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Since the much-anticipated Nike (NKE) earnings were released yesterday, let’s review them first.

Most headlines I’ve seen on the subject focus on how the athletic apparel company beat on topline revenue. This was thanks to its North American and European markets, which seem to be improving.

Its Chinese one, however, continues to struggle.

Williams Trading Senior Equity Analyst Sam Poser told Yahoo Finance Live that retail activity there “was slightly better than what we anticipated” but still not great. Its direct-to-consumer (DTC) business was down and its sales “still have issues.”

As such, Nike fell short on bottom bottom-line profits.

On the plus-side for real estate investment trust (REIT) holders, global foot traffic to Nike-owned stores rose around 14% year-over-year. Yet Poser also brought up that:

The [larger] mix of business to DTC really does help them fairly dramatically because it takes a lot of pressure off the supply chain. For every one pair they sell themselves, they basically have to sell two pairs to a wholesale account. So it appears as if they did a bit of maneuvering.

Overall, it appears Nike’s Western fan base remains willing to pay the price for some “swoosh.” But we have to compare that economic commentary with this Washington Post headline: “Fewer hot showers, less meat: How retirees on fixed incomes are dealing with inflation.”

I won’t repeat the particular retiree’s story it starts out with, skipping to this part instead:

Rising prices are squeezing household budgets around the country and putting additional strain on its 56 million older residents aged 65 and up…

The burden on older Americans is the latest example of how inflation – at 40-year highs – is exacerbating inequalities across the economy.

Bottom line: Higher prices on almost everything “are weighing heavily on those who can least afford it.”

More Non-REIT News to Know About

Please don’t shoot the messenger, but prices could go higher from here according to multiple sources when:

• “Breadbasket” Ukraine might not be able to begin its wheat planting season.
• Saudi Arabian energy assets were attacked on Sunday.
• Oil is back on the significant rise.

Apparently, the implications are even worrying Federal Reserve Chair Jerome Powell. He told the National Association for Business Economics yesterday:

We will take the necessary steps to ensure a return to price stability. In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than [a quarter-point] at a meeting or meetings, we will do so.

And:

There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level and then to move to more restrictive levels if that is what is required to restore price stability. We are committed to restoring price stability while preserving a strong labor market.

That commentary probably factored into yesterday’s mild market drop.

In other business-world news, the Securities and Exchange Commission (SEC) wants to make public companies disclose their energy activity. The proposal is for them to disclose their direct and indirect greenhouse gas emissions and submit climate goals, including plans to achieve them and progress toward them.

That still-developing story could have significant repercussions over time – not just to individual companies but also to the economy as a whole.

On a shorter timeline – and an even more speculative note – I know many residential real estate insiders believe these high prices are the new norm. And maybe they are.

However, MarketWatch ran an article yesterday that seems worth mentioning here. I’ll discuss it in our REIT segment down below…

The World According to REITs

Here’s the headline: “‘The Housing Market Is in the Early Stages of a Substantial Downshift’: Home Sales May Drop 25% by the End of Summer, According to This Analyst.”

According to Pantheon Macroeconomics founder and chief economist Ian Shepherdson, the housing market is unsustainable as-is. To support that position, he points to Mortgage Bankers Association data, which showed home purchase loan applications were down 8%+ year-over-year. And demand for refinancing is down 50%.

If he turns out to be correct, apartment REITs will obviously be impacted as well.

I don’t have any such entities to report on below. But here are your three insights into what’s going on in other commercial real estate subsectors:

• Pebblebrook Hotel Trust (PEB) reported that same-property occupancy stood at 50% last month, with demand rising significantly in the last two weeks of February. Same-property average daily rate (ADR) even beat 2019’s figure by 25%, while March bookings have accelerated from there with April expectations even higher. PEB attributes this in part to business group travel picking up.
• Farmland Partners (FPI) bought a corn and soybean farm in Edgard County, Illinois, for $910,000. The 65-acre property is being leased back to the seller for the rest of 2022.
• Four Corners Property Trust (FCPT) acquired a Fresenius medical care property in Michigan for $2.7 million. The existing net lease still has six years left to it, and the capitalization rate is 7.4%. It also purchased a Smokey Bones restaurant asset in Illinois for $4.4 million. That triple-net lease has 12 years left to its term, and the cap rate was 6.3%.

That’s what we’ve got today, at least for here. 

(Source: The Daily REITBeat)