Wages worldwide have stagnated and consumer spending has been pressured by rising commodities prices. People may not be able to afford to buy cars and houses. It turns out, however, that they can afford$100 sneakers.
Nike reported earnings for its last quarter of $594 million up 14% from the same period last year. Revenue rose 14% to $5.8 billion. Future orders rose 15% worldwide, which may have been the most important number the firm released. China orders rose 24% as might be expected, but orders also rose over 10% in the US and throughout Europe. There is no recession in the sneaker market.
It seems that the sales of items like workout shoes and McDonald’s (NYSE: MCD) hamburgers have not been damaged much by the choppy economy. Most people who are still employed, and perhaps recently unemployed, can afford them. Sales of these inexpensive goods also run across socioeconomic barriers. They are a litmus test which shows that while consumer spending has slowed, it has not died.
If indeed the least expensive items that people can buy currently sell well, it will be very telling if the sales of sneakers and hamburgers drop off. That will probably mean that the last dollar in the last pocket has been spent on food, energy, and housing. The real recession will have begun when that happens.
Douglas A. McIntyre