If one thinks of companies most affected by the Trump administration’s tariff policy, it would probably be retail consumer goods companies that have a large part of their manufacturing in China. However, SharkNinja (SN 0.68%), which had sold off on the back of those very tariff fears, just posted an impressive first-quarter report, even raising its revenue and profit guidance for the full year.
The company’s resilience and adaptability in the face of a near-worst-case scenario were impressive and show why this emerging consumer goods juggernaut could be a millionaire-maker stock.
Image source: Getty Images.
How SharkNinja sets itself apart
Consumer appliance companies aren’t generally thought of as exciting. However, SharkNinja, which just went public in mid-2023, has taken an aggressive approach that seeks to disrupt the industry.
In every category, SharkNinja always aims for five-star-rated products developed with deep input around customer pain points and perspectives, which have the potential to generate intense brand loyalty and go viral. SharkNinja then puts its intensive marketing research to its 1,000 cross-functional engineers and designers to build the highest-quality product it can to solve those problems. The company describes itself not as a consumer products company as much as a “problem-solving engine.”
That engine can be applied to a number of household goods and products. So, while the Shark brand began in vacuum cleaners, and Ninja began with blenders, SharkNinja has since expanded to 36 total subcategories across cleaning products, cooking and beverage products, food preparation, and beauty products.
The consistent innovation of existing products and the determination to enter new product categories each year have enabled 21% average revenue growth since 2008.
SharkNinja produces goods in Asia, but raised guidance anyway
While SharkNinja has an impressive history, the stock sold off this year on the announcement of the Trump administration’s tariffs. At first glance, this would seem like a death knell for the company, given that it has a large part of its manufacturing in China. While SharkNinja has diversified outside of China in recent years, it still has a lot of operations there. It has expanded only to other low-cost countries in Southeast Asia, including Malaysia, Singapore, Indonesia, Thailand, and Vietnam.
Despite all that, SharkNinja posted 14.7% revenue growth in the first quarter and actually increased its guidance not only for revenue, which management now sees growing at 12% this year, but also for adjusted earnings per share, which SharkNinja now sees at $4.95, versus $4.85 previously — good for 13% growth.
How management is mitigating tariffs
Make no mistake: The Trump tariffs are a big headwind for SharkNinja. But the company has made great efforts to overcome them.
First, SharkNinja has been able to shift a large part of its U.S. volume from China to these other countries, which currently have only the minimum 10% tariff attached for now. The diversification and dual-source strategy began back in 2018, so the company was better prepared for this scenario than it was five years ago.
In addition, SharkNinja has close partnerships with contract manufacturers and has been able to secure cost-downs and discounts on materials, all while shifting production of certain goods to the lowest-cost bidder when there is more than one manufacturing option.
SharkNinja also undertook a deep-dive effort on its value engineering processes, and management said it identified 1,500 opportunities to save costs. These include changes to configurations, finishes, features, and other elements, in a wide-ranging cost-saving effort.
Finally, SharkNinja has selectively raised prices on certain items sold in the U.S., largely without seeing decreases in volume. Management provided an example: It raised the price on its Ninja Luxe Café premium Espresso machine from $499 to $549, with no identifiable loss in demand.
That type of relentless execution and pricing power is a great sign of SharkNinja’s competitive advantage and brand power, which bodes really well for the company’s long-term growth and profitability.
A long-term compounder at a reasonable price
Although SharkNinja rallied hard after last week’s earnings, the stock is still about 25% off its highs and trades at a reasonable 18.5 times this year’s earnings guidance. However, SharkNinja still has a long runway for growth.
This includes not only expanding into new categories — with the company targeting two new subcategories annually — but also geographically. Management expects about one-third of its revenue to come from international markets in Europe and Latin America this year. It sees a long runway for growth in these new regions.
SharkNinja also has an excellent return on equity — a measure of how efficiently a company generates profits — of over 25%. Warren Buffett’s late partner, Charlie Munger, observed that over the long term, a stock’s returns tend to equal its return on capital, somewhat regardless of the price at which one buys a stock.
So, today, with a top-quality business like SharkNinja trading at a submarket multiple, it certainly has the ingredients of a millionaire-maker stock if bought and held for the long term.