Nike Inc NKE's surprise announcement that it will exit the golf equipment business has left investors wondering how to best take advantage of the space with the top dog in sports throwing in the towel.
Nike's large push into the golf market in the late 1990s coincided with the surging popularity of the sport, not to mention Tiger Woods' complete dominance.
According to Michael Swartz of SunTrust Robinson Humphrey, Nike saw initial success in the space but the hardgoods side of the business stalled for the better part of the past decade. Nike's total sales in the segment of $700 million also represents a "relatively smaller" piece of Nike's Golf segment.
Related Link: Nike Drops Golf Equipment: Here's How You Can Take Advantage
Swartz added that Nike's exit is an "unequivocal positive" for Callaway Golf Co ELY over the longer-term, as it opens the door to several hundred million dollars of incremental equipment sales. Naturally, the removal of Nike from the competitive landscape implies Nike's "marketing muscle" will no longer be a threat to Callaway.
Assuming Nike's hardgoods business does $100 to $200 million in annual sales and Callaway receives at the very least a "fair share" of the pie (20 to 22 percent), it implies an incremental $20 to $40 million in annual revenue.
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