • FX to be a 55 bps tailwind vs. last year

• SG&A to increase FY with demand creation expense normalizing relative to COVID year & “digital transformation”

Headwinds: Vietnam factory closures caused the company to cancel production of roughly 130 million units. China and APLA are experiencing lower to negative growth in sales and EBIT, primarily due to supply, and timing issues on product sales. Digital declined 27% impacted by delay in product launch timing on sneakers. According to the company, COVID related lockdowns continued to drive volatility in retail traffic. NIKE did claim to see retail traffic recover to pre-pandemic levels “at times” during the quarter. 

Tailwinds:Nike launched 3D immersive world of NIKELAND on Roblox. The company is seeking to meet young athletes wherever they are, even if that is in a virtual world. Consumer Direct channel is also performing well relative to last year, likely a function of customers getting back into physical stores.Black Friday week in NIKE Direct’s NA and EMEA channels increased +20% vs. last year which may indicate that the average consumer may still be feeling the purchase fever that began last year’s stimulus programs. Nike Digital as a percent of NIKE brand revenue is 3% points higher than last year and more than 2x from 2019. (40% of digital demand comes from mobile apps, with 79+ engaged members).

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GLOBAL MEETING
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December 22, 2021

9:30 AM

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