The list of companies that have been able to successfully pivot from a traditional industry giant to tech superstar is very small. I would put but the likes of Walmart and Target in that zip code along with one of my favourite companies Nike. The market has recently crushed the stock because of supply chain disruptions in Asia that are causing shortages leading up to the Christmas holidays & 1H next year.
Supply chains around the world have been devasted by COVID19. There are currently more container vessels waiting outside LA than ever before and things are not easing up as we are entering peak season. This will mean major disruption to your Christmas buying plans (so stock up early this year!). Outside of the global logistics mess, Nike is being impacted by COVID lockdowns that have shut down their factories in Vietnam and Indonesia leading to a doubling of the days to delivery. 80% of their Vietnam shoe factories and 50% of the apparel factories are shut.
BUT...lets’s take a step back and look beyond short term and look at what Nike is becoming.
Nike is in the early stages of becoming a DTC retailer. 37% of all its sales in 2021 will be online. Supply chain disruptions will force even more people to check inventory online before heading instore
DTC - sales are far higher margin and provide higher basket sizes. They are cutting out the middleman, saving costs, driving higher customer engagement & loyalty all whilst making more money. In a chat with Morgan Stanley, Nike's CFO said any consumers who connect with Nike on 2 or more platforms have 4x higher LTV.
New customers - Since the start of COVID19, Nike has signed up 55mln customers to its online portal, a staggering number. This makes it one of the largest DTC companies in the world with that alone.
Pricing power - Nike has already told retailers that they will increase prices to offset higher shipping and raw material prices - you can only do this if you are a strong brand
As I moved from the public equities investment world where I was obsessing over quarterly numbers to working inside real companies, you realise that change and transformation take time. Nike has IMHO crushed it over the last few years, doing what a lot of people thought was impossible. If there are issues beyond its control on its supply chain and the market is punishing the company for it then I would use that as an opportunity to think long term, not short term.