Ben Gilbert: belief

Transcript context

…That's exactly what I was going to say. It's just $8.6 billion of their $50 billion of revenue. Every corner of Nike is bigger than the brand that you associate with that space. The Nike brand does $49 billion, so there's some other revenue in there, Converse. I think there's some other catch-all, but basically there's Nike and Converse, and Nike includes Jordan. I mentioned earlier this shift to direct that Nike has been in the midst of for basically a 10-year journey. About 60% is still wholesale, is still sold through retailers. Impressively, 40% of this very large business, this $50 billion revenue business, is now done selling products directly to consumers either in stores or on their website. I can't imagine how difficult that transition is to make when you forge these long partnerships with retailers. Come back to that in a second. Their gross margin profile, 44%. It's interesting looking. Historically, David, we've been at tech podcast and we've looked at lots of software businesses that have these 70%–80% gross margin businesses. Nike has real costs. As you would expect with materials, labor, logistics cost of storing all this inventory, 44%, not bad. Let's just remember luxury. LVMH is a 68% gross margin business, Hermes is a 71% gross margin business. Nike is better than a car company, but it ain't no luxury. Nike does $6.4 billion in operating income, so that's their income before taxes, 12½% operating margin. That's what you should think about, their take home. Not a software company.…

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