Friday's Headlines: Peloton Partners With Dick's

Friday's Headlines: Peloton Partners With Dick's

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Wix (WIX) +4.0%

Vail Resorts (MTN) +1.6%

FedEx (FDX) +1.5% (BILL) +1.2%

FactSet (FDS) +1.0%

Moving Down ⬇️

Peloton Interactive (PTON) -14.4%

2U (TWOU) -9.1%

Shopify (SHOP) -8.4%

Baozun (BZUN) -8.0%

THOR Industries (THO) -7.7%

Peloton Partners With Dick’s 🤝

Peloton (PTON) has made the move into third-party brick-and-mortar sales, announcing yesterday a new partnership with Dick’s Sporting Goods that will see its equipment sold in the company’s outlets.

According to the joint press release, Dick’s will sell Peloton’s hardware products, including its Bike, Bike+, Tread, and Guide, along with other accessories across more than 100 of its outlets before the holiday season. Peloton equipment will also be featured for sale on Dick’s e-commerce platform.

This is a significant deal for Peloton as it marks the first time its equipment will be sold in retail stores that are not company-owned. Peloton had existed solely as a direct-to-consumer (DTC) company until very recently, controlling the customer experience every step of the way through digital and physical channels.

However, the company has struggled to grow its customer base in the past year or so, and new CEO Barry McCarthy has introduced new sales partnerships in order to revitalize the company. Last month, for example, Peloton signed a deal with Amazon to start selling its products on the e-commerce platform — the first major departure in its DTC strategy.

The hope for Peloton now is that flagging sales are bolstered, while also feeding into its connected subscriber base, which McCarthy sees as the company’s future. With the stock down more than 95% from its all-time highs, investors will be hoping that this bet pays off.


Rising Inventory Causes Concern for Nike 🛑

Nike (NKE) shares look set to open as much as 10% lower this morning after the iconic sportswear brand warned of a gloomy financial outlook, thanks in no small part to rising inventory levels.

Reporting on its first fiscal last night, Nike actually beat expectations on both the top and bottom line, though revenue of $12.69 billion represented growth of just 4% from the same period last year. For analysts and investors alike, this marginal level of growth was still considered decent relative to the macroeconomic environment, with supply chain issues and COVID-related store closures still rattling retailers.

These problems don’t look set to ease any time soon though. One of the main issues facing Nike at the minute that spooked investors is its rising levels of inventory, or unsold goods. In the last quarter, Nike said its inventory rose 44% to $9.7 billion on its balance sheet compared to the same period last year. Management said that this was driven by supply chain issues and falling sales in the key market of China, though it was partially offset by strong consumer demand in other regions like North America.

In order to combat these rising inventory levels, management has said that the company plans to “more aggressively liquidate it” so that newer inventory can reach consumers at the proper time. From a financial perspective, what this means is that there will be heavy discounts on older Nike lines in the run-up to the holiday season, which will put pressure on margins in the short term.

Nike stock is currently down more than 40% since the start of the year.


CarMax Shows Used-Car Fever is at an End 🚗

It would be difficult to get hotter than the used car market in 2021.

While most cars continually depreciate over their lifetime, the pandemic caused a once-in-a-generation turnaround that saw second-hand car asking prices rise more than 15%. With more cash in consumers’ pockets and new car supplies trapped in supply chain limbo, everyone was happy to purchase a 2015 Volkswagen Jetta.

No company benefited from this trend more than CarMax Inc (NYSE: KMX). CarMax is the United States’ largest used car retailer with more than 225 locations. These sites carry an inventory of 300-400 cars and can turn it over between 8 and 10 times per year. In 2021, CarMax sold 750,000 vehicles. The company also provides financing to consumers but it’s a relatively small portion of revenue.

However, in CarMax’s latest quarterly report, the chickens have come to roost. The retailer’s profit dropped by more than 50% and sales rose a mere 2%, coming in at $8.1 billion. Both metrics missed Wall Street’s forecasts. Total vehicle sales fell 10% from a year ago with retail sales down 6.4% and wholesale down 15%.

According to management, the poor results all come down to the macroeconomic environment and consumer uncertainty. Fears of a recession have shoppers reconsidering big purchases, not to mention raising interest rates.

The ugly quarter sent CarMax’s stock reeling on Thursday, falling more than 24% to $65.16 a share, a two-year low. Additionally, analysts and investors were quick to take the company’s struggle as an omen for the overall industry, with virtually every car stock trading lower pre-market. General Motors Co. and Ford are both down more than 5%.

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