Adidas Plans to Sell Parts of Its Golf Business
Story published at 12:19, Friday, May 6th, 2016
This week’s financial press has carried several reports that Adidas AG is actively seeking a buyer for parts of its golf unit, after years of slumping sales.
The Wall Street Journal, Bloomberg and others say that a strategic review finished in March convinced the German sportswear maker’s board that it should divest its Taylormade-Adidas Golf, Adams and Ashworth golf brands which largely produce golf hardware. The company would continue to focus on golf apparel and footwear through its Adidas Golf brand.
Taylormade-Adidas Golf, which Adidas bought along with Salomon in 1997, used to be one of the company’s top performing business units and is still the market-leading golf brand.
Ashworth was bought by Adidas for $72.8 million in 2008, and Adams Golf for $70 million in 2012.
Outgoing Adidas Chief Executive Officer Herbert Hainer is cleaning up Adidas’s operations as he sets the table for Kasper Rorsted, who takes the reins in October.
‘‘The golf market is not growing at the moment but it’s also not falling further,” Hainer said during a call with reporters. The portion Adidas plans to keep is producing solid returns and the company is cutting labour and manufacturing costs, the CEO said.
“TaylorMade is a very viable business,” Hainer said. “However, we decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market. I am convinced that TaylorMade offers attractive growth opportunities in the future. At the same time, the planned divestiture will allow us to reduce complexity and focus our efforts on those areas of our business that offer the highest return.”
The company hired Guggenheim Partners LLC last year to look at options for the business. Golf equipment may have posted a nearly 100 million-euro loss last year, some analysts have estimated.
Writing in Yahoo Finance, sports business specialist Daniel Roberts reports on an interview with Mark King, CEO of Adidas USA. King was TaylorMade’s CEO before he left to run Adidas in the U.S. in 2014.
“”I think the decision was made to sell it,” King says, “because the company has realized that we should be focusing on the biggest growth opportunities. And the biggest growth opportunities are in running, training, basketball. And we have a lot of runway in those. As opposed to being in something that is harder to focus on.”
Harder to focus on? In other words, golf equipment is a bad business these days (despite Hainer’s insistence to the contrary)? “It is,” King says. “And that was the realization.”
As the former TaylorMade chief, King has had a hand in the many efforts to attract new fans to the sport of golf and change the downward trend. Two years ago, along with the National Golf Foundation, King helped launch Hack Golf, an open invitation to innovations that might grow the game. The most notable of those was a larger, 15-inch hole that some hoped would lure young kids to try an easier version of the game. It was met with ridicule in some parts of the sport.
The drop in equipment sales, the drops in TV viewership of some of golf’s four Majors, and the closing of courses are all connected. If participation can rise, and fan interest can rise, club sales will rise, too, writes Roberts.
So what does the way forward look like?
“I just think any category runs its play until the play doesn’t work anymore,” King says. “And then it’s forced to ask, Do we need to do things differently? Tennis did that. Bowling did that. Skiing did that. And I think that’s where the game of golf is today. It needs to change some of the entry points to the game to attract new consumers. And I think golf will find a way to do that, whether that takes five years or 10 years.”