Rundown: Nike teams up with Skims, Celsius acquires Alani Nu & Crocs preps for tariffs

0:03Hello, hello, and welcome to this week's Modern Retail Rundown. I'm Gabby Barco. I'm here this week with executive editor Anna Hensel. How are you, Anna? I'm good. I feel like I should have an energy drink with me in honor of one of today's stories, but it's Friday morning, so that might be a little aggressive. I know. Yeah, I always feel weird about having a morning one. It makes me feel like a teen gamer, but who knows, maybe afterwards. Yeah. Yeah, we have some energy drink news later on, But first up, we have a bunch of stories to talk about. So we're going to talk about Nike and Skims' new activewear brand that they announced.

0:48I thought it was interesting that this is a standalone brand, not just the collaboration. We'll get into that. After that, we'll talk about Celsius acquiring energy drink startup Alani Nu for$1.8 billion. It's obviously an exciting time in energy, as we were just saying. And then we'll wrap up by talking about what Crocs had to say about tariffs. They expect to take a hit like many retail brands. So I think it's a timely story to discuss. But first up, let's talk about Skims Nike. Nike Skims, actually, is what it's called. I know, which comes first. But yeah, I was surprised by this partnership.

1:30But in hindsight, as I thought about it more, I think there are some interesting things here that make sense so we can get into it. Yeah. So basically this week, Skims and Nike announced that they are launching a new brand for women's activewear that will just be sort of a long-term collaboration or partnership. They'll start releasing collections starting this spring in the US. And then I think the global rollout is not until 2026, but it seems like it's already getting started. So this will be, you know, apparel, footwear, accessories, and it will be blending naturally, you know, Nike's performance driven technology and then the body conscious, you know, sort of inclusivity that Skims really has, you know, cornered there.

2:21What are your thoughts? I mean, it makes sense. I'm kind of curious to see what they look like, But we'll talk about how for Skims, this feels like a pretty natural progression. But yeah, ironically, I feel like for Nike, it's actually a bigger deal, which is interesting. Yeah. I mean, I just was really surprised when I first read this because obviously Nike is known for partnering with athletes, although I believe in the New York Times story about this news, the other Skims co-founder called Kim Kardashian the Michael Jordan of influencers. So I guess it makes sense from that perspective. But I just think that there is so much more competition now in women's active wear, women's athleisure.

3:09It all kind of blends together. And when I just look at how much competition there is out there right now, Lululemon, Viore, Alo Yoga, all kind of going after the same market. I feel like Nike has been around for so long that it kind of needed to do something unexpected to get people's attention and and get like their interest in its women's wear again. So definitely I'll be very curious to see how this does. I feel like this will keep people talking for a while. Yeah, I think this is maybe a good time to talk about, you know, why the market seems really excited for Nike, which has been struggling with lifestyle specifically and women's wear, as you mentioned, but their shares did spike over 6 % in light of the news and the market cap increased by almost 5 billion.

4:04I thought that was a typo because that's a lot, but that just, you know, illustrates how big Nike is. But yeah, I think delving into or trying to, you know, tap into the audience, because I do think there is a lot of overlap probably between the Skims and the Nike audience. So it only makes sense that you would, you know, join forces in in capitalizing on that. But yeah, I think with that, you know, struggling sales lately, I think we've talked a lot on this podcast about all of the changing strategies over the last few years. But I think this segment seems like a pretty big like there's a renewed emphasis on it.

4:46So do you want to talk about why SKIMS may be a great catapult for that? like to kind of try to get into that segment? Yeah, I think this comes at an interesting time for Skims because a lot of people are speculating about when they'll go public. So this would be a great growth partnership to announce if a company was planning to go public soon. I feel like Skims is doing a lot more to just kind of emphasize its authority in like very form-fitting but also high-performing essentials so it started to venture more into sportswear having become the official underwear brand of the usa olympics team uh the wnba in the last few years and so it seems like they're really focused on striking partnerships that again establish their authority and then on nike's end again getting growing its women's business is a big priority um so it recently ran its first super bowl ad in decades actually promoting women's sports so i'll be interested to watch kind of how they marry all of these things because i think again with the Nike Skims partnership, it's like they kind of needed a new, they need a new franchise in this area, like the Jordan brand, right?

6:14So I guess they looked out across the landscape and kind of saw Skims and Kim Kardashian as the ideal partner to build a new franchise. But there's going to kind of have to be like, of course, all these other brand marketing things they do that ladder up to like constantly refreshing in the consumer's mind, right? That like Nike should be their place to go to for women's athletic wear or leggings or other performance, enhancing leisure clothes, whatever you want to call it. Yeah. Yeah, and I think we're just coming off of Skims' North Face collaboration that sold really well. That was more focused on skiing and sort of ski gear.

6:59And so it makes sense. But also I thought it was interesting that this is actually Nike's first ever brand that they created with another outside company. So clearly, it is a big deal. It's a big deal. Yeah. And because Nike is very protective of their brand. I mean, they made a really big push, you know, over the past few years to really grow their DTC sales. And they were cutting wholesale partners who they felt didn't kind of really align with where they wanted to go. And then they realized that they cut too many and kind of were trying to make a push into DTC too soon. So that's another interesting layer to this is I think that maybe it comes at a time where Nike realizes they need some other brand partners.

7:50Yeah. And, you know, who other than Kim Kardashian to push over your marketing strategy. It's working so far. Yeah, so I guess we'll see what the collection will look like, how it will sell. It looks like it's highly anticipated, but it's almost around the corner. It'll be here before we know it. Yes. Okay, well, speaking of collaborations, sponsorships, and all of that, why don't we talk about the latest consolidation in energy drinks. So this week, Celsius announced that it is buying Alani new in a combined cash and stock deal. It's worth $1.8 billion. Obviously, that is a big buy, but it also came with the news of Celsius's full year performance.

8:40So there was a lot of news coming out of the company, but this was obviously a stand out given just how much activity there is in energy right now. Right. This was really fascinating to me. I'm sure I've seen Alani New on store shelves, but as someone who doesn't drink energy drinks that often, they all kind of blend together for me. But it's just it's a really interesting area. And I'll be excited to see how these two brands team up. Yeah. So just to kind of get into the state of Celsius and energy drinks right now. It's a very popular area. We're seeing more consolidation in energy drinks. However, Celsius's growth has actually slowed over the past year per Nielsen IQ data compiled by Jeffries.

9:30Looking at Celsius's Q4 performance in Q4, sales actually fell 4 % down to$332 million. The company also had a net loss of$18.9 million. Still for the full year, Celsius said it did record$1.36 billion in revenue. So I think the story is this is a brand that's still growing, albeit maybe a bit more slowly than they have in the past. And then the bet is that by acquiring Alani New, it can get to$2 billion in revenue. That was the number that was thrown out in this announcement, that basically this will help them become a$2 billion brand. And Celsius is still expanding distribution, it's adding new products, and it says Alani New will help it reach new audiences.

10:21So this was just the quote from the press release, the transaction will combine two growing scaled brands in the U.S. energy drink category, creating a leading better for you functional lifestyle platform that is well positioned to capitalize on the growing consumer preference for zero sugar alternatives. A lot of buzzwords there. But yeah, I think they're kind of teeing it up as, you know, they're growing the Celsius platform, if you want to call it that, and we'll have, you know, now multiple brands that they can launch even more sub products under. Yeah, this is probably a good time to talk about who is Alani Nu.

11:05For those unfamiliar, it has very colorful branding. It was founded in 2018. And it basically positions itself as like a female geared health and wellness energy drinks maker. So, you know, more, you know, geared towards like lower calorie, no sugar. Actually, I think this is interesting, but it also sells, you know, protein shakes and bars and wellness snacks. So it's not just the classic energy drink maker, which is why, you know, this is maybe a new direction or a new opportunity for Celsius. And then, of course, you know, speaking of Kim Kardashian, you know, they are they did also grow exponentially through social media and influencer partnerships.

11:47Yeah. You know, if you look at the brand on social media, very active, has a lot of followers, again, has this very bright, colorful branding that I think is designed to appeal to women. And I think for me, the takeaway just in looking at both Alani News, like website and socials before this, and also Celsius is, again, it just reminded me how big this category has gotten. Celsius now also sells electrolyte packets, which I didn't realize. So these brands see a lot of opportunities, I think, to go into other adjacent better for you categories or what else? Someone who's looking for an energy drink with zero sugar, what else might they want to drink during the day?

12:39Pre-workout, protein shakes, et cetera. So there's a lot of room to grow here. And I also remember, Gabby, you did a story on energy drinks a while back. And what I was really surprised by, again, I had thought this category was very saturated, but I remember you spoke with companies and, you know, they saw some people want a ton of caffeine. Some people want less caffeine. Some people want more natural ingredients like green tea extract. So there's a lot of room to grow in this category. Yeah, exactly. And I guess, you know, with Celsius, even though it's seen as obviously the pinnacle of this better for you energy movement, I think it hasn't really been super aggressive about acquisitions.

13:21Like I think if they wanted to, they could just kind of buy up all of these smaller brands, but they've been pretty strategic. And this is obviously a time when they're still, you know, trying to compete with the big guys, the Red Bulls of the world. So while, you know, at the same time, I think all of those companies are also, you know, the PepsiCo Keurigs of the world are also buying up energy startups, energy drink startups. So yeah, it's, there's a lot going on. But it always anytime I talk to an analyst, they're like, it just seems like the sky's the limit, because people can't get enough.

13:56I think it'll just be interesting to see, you know, who the winners will end up being at the Right. And when we see, because to your point, Keurig, Dr. Pepper acquired Ghost. When you have these huge beverage conglomerates also getting into the space, they have a lot of money to spend. So like we can we may potentially continue to see a lot of acquisitions in this area. Yeah, Pepsi also a big investor in Celsius. I think that has been one of the factors of their all of the recent distribution. They really become an international brand at this point. So, yeah, with that said, I think it'll be interesting to see this Alani new addition to the portfolio, how it will pan out.

14:44But yeah, we can wrap up and move on to Crocs. you know tariffs is of course on everybody's minds we've been covering it for what feels like years at this point I think it's only been a couple of months I know we've aged how many years and it's not discussion I know but obviously when you have a huge company like Crocs you know talk about it in their quarterly earnings that is a big deal and it seems like they are anticipating taking a hit from it so let's let's get started with the numbers Yeah. So it's a big retail earnings season now. Walmart also just reported earnings this past week. There'll be more to come in the next few weeks.

15:28And what I'm really watching closely is just what companies say about tariffs. It's kind of a giant puzzle piece right now. Will some of these tariffs that have been announced actually get implemented? Will they get delayed? Will new tariffs come out of the woodwork? It's like a big puzzle that companies have to figure out. So the one thing that I'm really watching closely this earnings season is what companies are saying about tariffs. And a lot of companies, because this is such a moving target, they they aren't saying much right now. But Crocs was one of the companies that gave kind of more concrete numbers about how this could impact them.

16:10So I wanted to dig into that. So basically, Crocs said during its earnings call this past week that it projects its gross profit will take an$11 million hit from tariffs this year. That's assuming that a 25 % tariff goes through on Mexican imports in March. And that's interesting. I think a lot of companies are still hoping, maybe praying that that doesn't actually go through. but they broke out these numbers with the assumption that that would go through. That's also taking into account 10 % tariffs on China imports that went into effect in early February. And Crocs, it's interesting. Footwear is going to be a category that's very heavily impacted because a lot of footwear is imported into the US.

16:59But Crocs, like many big companies, They've taken steps now to diversify where they manufacture their products. It sounds like they're not too reliant on one country. So they say about 15 % of Crocs' inventory will come from China this year and another 4 % from Mexico. So$11 million is a notable number for sure. I mean, for a small business, that would be deadly. But I think kind of what Crocs seem to say on its earnings is that this is manageable. Like, yes, our gross profit can take this much of a hit. But right now, the line is basically that it's manageable. Yeah, I mean, I think this is maybe a good time to also compare that to just some of what we've heard from other retailers.

17:47Like you said, everyone's being a little bit cautious about how they frame this and how it'll impact them. But we've had a couple of other retailers mention that China tariffs in particular are going to create a big headache. And then, of course, Mexico, too. But, for example, Yeti, which reported its earnings last week, said that the China tariffs went into effect for the full year, as we know. And it would have less than$10 million in impact, so slightly less than Crocs. the cooler brand said it wasn't gonna bake that into its forecast yet because it still thinks it's pretty much manageable yet and the situation is fluid as we keep saying yeah i was looking through the earnings transcript on that and they again they were like it's manageable if we have to we will raise prices later in the year but they're not quite there yet um and then a couple other brands I looked at closely.

18:49So Shark Ninja, which sells blenders and appliances and a lot of things that basically cannot be made in the US. They set a really aggressive goal to ensure that 90 % of its products that come from outside of the US come from places other than China by the end of 2025. So they were kind of, they seem to be aggressively stockpiling inventory and trying to get it in ahead of any potential tariffs. But they still project that sales will grow this year and they're still optimistic about the consumer environment. And then you have the Walmart CEO who gave kind of a very diplomatic answer on their earnings call this week when talking about how tariffs could impact them.

19:33So Walmart CEO Doug McMillan said tariffs are something we've managed for years and we'll just continue to manage that. He also said, we can't predict what will happen in the future, but we can manage it really well. And we're wired to try and save people money. I think that obviously a company like Walmart could benefit if people are being more price conscious. They could see an influx of shoppers, given that Walmart has historically been known for lower prices. But yeah, all of the like publicly traded retailers on earnings calls right now, they're basically saying we can manage this. We know what to do.

20:13It won't be that big of a hit, but we can manage it. But what have you heard anything else from executives? You talked to Gabby about how they're feeling about tariffs right now. Yeah, it seems like a lot of it is like a wait and see approach. And of course, because China has already gotten into effect. And I think for the most part, a lot of retailers have experience in managing those because this literally happened during the last Trump administration. But I think what a lot of people seem nervous about is the Mexico, Canada, like the neighboring countries, which, of course, our commerce is so reliant on.

20:49So, yeah, that'll be interesting. And like you said, that's not till March, which I guess is very soon. But a lot of the people I talk to are like, we just feel like we can't say anything other than, I guess, try to strengthen your supply chain and diversify it. That seems to be the big take right now. Yeah. Yeah, I think it's just it's just a wait and see. There's only so much you can do. But yeah, we'll we'll check back in March and see if there's more back and forth on this another head fake on tariffs. And if so, I feel like we'll age another like 10 years. Yes, exactly. So on that note, we can wrap up for this week.

21:31You can follow us on social. We are at Modern Retail. And listen to Thursday's interview podcast with retail executives. And please come back on Saturday. We have more rundowns for you. Thank you.