This week’s top transcripts for our consumer cyclical and staples lists cut across various sectors including apparel, home appliances, and the alcoholic and non-alcoholic beverage markets. The beverage market has become a recurring trend in the blog at Stream by AlphaSense.
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Demand Miscalculations Post-pandemic
After not having enough inventory to meet consumer demand for the past two years, NKE (Nike) now has far too much. The apparel brand faced challenges at the end of September due to tighter profit margins and the relative strength of the dollar against foreign currencies. This means that US brands, like NKE, are less affordable abroad.
In order to get rid of the surplus inventory, reportedly now at $9.7 billion per the Wall Street Journal, NKE will have to increase discounts and mark-downs heading into the fourth quarter:
“I think we’re going to have a terrible holiday. I feel a general reticence. If you add to that any meaningful decline in home values, I just feel like none of the shoes have dropped yet. For people to sit here and say they’re going to clear through their inventory in nine to 12 months when there’s a storm on the horizon, I think it’s 1) using aggressive assumptions from an abnormal cycle through COVID even if they’re haircutting them and 2) not fully factoring in what could be a real pullback in consumer demand. I don’t know, I’m not buying stuff for Christmas. Why would I? …That’s another reason to be very reticent about whether people are going to blow through inventory, because if I do have a dollar to spend, I’m still hung over from COVID, I’m more likely to travel than buy something.”
When it comes to China, there are concerns about what the future after COVID holds for NKE. Though NKE has a competitive edge in the region due to strong ties formed over time, the market just isn’t the same post-pandemic.
“You don’t spend two years locking your country down and come out with more liberties. You come out with fewer. I don’t know. That’s my greatest fear about China. You’ll see that Nike’s earnings report showed a massive slowdown in growth in China that they’re blaming on lockdown. The question will be after two years of lockdowns, when things are fully open, what does the normalized business look like and are we still growing or are we flat to down?”
However, the former NKE executive says the company may still be better positioned as a resilient global brand than many of its competitors.
“The whole idea at Nike is ideas over items. Instead of just launching the new Air Max shoe, it’s about how do we build a story around it, connect it to its service on one of our apps and then ignite it through a partner or an influencer that you have an entire ecosystem around it versus just dropping a shoe into the marketplace…We just have more talent and we’ve got more infrastructure, particularly in digital, I think.
In our stores, we’ve made more investments in stores and bit the bullet on doing it. …We want the edge. We want the next. We don’t want the establishment. We want to be on the edge, and it’s cheaper to be on the edge.”
Top Five Expert Call Transcripts: Consumer Cyclical
- NKE (Nike Inc) – Former VP Is Concerned Over Excess Inventory Position in the Footwear and Apparel Industry Echoing NKE’s Comments on the Recent Earnings Call
- LOW (Lowe’s Companies Inc) – Former Regional VP Is Bullish on E-Commerce for Appliances
- ETSY (Etsy Inc) – Former Senior Product Manger Thinks Etsy Will Keep Growing but is Critical on Quality of Management
- AMZN (Amazon.com Inc) – Former Broadcast Director Thinks There Are Some Technical Challenges Between on Prem and Cloud Benefits
- CPNG (Coupang Inc) – Former Sr. Product Owner Believes CPNG Is Well Aligned to Future Trends and Supported by Barriers to Entry in South Korea
Top Five Expert Call Transcripts: Consumer Staples
- SYY (Sysco Corp) – Competitor Thinks Large Distributors Like SYY Will Continue to Benefit From Scale Economics and Private Label Exposure
- BUD (Anheuser-Busch InBev SA/NV) – Former Media Director believes scale helpful for changing market conditions (supply chain disruptions)
- PEP (PepsiCo Inc) – Former Global Director Believes the Partnership With BTVCF Gives PEP Insights Into Global Trends That Inform Its Business in the US
- PM (Philip Morris International Inc) – Former Sales Director Is Optimistic Vaping Will Become Legal in Brazil
- CAG (Conagra Brands Inc) – Former Sr. Analyst Believes CAG Has a Strong Leadership Team That Changed the Narrative to a Traditional Snacking Company Through Innovative Products
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