Nike vs ON

Is ON really winning?

Nike is the consumer brand.

168b market cap.
Most of its value and revenue comes from the marque brand, NIKE.
Nike’s Q1 2023 revenue was 12.4 billion.
NIKE Brand was 11.8b, converse was 612 million, or 5%.

For context, Hermes did about 3.5b in revenue in q1.

Nike’s core brand is generating 3x the revenue of Hermes and over 5x lululemons revenue.

We all hat tip what LVMH and the luxury houses have built, but Nike is king of cash.

But what about ON?

On is a darling.
DTC brand that is taking over.

But how big is ON?

ON is worth 9.44 BILLION dollars.
5.5% of Nike.

Is that valid? Is that shocking?

Lets see,

Quarter for nike ends 2/28, ON ends 3/31, so it isnt apples to apples, but still worth a look.

Nike results:

12.4b in revenue.
14% revenue growth.
1.2b in net income.

Nike brand grew 14%, converse grew 8%.
Gross margin got slammed as they moved inventory GLUT in December and Jan.

ONs results:

468m in revenue,
78% revenue growth.
Wholesale was up 86%, DTC was up 64%
Gross margin increased up to 58% from 51%

About 50m in net income.

Head to Head:

Nike is worth 17.8 ONs.

Nikes revenue is 26.5x ONs.

Nikes profit is 24x ONs.

ONs growth rate is 5.5x Nikes.

Thoughts:

• Nike has the market to lose.

  • When you get to 40b in revenue, its a big ship to defend

  • How do they stop the leaks? how do they fight off ON?

• ON has the growth AND profit

  • They are growing faster than ANY SAAS company

  • And they are generating 8 figures in profit PER QUARTER right now

  • That is fucking impressive

• But I am worried ON is a fad

  • Fashion has to be cool, can you be cool at 80% growth?

  • lululemon has never had a quarter with as much growth as ON just posted

• ON is worth 4x what Supreme was bought for

  • They are catching lighting in a bottle, but how big is that bottle?

  • Supreme was cool for 10 years and sold for 2b

  • On is 10 years old an is worth 4x supreme?

• To take it a step further… ON is worth 30% more than ALL OF VF CORP

I wouldnt own ON stock.
I think they are the best team in fashion right now, but the growth is too high for a fashion company.

At 9b they need to be the next nike.
But they have converse revenue.
and will Nike really drop the bag?

I think Nike will buy Veja and 2 other shoe brands in the next 3 years.
They will start to look more like LVMH or Kering.

Or… they buy VF corp.

Athlete focused, but breaking into lifestyle.

But I also wouldnt own Nike stock.

they could totally drop the ball.
When you are this big, sometime you dont see the icebergs.

VF seems like the player to watch.
They successfully run multiple well known brands.

And they got their ass kicked the last few years.
Stock way down, profit hurts.

TLDR:

• ON is crushing the whole industry

  • But that can be bad when you need to be cool

• Nike is still THE BEST

  • Showing growth and 1b in profit a quarter

• But both seem risky

• Nike has too much to lose

• ON is too hot

• In major consumer, I am making different calls

• Also listen to my podcast