Nike Could Grab 6% of Global Sports Apparel Market

by Trefis Team
-29.82%
Downside
97.80
Market
68.63
Trefis
NKE
NIKE
Rate   |   votes   |   Share

Although Nike (NYSE:NKE) is mainly known for its athletic shoes, the company owes about 26% of its value to the sports apparel that it sells under the Nike brand. Nike-branded garments currently account for about 4% of the global sports apparel market. [1]

Nike is the world’s largest manufacturer of athletic footwear, apparel and equipment by sales. The company reported revenues of nearly $18.5 billion in calendar year 2009, far ahead of competitors like Adidas AG (ADDYY) and Puma (ETR:PUM). Nike sells its products under several brands, including Nike, Nike Golf, Converse, Cole Haan, Umbro and Hurley.

We estimate that Nike’s sports apparel share could rise to at least 6% during the Trefis forecast period. We have priced this expected growth into our $67.82 stock price estimate for Nike. Our analysis follows below.

Apparel vs. shoes

Nike-branded apparel is the company’s second-most valuable business after the footwear division, which accounts for 44% of our stock price estimate. Nike’s 4% share of the $122 billion global sports apparel market [2] is small compared to its 16% share of the worldwide athletic shoe market. However, the global sports apparel market is estimated to be twice the size of the global sports footwear market, so even a small share adds significant value to Nike’s stock.

The charts above show our estimates for Nike’s share of the global sports apparel market and the overall market size. You can drag the trend-lines to create your own estimates and see how they impact the company’s stock value.

We think Nike’s global sports apparel share could exceed 6% by the end of our forecast period. We base this expectation on two opposing factors. On the one hand, Nike is adept at leveraging its marketing and brand strengths along with its intense focus on R&D. OnĀ  the other hand, Nike’s sales tend to be limited by the premium nature of its products.

One reason why we’re conservative about Nike’s growth prospects in the global sports apparel market is that apparel shoppers tend to be more price-sensitive than shoe shoppers. Because most customers buy multiple apparel products, they are often not in a position to pay premium prices for all their apparel. Nevertheless, Nike’s strong marketing and branding should allow it to make modest apparel share gains in coming years.

You can see the complete $67.82 Trefis price estimate for Nike’s stock here.

Notes:
[1]
Calculated based on reported Nike apparel revenues in SEC filings and our market size estimates
[2]
Calculated based on press releases on the global sports market from the NPD Group, a market research firm.

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!