Nike: After Solid Quarter, Our Thesis Intact
Based on the current quarter's momentum and the strong engagement reported from the new advertisement featuring Colin Kaepernick, we think management's full-year guidance is conservative.
Wide-moat
Nike’s ability to balance lifestyle versus performance goods highlighted our belief that the firm will be able to cater to consumer demands through fashion cycles, justifying our wide moat rating. In the quarter, Nike’s brand intangible assets helped it sustain top-line growth in the historically challenged North American segment, while keeping inventory flat helped the firm achieve 50 basis points of gross margin lift (to 44.2%). We believe the brand assets helped the firm create new digital partnerships with Jet.com, Flipkart, and WeChat, which will continue to aid performance in the digital channel. Finally, we are encouraged by the firm's continued investment in supply-chain and cost initiatives seen in the invention of the new plant assembly process for its Advanced Product Creation Center that reduces labor needs by 50% and cuts overall product creation cycles in half (rapid prototyping and 3D printing).
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