Never Bet Against Oprah

Oprah is at the forefront of a major re-launch of one of Nike’s best technologies in a decade – one that will finally get t he attention it deserves. Good for Nike. Great for FL.

 

Even though her show starts after the market closes, I do not watch Oprah. But 7.4 million (mostly female) American consumers do. Every year, thousands of products arrive at HARPO studios around the holidays for Oprah to pick her list of ‘Ultimate Favorite Things’. Last year she downplayed higher-priced items due to the recession. But this year the list is in full force. (ie, Oprah loves the iPad. Surprised? I didn’t think so…).

 

Two of the items caught our attention in particular.

 

Lululemon: The first item is a pair of Lululemon pants that offer more flexibility (in usage) that than the standard ‘Down Dawg’ and doubles as everyday ‘around town’ pants. Also, in Oprah’s words, “I’ve got to tell you, anything that cuts your but in half should be your favorite thing too.”  It’s also notable that the model wearing the pants was wearing a pair of Nike Free. That brings to the second item…

 

Nike Free is made the cut and is staging a big comeback. I mean REALLY big. This is a fairly old technology in that it came out around 6-years ago as a way for elite runners to practice running as if they were barefoot on grass. But for several reasons, Nike chose to hold off from stepping the accelerator. That was in part because Reebok and Adidas were hemorrhaging share in the US, and Nike didn’t have to do a lot to see its share go from 37% to 48% (while Adibok went from 18% down to 7%). Heck, maybe the timing was not right.

 

Now what?

  • “Toning” has become a $1bn+ category. Nike might play down this category in public. But internally, they’re livid – as any winner would be after losing a match to a seemingly lesser opponent.
  • Has anyone read ‘Born to Run?” A truly exceptional book documenting how a Mexican tribe absolutely dominates the sport of Ultra-marathoning, and no, they don’t wear Air Max 360s. They run barefoot. A great read…I’d recommend it.
  • Let’s not forget about UnderArmour’s FW product. This is the year they hit stride.

 

So all of a sudden, Nike has 2 stronger large competitors, mid-and small size competitors like New Balance and Newton running, plus some Asian imports like Anta and Li-Ning, and too top it off, they missed growth in a category that could and should own. Yeah… not good for job stability if you’re in charge of Running at Nike.

 

But does that mean that Nike will bow to the pressure and become more mainstream? No!!!

 

What you should expect is that Nike will go full force with its Free technology.  Will it be the same ol’ product as 5 years ago? Nope. They will do to the same thing to the e-reader that Apple did with iPad in the wake of Kindle/Amazon’s success. You can’t even mention Kindle and iPad in the same sentence without it sounding strange. That’s what Nike will do with Free. It will hit in spring en’ masse, and should start showing up in orders in full force by holiday. Most tools and molds are already amortized, so margins will be solid.

 

Yes, this helps Nike. But Retailers like FL should be the biggest winners.

 

Never Bet Against Oprah - banner

 

Never Bet Against Oprah - lulu

 

Never Bet Against Oprah - nke

 


People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more