Why Nike is Recession-Proof and Others Are Not
A few years ago, I had an eye-popping moment at the Adidas store in New York City. It was the grand opening of their 5th Avenue space in December 2016 and I was immediately floored by what I saw. What I witnessed was a company that people had a strong passion for and had a strong brand that people felt resonated with the current styles. It did not take long for me to call my broker and ask about Adidas stock. He advised against because long term, retail stocks can be fickle based on what’s in or out of style. That may be true for most companies, but since then, it has been evident that it is not the case for Nike.
Nike has stood for the tests of time and now more than ever, the athletic company has shown they’ll be able to withstand all the storms that come by it. Just recently based on their last quarterly report, they showed they were able to offset their losses in China with their recent rise in North America and growth in their digital business as well. As Bank of America’s Robert Ohmes has noted, Nike is the key brand with wholesale customers in times of distress and that they should be able to benefit from their superior sourcing capabilities thanks to their strong vertical integration supply chain. He also added that a challenging environment could actually enhance Nike’s global market share momentum.
This shouldn’t be surprising as compared to rivals like Adidas, Under Armour and even Lululemon, Nike is the one brand that provides a consistent strong quality of products, an excellent variety of high-demand products and a reliable price point. Look at its competitors and think about how much more powerful Nike is than them. Adidas didn’t really considered to be “cool” until 2016, doesn’t have the legacy power that Nike has with the Jordan brand and has the possibility for a few missteps to fall behind if they can’t keep up with the constant as well as recent expectations. Under Armour completely blew the entire “athleisure” phenomenon that has swept the nation, their founder just left the company and they’ve dipped into too many poor business deals. Lululemon is a phenomenal company but is quintessential to our recent strong economy as many can find similar products for a cheaper price in a down economy and their products are way too expensive in general.
Nike provides the most comfortable sneakers that have more reasonable prices than its competitors, they recently signed major partnerships with the NFL and MLB for jerseys and have products that generations are obsessed with. In the good times and bad, Nike is the only reliable one compared to their competitors. Watch out for how it does compared to others in the upcoming months.
