The market has had investors walking on thin ice in recent months. With record levels of inflation, rising interest rates, and concerns involving Russia and Ukraine, growth stocks have been under an immense amount of pressure lately. It's very common for investors to shift from speculative investments into safer assets during times of uncertainty, which is exactly what's going on today.
It wouldn't be unwise to consider turning to more established companies for the time being. Companies like Nike (NKE 0.95%) offer investors much-needed security in today's shaky economic environment. Nike, which is perhaps the world's most recognizable retail brand, possesses many favorable characteristics for a long-term investment portfolio. Although there are many reasons to fancy the prominent retailer, here are three worthy justifications for buying Nike today and holding it forever.
Image source: Getty Images.
1. A world-class retail moat
Nike's moat in the sports apparel market is unrivaled. In 2021, Nike generated sales of $44.5 billion, compared to top competitors Lululemon Athletica, Adidas, and Under Armour, which experienced revenues of $6.3 billion, $21.2 billion, and $5.7 billion, respectively. The company reigns over nearly 50% of the athletic footwear market in the United States and roughly one-third of the entire sports apparel industry.
With the sports apparel market forecast to generate $270 billion in annual sales by 2028, Nike is primely positioned to sustain solid growth in the years ahead. Plus, the company's roster of athlete sponsors is unrivaled. From Michael Jordan, LeBron James, and Serena Williams, to Tiger Woods, Rafael Nadal, and Christiano Ronaldo, Nike is equipped with a portfolio of the world's most influential athletic figures. Couple that with the company's "Just Do It" slogan, and it's safe to say Nike's economic moat is as durable as they come.
2. Consistent numbers day in and day out
Even when investors expect the worst, Nike seems to deliver strong results. The company has recently battled several obstacles related to pandemic-driven factory shutdowns and sales growth in the greater China region. Even so, Nike still managed to report a top line of $10.9 billion and a bottom line of $0.87 per share in its most recent quarter, beating consensus estimates by 3% and 21%, respectively.
The results surprised many investors as Nike's sales in China -- which represent a solid chunk of its business -- declined 8% in the quarter. The beauty of Nike is its wide and diverse global portfolio. Yhis enables the company to succeed time and time again even if some segments of the business experience substandard performance. Especially in an unstable market today, investors should be very pleased with Nike's ability to navigate challenges and provide strong results on the financial front.
3. Perpetual innovation
One of Nike's underrated strengths is its ability to evolve with the consumer over time. The company isn't afraid to challenge the status quo and think outside the box. In a world that is becoming increasingly electronic, Nike's digital sales continue to skyrocket. In the third quarter, Nike Brand Digital sales climbed 22% year over year, largely driven by a 33% increase in the North America region. The Nike mobile app was also up more than 50% in the quarter, surpassing Nike.com as the company's highest share of digital demand.
Nike continues to break barriers and enter new markets, like the metaverse. In late 2021, the company purchased RTFKT Studios, a non-fungible token (NFT) company focused on creating virtual shoes. Although the NFT market is still in its early innings, the acquisition proves Nike is perfectly willing to adapt to consumer demands and experiment with new cutting-edge technologies.
Nike is a safe play today
In today's market, I view Nike as an excellent investment choice. The sports apparel juggernaut has watched its share price depreciate 22% year to date, and as a result, the stock appears awfully cheap. Nike is trading at 33 times earnings today, representing a 26% discount to its five-year historical average price-to-earnings multiple of 43. The company's attractive valuation, intertwined with its elite market positioning and strong fundamentals, makes it a worthy investment opportunity in today's wobbly stock market.
