Here’s How Nike Is Looking To Establish Itself In The Middle East
As it looks to gain market share from Adidas in the high potential middle eastern market, Nike (NYSE:NKE) is working on innovative products to woo customers. In Saudi Arabia, Adidas had a 33% market share in sportswear in 2016, maintaining its leading position primarily due to its strong international reputation. However, an evaluation of emerging markets by a Credit Suisse survey in 2015 revealed that Nike is gaining market share in the country where it saw an 11% increase in the retail sportswear market (2013-2014). To establish itself further in the region and other countries with large Muslim populations, Nike recently announced that from spring 2018 the company will begin to sell a performance “hijab” for Muslim women athletes. Nike has spent a year in developing this product and it is aimed towards inspiring more women in the Middle Eastern region to join sports. Nike began developing this product after Muslim athletes complained about wearing a traditional head scarf during sports competitions. The new head cover to be launched by Nike is a single layer pull on design made from lightweight polyester in dark, neutral colors. It provides comfort and at the same time takes care of the religious sentiments. We believe as the Saudi Arabian economy improves and the government takes initiatives to promote physical activities in the region, this move can help Nike to grow its women’s apparel business in the region.
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Growing The Woman’s Apparel Segment
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Nike has set a revenue target of $50 billion by 2020 and the company expects its women’s business to contribute significantly towards this goal and generate $11 billion in revenues by 2020. While Saudi Arabia is not a very significant market, and revenues of its sports and outdoor segment are estimated at $119 million in 2017, the pro-hijab can help the company gain market share in the women’s segment in other Muslim dominated countries as well. As women athletes find this product useful they can become loyal customers of Nike’s other products for women. We do not expect Nike to reach its target of $50 billion in revenues by 2020 and we expect the apparel segment to contribute around $12 billion towards its revenues by 2020.
However, if the company is able to achieve this revenue target by 2020 (with a significant contribution from the apparel segment), there can be a nearly 20% upside to our price estimate.
As Nike looks at the women’s apparel segment as a key driver for future growth we believe the “pro hijab” can contribute towards this goal. By creating an innovative product which furthers the cause of Muslim female athletes, the company can create a loyal customer base, in addition to driving revenues from a new product line.
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