Publication Date: 26 Nov 2018 - By Robert P.By Robert P.
Equity FundamentalEquityUSAConsumer
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Qualitative Concerns
Nike, roughly 65% of sales, continues to invest heavily in ecommerce and direct to consumer initiatives. The company’s app is growing rapidly and Nike looks to double direct to consumer revenues in the future.
Nike is not the only supplier shifting sales into their own channel with Under Armour and Adidas doing the same.
Foot Locker has multiple locations in many malls and significant exposure to lower tier malls.
Fundamental Concerns:
While the inventory drawdown has been a positive, lower inventory and dramatically lower purchase obligations could indicate weaker future revenues.
Long term gross and EBITDA margins are weakening with e-commerce trends only increasing.
SSS show little sign of improvement, only growing in the margin dilutive direct to consumer business.
Valuation well above Finish Line acquisition and a large premium to itself historically.
