👟 Nike is Being Eaten Alive

MARKET UPDATE

Good Morning Investor! On Friday, Shares of Synchrony Financial ($SYF) surged over 6% off the back of the company announcing a new enhanced partnership with Atlanticus Holdings Corporation ($ATLC), which boosts the company’s financing options.

TODAY’S BIG HEADLINES

Nike Continues to Sink Under Competitive Pressure

Amazon to Launch a Competitor to Temu & Shein

America’s Obsession With Comic Books Hits Wall Street

CONSUMER DISCRETIONARIES

Nike Continues to Sink Under Competitive Pressure👟

Light Footwork: Friday may have been sunny somewhere, but not at the headquarters of famed shoemaker Nike ($NIKE), which reported a lowered annual sales forecast. Increased demand for shoe startups like On Running ($ONON) and Deckers-owned Hoka ($DECK) sent Nike shares tumbling almost 20%.

• It was Nike's worst day ever, wiping out $28.41 billion in market cap. Talk about a rough run. I doubt that they’ll be getting any kudos for that on Strava!

• Specifically, Nike reported an annual forecast predicting a mid-single-digit percentage fall in sales, a big slump compared to the expected 1% growth. Analysts were left scratching their heads and checking their calendars to make sure it wasn't April Fool's Day.

Rising Tides Lift All Boats (Except Nike’s): Despite recent dire numbers from both Nike and Adidas ($ADS), their competitors are lacing up for success. Brands like Hoka, Asics ($7936), New Balance, and On Running now account for 35% of the global market share in 2023, a significant leap from the 20% they held from 2013 to 2020.

• Last month, On Running reported earnings per share that effectively doubled analyst expectations, with sales growth of 46% on an annualized basis, and they even raised their full-year guidance. Meanwhile, Nike's sales forecast feels like stepping on a LEGO in the middle of the night.

• In February, Deckers revealed that its Hoka brand saw Q4 2023 sales jump by 21.9% to $429.4 million, indicating that consumers are shifting their preferences toward other brands. Nike, it seems, is no longer the only game in town.

Wall Street Whispers: Shares of the famed shoemaker are now down 29% year-to-date, while competitors Deckers and On Running are up 43% and 45%, respectively. As these brands continue to gobble up market share in the active running segment, Nike is left to wonder if it should start running in the other direction.

ECOMMERCE & CONSUMER DISCRETIONARIES

Amazon to Launch a Competitor to Temu & Shein⚔️

Everything Must Go!: Amazon ($AMZN) is jumping into the discount retail fray, announcing its plans to launch a competitor to Chinese retail giants Temu and Shein. The service will deliver products directly from China, similar to AliExpress. If you thought Amazon had its hands full already, think again.

• The New Challenger: This move isn't entirely surprising. Amazon has enjoyed a near-monopoly over e-commerce but has been rattled by the rapid growth of these Chinese competitors. Meanwhile, traditional competitors like Walmart ($WMT) have only just figured out how to sell products online. Welcome to the party, Walmart.

• Shipping Shenanigans: Amazon aims to mimic the business model of Temu and Shein, which fly in products from China using a trade loophole known as de minimis. This loophole allows retailers to avoid paying import taxes on any package shipped directly to a customer, as long as it's under $800 in value. It's like a tax-free shopping spree, but slower.

The Dicotomy of Value: Of course, there's a trade-off. Delivery times will be substantially longer than Amazon's speedy Prime deliveries, but the discounts might be too tempting to resist. Who needs fast shipping when you can get a deal, right?

Risk it to Get the Biscuit: Despite this being a fairly new concept, Amazon isn’t the only US company currently weighing up whether or not to copy this strategy. It’s certainly not a straightforward business model either, as there are some significant risks to consider.

• Amazon isn't the only US company eyeing this strategy. But it's a tricky business model with significant risks. Amazon could end up cannibalizing its own business, failing to lure Temu shoppers while driving its existing customers to start discount shopping.

• Plus, this model relies on air freight, which is 3-5 times more expensive than shipping by sea. With the pressure already exerted by Shein and Temu, prices could skyrocket with Amazon's added demand.

MEDIA & CONTENT

America’s Obsession With Comic Books Hits Wall Street 🦸‍♂️

The Rise of Anime: Wall Street is starting to look like a modern-day Comic-Con, with interest and investment in anime, manga, and manhwas (South Korean comics) skyrocketing to all-time highs. The reason? Manga has become the belle of the ball in US bookstores, making up at least half of graphic novel sales over the past three years. Apparently, superheroes and caped crusaders need to move over for big-eyed protagonists and epic storylines.

• Just last week, investment firm Blackstone shelled out a staggering $896 million into infocom, an e-comics platform, marking its third private equity investment in Japan within six months. Someone's got a crush on comics.

• Then, on Thursday, South Korean online comics titan Webtoon, boasting over 170 million users across 150 countries, made its grand debut on the US stock market with a jaw-dropping valuation of nearly $2.7 billion. Trading under the ticker symbol “WBTN,” it's clear that Webtoon is here to play in the big leagues.

Sky is the Limit: The Japanese government has some ambitious goals, aiming to boost the value of its content exports from ¥4.7 trillion to ¥20 trillion by 2033. Meanwhile, South Korean webtoons, propelled by the nation's blazing-fast internet and smartphone obsession, have seen their market value skyrocket from $109 million in 2013 to $1.33 billion in 2022. Last year alone, Netflix jumped on the bandwagon, launching at least seven shows inspired by webtoons like “The 8 Show” and hosting anime classics such as Demon Slayer, Attack on Titan, and Vinland Saga. Clearly, the future is bright for fans of animated adventures.

MORE NEWS

Additional market-moving events🌎

The Autonomous Prius: Toyota ($TM) plans to launch its first EV with advanced self-driving technology in China by 2025. (Reuters)

Vision Pro Hits China: Apple's ($AAPL) Vision Pro headset began deliveries in China at $4,128, about 18% higher than the U.S. price of $3,500. Despite this, training sessions for the device are fully booked in Beijing Apple stores, indicating strong interest. (CNBC)

Pixar’s Cash Cow: Pixar’s Inside Out 2 has hit $1 billion in revenue at the box office, making it the first film to do so since Barbie. (CNBC)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500. Then on the 10th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,104.00 SEK (📉-15.88%)

• Hims & Hers Health: $20.19 (📈+39.53%)

• PayPal: $58.03 (📉-7.98%)

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