Strong Growth Potential for Nike’s Golf Market Share
The impact of the global recession affected the sports equipment market and was felt by several companies including Nike (NYSE:NKE), Skechers (NYSE:SKX), K-swiss (NASDAQ:KSWS), Steven Madden (NASDAQ:SHOO) and Adidas (PINK:ADDYY). Nike’s golf market share has decreased from 4.8% in 2007 to 4.3% in 2009. [1] However, a strong brand coupled with product innovation and marketing initiatives should put Nike back on a growth trajectory.
The positive outlook will however have very little impact on Nike, as we estimate the Golf business to constitute only around 3% of Nike’s stock. We currently have a Trefis price estimate of $67.82 for NIKE’s stock, about 15% below the current market price of $79.80.
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Golf Sales could be affected but overall outlook is positive
Nike sells golf balls, golf clubs, footwear and apparel for men and women under its Golf brand. One of the major reasons for the success of the Nike Golf brand was the marketing relationship with Tiger Woods, a world renowned golfer. Nike has consistently invested in R&D to develop innovative and stylish products to command premium prices. For example, Nike Golf’s SQ DyMo driver offers players the ability to customize perimeter weighting to again promote a specified ball-flight. Sales of golf accessories like golf clubs and golf balls along with footwear assure an additional revenue stream for Nike.
The average of Trefis member forecasts for Nike Golf Market Share indicate that market share would increase from 4.5% in 2010 to around 6% by 2016, compared to the baseline Trefis estimate of an increase from 4.4 % in 2010 to 5.5% by the end of the Trefis forecast period. The member estimates imply a small upside to the Trefis price estimate for Nike’s stock.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Nike’s stock to Nike Golf Market Share.
Our complete analysis for NIKE’s stock is here.
Notes:
1. Nike’s Golf Market Share is calculated as: (Nike Golf Revenues)/(Global Golf Market). Nike reports Golf revenues in its SEC filings. We have estimated global golf market size based on a summarized report on Sports Equipment: Global Industry Guide by Datamonitor.