Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0779
    -0.0014 (-0.13%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2620
    -0.0002 (-0.02%)
     
  • USD/JPY

    151.4100
    +0.0380 (+0.03%)
     
  • Bitcoin USD

    70,449.71
    +115.97 (+0.16%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Nike has ‘fewer challenges’ with its supply chain, analyst explains

Raymond James Managing Director and Senior Research Analyst Olivia Tong joins Yahoo Finance Live to discuss consumer spending, supply chain woes, retail inventory, and the outlook for Nike following its latest earnings report.

Video Transcript

- Consumer sentiment and spending ticked up slightly in August as the pandemic forced people to reconsider how and what they buy, requiring consumer staple companies to adapt to the unpredictable landscape. Raymond James Managing Director and Senior Research Analyst Olivia Tong joins us now to discuss the future of some of these brands. Olivia, great to have you here. And for some perspective here on the consumer particularly, as households are navigating, what is going out the door in order for them to be able to either maintain a lifestyle or just get the basic necessities right now? Where do we really sir in this broader part of the equation in the economy?

OLIVIA TONG: Sure. Thank you for having me. Really appreciate it. A couple of things to think about with respect to the environment right now-- we are, obviously, coming off of a period of COVID, where you had massive demand as people were at home. And now we're kind of on the back side of that.

As a result, you are seeing retailers pull back a bit on ordering. Supply chain challenges have also lifted quite a bit. So they are not as tight as they used to be.

And the consumer is a little bit softer. Gas prices are still higher than they had been before. They've come down a fair bit, but they are still higher.

We are seeing, obviously, signs of the economy slowing a little bit. So that is something to be mindful of. And that has clearly had an impact in terms of consumption and then also purchasing.

- Olivia, Friday is for stock picks. So let's get into some of yours. We'll start with Procter & Gamble. Last time we heard from P&G, about three months ago reported earnings-- excuse me-- warned a little bit about increasing dollar risk and volatility, warned about inflation starting to impact their business, also warned about consumers trading down to some private label brands. Do you think any of that improved in the third quarter? Or did things get worse and the market is not prepared for it?

OLIVIA TONG: I think most of what you said, that has continued. No change there. The consumer continues to be a little bit softer. I mean, I think a few things to think about with respect to trade out, it doesn't always have to be changing in terms of brand.

You may see difference in terms of pack sizes. Maybe a consumer is thinking about the total cost of their basket. So pack sizes come down. Or in some cases, they're thinking about value, so perhaps buying that large pack where the dollar per unit is a little bit lower.

The one thing that has changed a little bit is commodity costs have come in. So with respect to the companies, that has helped a little bit on the margin. That does take a little bit of time for that to come through in terms of the P&L. The offset, unfortunately, is that currency rates have worsened, clearly, with the dollar continuing to reach new highs, whether it's euro or the pound and what have you. So that has become a bit of a bigger issue in the last couple of months.

- Olivia, what's different about how some CPG companies are able to actually manage their logistics and get inventory into wholesale partners differently from a company like Nike that we were talking about even earlier, where there are significant challenges that continue to lie ahead for some of the athletic or just the broader apparel and footwear companies that they're citing, versus some of the CPG companies, who are getting those necessity purchases into different stores and locations?

OLIVIA TONG: Sure. Great question. So one big thing to think about, of course, is the fact that they are producing closer to where our consumption is, whereas some other retail and apparel and footwear companies, obviously, a lot of the production is happening overseas. So that time, the supply chain is a fair bit longer.

When it comes to everyday goods, you are typically producing a little bit closer and typically wherever the consumption is happening. So in the US, it's getting produced in the US. So there's fewer challenges with respect to that.

The other thing is how frequent you are purchasing. Clearly with home goods and everyday usable goods, you are purchasing that on a much more frequent basis than you are with respect to apparel or footwear. So that does help from that perspective.

I think the other thing to think about is that many of these companies in the last couple of years have made a fair bit of investment in terms of efficiency improvements. So they've cleaned up their businesses. They were, obviously, tested quite dramatically during the pandemic. So now we're actually in a period where they've hopefully taken a lot of the learnings that they got from pandemic. And that's being reflected now.

- Now, Olivia, we've been very hard here on Clorox. It has not been a pretty year or postpandemic couple of quarters for Clorox-- guidance cuts, margin pressure. Is that over? Are we going to start finally hearing a little bit better things from this company?

OLIVIA TONG: So I think a couple of things to think about with respect to what we were talking about before, commodities have come a little bit better, which is helping. They also have less exposure to currency than a lot of their peers. So from a dollar perspective, they should start to see a little bit less relative impact compared to some of their peers because they are 80% domestic.

What is challenging, of course, is the postpandemic period. Wipes consumption is down. Cleaning is not quite what it used to be. And in some cases, a lot of these companies are still trying to recapture some of the commodity cost inflation that we've seen. So pricing is still up at a time when consumers are very mindful of, as we talked about earlier, the dollars coming out of your wallet.

- Well, for what it's worth, I'm still a Clorox wipe user. They work. They just make a lot of sense to me. All right, we'll leave it there.

OLIVIA TONG: As am I.

- Raymond James Managing Director and Senior Research Analyst Olivia Tong, good to see you. Have a great weekend.

OLIVIA TONG: Thank you. You as well. Take care.

Advertisement