iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,431 Blog Posts

The NBA Top Thesis Begins: $NKE Reports a Deterioration in Gross Margins; Shares Cascade Lower in After-Hours Trade

Gross margins at the largest make of rubber footware, produced by slaves, reported gross margins were down 30bps. Revenues were light at $8.24 bill v $8.28 bill. As a result, the stock is staggering lower–off by more than 6%, as investors get out of dodge.

But don’t worry lads, NKE bought back $540 million worth of stock in the 4th quarter alone, as part of their insane, four year, $12 billion excursion into wasteful corporate governance.

Others in their peer group, namely UA, DKS, FL and FINL should fall in kind.

I’ve discussed this issue before and have broached the matter of FL being a generational short, based upon NBA UN-popularity and woeful demographics that cater to an industry wrought with inexplicable inflation. At some point, pricing power becomes an issue. Nike’s core customer is the stock boy at Walmart, who is unable to buy their overpriced idiot shoes, without selling heroin on the side to subsidize his zealotry.

In my opinion, both FL and NKE are shorts.

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17 comments

  1. djmarcus

    How much is due to sports authority? think UA had to guide lower from that; don’t see why it wouldn’t impact NKE also. But not my area of focus by any means

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  2. Dr. Fly

    Oh come on. The fucking sneakers cost $200+ and the main customer is a high school teenager

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    • og

      Don’t worry Jack Ma is more than happy to sell them counterfeit Nikes.

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      • the dude

        Better quality too, according to Jack.

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      • mx2101

        Maybe counterfeit in the sense they are not a genuine Nike product, but both made in China, no?.
        Wouldn’t it be delightful if the counterfeits were made in the same factory as the actual Nike product?

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    • btn

      AJs were over $100 in the 1980s, which is over $200 after inflation…

      I guess if less kids are driving, there is more room in the budget for fancy sneakers and smart phones.

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    • djmarcus

      the FL theme I get… Nike isnt as tied to hard retail locations / their own stores. I have no position here, and find NKE way too richly valued to even consider, but just playing the devil’s advocate here

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  3. btn

    FL just might reach the $45 level and then I’ll have to eat my words or go long…

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  4. thegametheorist
    thegametheorist

    ESPECIALLY since Steph Curry got shut up in the finals. Shoe sales going to go down as he loses his legendary status.

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  5. braveflaps

    Wear flip flops and allow Walmart to sell smack and all will be really, really…………………real…..gooooooooooooooooooooooooooooooooodbeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

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  6. roundwego

    I agree nike has lived high on the hog. But i dont see why you think nba is at a peak. They are small relative to nfl and nba is more recession proof.

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  7. bushwacker2

    ….they pay the brothas way too much in endorsements. Just saying…

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    • roundwego

      you saying white athletes are worth more for endorsements?

      That’s definitely racist, and yet could be true.

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  8. chuck bennett

    Full disclosure for you guys who didn’t know

    Been short FL since 61. Know that I know BTN is a buyer at 45, I’m sure now it’s going back to the beginning before this 3 year run. I may not hold it but…

    See you in the 30’s.

    Regards

    Chuck Bennett

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    • btn

      Just for clarification, I think the stock is fairly valued at $45, but I’m not so eager to own it that I’m going to try and catch falling knives. Also, the fact that Cramer thinks FL is a buy makes me second-guess myself.

      I will say I’d rather own FL at $45 than NFLX at $90. One company had +745M in Op Cash flow and one had -749M

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  9. bexpo

    NKE has fully recovered pre-market…that was awfully fast, down just pennies now?

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