To market to market to buy a fat pig. Things look messy in Spain at the moment, the Spanish government are saying that no referendum took place and if it did, it was illegal. Senior politicians in Catalonia are saying that the referendum, where 90% voted yes to independence, clearly shows they should be an independent state. Given how difficult it was to go cast your vote, there were a number of injuries, it makes sense that the ‘yes’ voters persevered and the ‘no’ voters stayed at home.
As Paul was saying in the office this morning, imagine if the Western Cape decided that they didn’t like being coupled with the rest of South Africa and wanted to be independent. Imagine the chaos and division that would ensue. I don’t have friends or family living in Spain, I don’t even support a Spanish Football team, so I don’t have a horse in this race. From an outside perspective, one country is always better than two. There are less regulations, less bureaucracy, less politicians to pay and more movement of resources to where they need to be.
New York, New York. On Friday, there were record highs again for US markets. Here is the scorecard, the Dow was up 0.11%, the S&P 500 was up 0.37%, the Nasdaq was up 0.66% and the All-share was up 1.06% We are still below the 56 000 mark for local markets but with a few good days, we will also be in record high territory.
Company corner
Michael’s Musings
Last week we had 1Q numbers from Nike, which missed analyst estimates at the top line but beat on the bottom line. Here is the press release from the company, Nike, Inc. Reports Fiscal 2018 1Q Results . Here are the headline numbers, revenue of $9.07 billion up 0.1% from $9.06 billion and EPS of $0.57 down 22% from 0.73%. A big reason for the drop is due to their effective tax rate going from 2.5% to 11.4%; as you can see much lower than the 35% US tax rate thanks to all the deductions allowed.
As it stands at the moment, the company has two distinct parts to the business. They have their North America (NA) segment which accounts for around 45% of their sales and the ‘international’ segment which is around 55%. The NA division has been struggling as wholesaler middle men like Foot Locker have been closing stores. There has also been increased competition from the likes of Adidas and Under Armour. Compared to the first quarter of 2016, the NA division saw revenues drop 3% to $3.9 billion. To counter the issues of middle-men distributers, Nike has been going directly to the customer in the form of the Nike stores and through their online retail page. The Nike direct division had sales increase by 11% and the online segment grow sales by 19%.
The bulk of the International division had growth of around 5%, but the region of most excitement for Nike is China. They grew sales by 12% in China, bringing in revenue of $1.1 billion for the quarter. For now all the growth in China is offsetting the shrinkage in NA but once NA stabilises we should see strong top-line growth again.
If the athleisure space was a stagnant market there would be cause for concern due to the resurgence of their competitors. This is a market that is still growing, particularly in emerging markets, there is space for all the competitors. The main reason to own Nike at the moment is due to the huge growth potential coming out of China.
Linkfest, lap it up
One thing, from Paul
This week on Blunders: there could be cash in your cistern, Equifax is a mess, cheating marathoners in Mexico, and Hugh Hefner is dead – Blunders – Episode 74
Byron’s Beats
Elon Musk has certainly perfected the ability to wow the world with his announcements. Steve Jobs was brilliant at this but no one else since Steve has been able to capture the world’s attention (and imagination) until Musk came along. On Friday Elon introduced some incredible concepts to the world. Mars exploration is still pretty far fetched in my opinion. I am far more interested in making this planet a better place. This YouTube clip titled BFR Earth to Earth shows that you can fly to most places on earth in under 30 minutes. Watch the clip and you will see what he means, it is only 2 minutes long.
Bright’s Banter
We have been getting quite a number of questions from our clients who hold Sasol Inzalo shares about what to do next since the scheme has not made them any money. This Biznews podcast with Paul Victor CFO of Sasol, and the Co-CEOs Steve Cornell and baba uBongani Qwababa goes in depth on what went wrong with the previous scheme and what the new Khanyisa Transaction is trying to achieve – Everything You Need To Know About Sasol Inzalo And Sasol Khanyisa Transaction
Further reading on the topic can be found here straight from the company’s website.
Home again, home again, jiggety-jog. Asian markets are closed today. Our market is off to a strong start this morning but the Rand is on the back foot due to the Dollar surging.
Sent to you by Team Vestact.
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