Tonight, ESPN will air the final two episodes of The Last Dance, its fantastic documentary about the greatest basketball player who ever lived: Michael Jordan. The Last Dance has been a genuine hit, as it's helped fans get through this tough time without live sports -- and besides, it's just really well-done.
For those who may not remember the Michael Jordan era, not only did "MJ" transform NBA basketball into a global phenomenon, he also propelled several consumer companies to new heights of brand awareness through big-time endorsements.
What's interesting is that even 25 or so years later, these companies are still going strong. In fact, the following Michael Jordan-endorsed brands could make solid picks for either the defensive, long-term investor, or those with a more aggressive bent amid the coronavirus downturn.
Image source: Nike.
It's gotta be the shoes
Perhaps most notably, Michael Jordan is famous for elevating Nike (NKE 1.20%) from an upstart indie shoe brand to the world's premier athletic apparel brand. It may seem odd today, but the 1980s were actually dominated by Converse and Adidias sneakers. In fact, it took a lot of convincing to even get Jordan to come on board and endorse Nike in the first place. Yet eventually he did, making the "Air Jordan" sneaker line into a global phenomenon, helped by this iconic Spike Lee ad:
Source: The YouTube channel of SoxFan10.
Nike's brand power is perhaps stronger than ever today, even amid coronavirus. On its recent earnings release, CEO John Donahoe proclaimed, "We know it's in times like these that strong brands get even stronger," and Nike's recent quarterly results seemed to back that up.
Despite COVID-19, revenue increased 5% and an even better 7% on a currency-neutral basis. As the company closed stores in China in January and February and then the rest of the world in March, demand shifted online, where Nike's digital sales surged a whopping 36%. Nike also reported a big increase in Nike app downloads and app activity as people looked for new ways to stay athletic and physical even while in quarantine.
Nike's stock is down 13.9% this year -- a bit below the market, but not materially so. Still, over the long-term, Nike's stock has been a proven outperformer, and that should continue through the downturn and beyond once people return to play more sports. That could make the current period of unique under-performance a chance for the long-term investor to scoop up shares of this quality brand.
NKE 10 Year Total Returns (Daily) data by YCharts.
Be like Mike
The second-most-famous Michael Jordan endorsement was for Gatorade, now owned by PepsiCo (PEP -0.68%), which acquired the brand via its 2001 acquisition of Quaker Oats.
After his success with Nike, Gatorade recruited Jordan to be its official spokesperson, and the result was the iconic "Be like Mike" ads that appeared in 1991.
Source: The YouTube channel of bigwayne84.
While iconic, the "Be Like Mike" ads weren't as effective at moving product, apparently. However, later versions with more typical basketball scenes featuring Jordan sweating and dunking began to move Gatorade bottles much faster.
Today, PepsiCo is a consumer staples conglomerate that's set up very well to weather the coronavirus downturn. The company's portfolio is about half drinks, half snacks -- things people consume no matter what the economy is doing. PepsiCo beverages include Pepsi, Mountain Dew, Gatorade, and newer brands such as Bubly sparkling water. Meanwhile, its snacks portfolio, under both the Quaker Foods and Frito-Lay subsidiaries, is home to Fritos, Cheetos, Tostitos, and many other familiar chip brands people eat in both good times and bad.
Despite COVID-19, Pepsi's first-quarter organic sales were up a strong 7.9%, with constant-currency earnings per share up 10%. Unlike many companies that are now cutting their dividends, Pepsi is a safe haven that expects to return $5.5 billion to shareholders via dividends, along with $2 billion in share repurchases, during 2020. And the company isn't slowing down either: It recently purchased the Rockstar energy drink brand for $3.85 billion in a continuing push to expand its non-soda drink portfolio.
As a resilient and highly diversified consumer staples stock that can grow even in a downturn, well-managed PepsiCo is definitely worth a look for risk-off investors. In fact, the stock is flat on the year, outpacing the overall market by an impressive 10 percentage points, evidence of its brand strength and recession-resistant business model.
PEP Year to Date Total Returns (Daily) data by YCharts.
Wait 'till we get our Hanes on you
In between his endorsements for Nike and Gatorade, Jordan was also the official endorser of the Hanes underwear brand.
Source: The YouTube channel of Shatoosh.
Today, HanesBrands (HBI -3.30%) is a collection of many apparel brands, including Hanes underwear, Champion sportswear, Bonds, DIM, Maidenform, Bali, Playtex, Lovable, Bras N Things, Wonderbra, and several others.
Image source: Hanesbrands.
Hanes hasn't fared as well as the previous two names -- its stock is down a whopping 42% in 2020, as its business was more severely affected by retail outlet shutdowns than either Nike or PepsiCo. Sales plunged 17.1% in the first quarter, and net income fell from $81 million in the first quarter of 2019 to a $7.9 million net loss in the first quarter of 2020.
HBI Year to Date Total Returns (Daily) data by YCharts.
Still, there may be some hope for HanesBrands to turn things around. Management claims that absent the effects of COVID-19 and one-time gains in the year-ago quarter, first-quarter sales were tracking to be up 1.6%, ahead of management's projections. The Champion brand has also been an outperformer, with management claiming recent online sales trends for Champion are in the "Black Friday or Cyber-Monday range." The company also just inked a new distribution deal with Amazon to sell its low-priced C9 Champion line, which could be a promising way to boost online sales in 2020 to the mass market.
Like many peers in the consumer goods space, HanesBrands owns its own manufacturing footprint, and it believes that it can begin making face masks to satisfy the overwhelming demand for more face coverings amid the COVID-19 pandemic. Management believes masks could actually be a "sizable revenue opportunity" over the next few years.
Finally, in an environment in which many companies are slashing their dividends, Hanesbrands just declared its most recent dividend, which, thanks to the stock price decline, gives shareholders a juicy 7% dividend yield at today's prices. While companies with yields that high might choose to slash payments to preserve liquidity, apparently Hanes' management feels good enough about the business to maintain the big payout -- at least for now.
A Jordan stock for all investors
Of all the Jordan stocks, PepsiCo is definitely the most recession-resistant and defensive stock for the risk-averse investor. Meanwhile, Nike has the best-quality brand that, while suffering a slowdown from COVID-19, has the power to bounce back and thrive over the long-term, and is thus appropriate for younger buy-and-hold investors looking to pick up quality names at a discount.
Meanwhile, HanesBrands is definitely the riskiest of the three. Nevertheless, at a bargain-basement PE ratio of 6.0 and given its a 7% dividend yield, aggressive investors may see deep value in Hanes, should the company be able to expand online or if the economy opens up quicker than expected. Still, apparel stocks like Hanes are difficult, as they aren't as recession-resistant as food, and Hanes' brands don't have the overwhelming brand power found in Nike's portfolio.
In sum, even 30 years later in this strange coronavirus economy, there's a Michael Jordan consumer-products stock for every type of investor.
