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Nike Inc. (NYSE:NKE) is the world’s largest manufacturer of athletic footwear, apparel and equipment. Nike’s 2009 sales totaled nearly $18.5 billion, far ahead of competitors like Adidas AG (OTCQX:ADDYY) and Puma.

Nike Golf is a leading manufacturer of golf equipment, including balls, clubs, footwear and apparel for men and women. It competes with the likes of TaylorMade-Adidas Golf and Callaway Golf Co. We estimate that Nike Golf contributes just under 3% of Nike’s stock value, quite small when compared to the company’s footwear and apparel businesses.

Global demand for golf equipment has flattened in recent years after substantial growth prior to 2007. Reasons include slow North American demand during the recent recession, widespread discounting due to increased competition, and static golf participation numbers worldwide. Below, we explain why we don’t expect the golf slump to hurt Nike’s share value going forward.

Golf market expected to revive

The global golf equipment market is worth about $14.5 billion a year. Rapid economic growth in China has created a new elite class, boosting demand for golf. China is currently the world’s fifth-largest golf market by number of golf courses, with around 310 courses today and hundreds more in the pipeline.

India is another fast-growing market for golf. Callaway Golf (NYSE:ELY), which recently launched its product line in India, forecasts 30% annual growth in Indian golf equipment sales over the next few years.

Women golfers are yet another growth segment. According to recent research, women golfers tend to buy golf outfits along with equipment that they can wear even when they are off the field. This emerging demographic is likely to play an important role in global golf sales going forward.

Even if the golf slump continues, Nike’s downside is negligible

Although we forecast growth in the global golf market starting from 2010, it would be unwise to ignore the more pessimistic scenario. The global economy is still coming out of recession. Unemployment is still high in many markets, causing consumers to be cautious about discretionary spending on expensive items such as golf equipment and apparel.

Moreover, emerging economies like China and India are still small in terms of the golf market and may not be able to immediately compensate for slow demand in developed geographies like North America.

Assuming that worldwide golf demand stays weak, Nike’s stock faces only a minor downside, on the order of 0.2%. You can modify our forecast above to see how changes in golf market size impact Nike’s stock price.

Disclosure: No positions

Source: Nike Expected to Survive 'Global Golf Slump'