Nike (NKE) and Lululemon Athletica (LULU) are both leaders in terms of long-term profits and share performance growth. However, share price performance today does not reflect this. Both stocks have been declining due to worries about the broader economy. But, if you could only invest in one right now, which would be the better investment? Let us investigate.
Nike Stock: Nike’s Argument
Nike’s latest news has not been stellar. The sports clothing and footwear behemoth is dealing with excess inventory and a declining gross margin. The inventory crisis is connected to disruptions in the supply chain. Nike intends to use markdowns to address the issue, which will put more pressure on profits.
In fact, the business expects that markdowns, increased transportation costs, and unfavorable currency headwinds would result in a 200- to a 250-basis-point reduction in fiscal 2023 gross margin.
Nonetheless, Nike’s internet sales are increasing. During the fiscal first quarter, Nike digital grew by double digits throughout North America, Europe, Asia, and Latin America. Higher traffic and order value increases also contributed to the improvements. Nike’s direct-to-consumer sales are also increasing. When currency movements were excluded, Nike’s direct sales increased by 14% in the third quarter.
Let us now consider value. Nike is priced at 29 times projected profits. This is a decrease from 48 late last year. At the same time, income is increasing. This seems to be a fair price given Nike’s strengths – plus the knowledge that the present headwinds are just transitory.
Lululemon Stock: The Lululemon case
Lululemon is a yoga-inspired apparel retailer. And, like Nike, the brand is well-liked by customers. According to The NPD Group, Lululemon acquired more market share than any other brand in adult active gear during the last two years.
Lululemon stock (NYSE:LULU) has already met two of its 2019 Power of Three growth objectives: doubling sales in digital and in its men’s line. In fact, it increased digital sales between 2018 and the previous year. And it’s well on its way to achieving the third target of tripling overseas income.
Lululemon has established a new set of objectives since things are going so well. It will double men’s line sales, double digital income, and quadruple overseas revenue as part of a five-year strategy revealed this spring. This will be effective as of 2021. If Lululemon is successful, it may usher in a new age of share price appreciation.
The retailer’s quarterly sales and operating profits soared by double digits.
Lululemon, like Nike, has suffered a drop in value. It is now selling at around 29 times the projected earnings forecasts. In comparison, there were roughly 60 late last year. Given Lululemon’s handling of the present climate and future prospects, this seems to be a steal.
So, is it going to be Nike or Lululemon stock?
Both of these athletic giants are expected to triumph in the future. And they’re both trading at fascinating prices right now. Because of the prominence of their brands, they have strong sales and profit growth possibilities.
Lululemon is farther along in its growth narrative than Nike. It may anticipate higher revenue growth in the future as it expands its operations per the most recent growth strategy. That suggests Lululemon may have more catalysts to push up its stock price. That is why I would select Lululemon if I could only acquire one of these consumer product companies today.
Featured Image – Megapixl © Chernetskaya
Author Okoro Chinedu 
