Daniel Schwartz 3.8 3 ideas

3G Capital recently invested in Skechers. Schwartz notes SKX is the 3rd largest sneaker company globally (behind Nike/Adidas), growing mid-to-high single digits, with $9B in sales vs Adidas' $14B. Unlike competitors reliant on "hero skews" (e.g., Jordans or Yeezys), SKX has a diversified product mix and high customer loyalty. Crucially, SKX owns its distribution (5,000+ stores/DTC), insulating it from the "retailer disintermediation" risk that plagued 3G's CPG investments. 3G's entry signals a conviction in SKX's undervaluation relative to its growth and a potential for operational improvements to close the gap with Adidas. Consumer spending slowdown; failure to maintain growth without a "hype" product.

Schwartz highlights the "share gain of private label" and explicitly praises Costco's "Kirkland" as a fantastic brand that disintermediates suppliers. This is the inverse of the KHC thesis. Retailers that own the customer relationship have immense pricing power and margin expansion opportunity by replacing branded goods with proprietary private labels. Long the disintermediators. As inflation presses consumers, the shift to private label (Kirkland/Great Value) accelerates, benefiting the retailers at the expense of the suppliers. Valuation concerns (COST is historically expensive); regulatory scrutiny on retailer pricing power.