Adidas Considering Leaving the Golf Business

The German sports apparel company has hired an investment firm to explore a sale of the Adams and Ashworth brands, and possibly TaylorMade.

Golf sales fell 26% from a year ago according to the Adidas second quarter earnings report.  The disappointing numbers prompted CEO Herbert Hainer to hire Guggenheim Partners LLC to find buyers for part, or all, of its golf brands.

“The problem which we have is the R15 and the AeroBurner are not selling. It’s also fair to say our competitors are getting better,” Hainer told reporters.

In October 2014, after only two months on the market, Ping’s G30 took over the #1 spot in driver sales.  Adidas may have to get creative in justifying Taylormade’s claim of the “#1 driver in golf”.  Most likely it will lean on the amount of professionals using TaylorMade drivers.

The Adidas Golf Brands
The Adidas Golf Brands

Hainer’s priority will be the sale of Ashworth and Adams, but has also recently restructured Taylormade, resulting in layoffs of 6% of its workforce.  Adidas bought TaylorMade in 1997, Ashworth in 2008 for $72.8 million, and Adams Golf for $70 million in 2012.

Overall, the earnings report was positive for Adidas.  Sales rose 5% over the previous year (a year boosted by a World Cup) and net profit increased 1.4% to $159 million.

Adidas has, and will continue, to blame the decline of the golf industry as a whole for the drop in sales.  They will drone on about Millennials not taking up the sport, recreational golfers aging, and Tiger Woods’ lack of domination on Tour leading to the sport losing five million players over the last 10 years.

We can debate the state of golf another time (my position is golf has already started rebounding).  Regardless of the direction the arrow is pointing for the industry, Adidas’, most specifically TaylorMade’s, problem is loss of market share.

Just as Ping drivers have started out-selling TM, Callaway has overtaken the lead in irons, hybrids, and fairway woods.  It’s no coincidence that the G30 and reintroduced Big Bertha product lines are receiving rave reviews (in both the press and in my experience from my golf buddies).  Check out a detailed breakdown of TaylorMade’s fall here.

TaylorMade’s Failed Marketing Machine

TaylorMade hurt their reputation with their release schedules.  At the peak, they were releasing three different drivers per year, each claiming some new technological achievement.  Were you like us laughing at how hard the R&D department must be working to achieve these regular advancements?  They became snake oil salesmen.

So as the consuming golf public turned a deaf ear to TaylorMade marketing claims, other club makers stepped in with incredible reviews, eyewitness testimonials, and legitimate clubs that improved our games.

Big box retailers sat on a glut of inventory and were forced to discount product they had received only months earlier just to move it.  There was absolutely no reason to pay full retail price for a TM driver.  The SLDR was unveiled late fall 2013.  By the next spring, I had the $399 club in my bag for $225.

And how about their product naming inconsistencies?  How many different club lines can you name from the last few years?  Burner, Rocketballz, RBZ, R11, R11s, SLDR, R1, R15, Jetspeed, RSi, AeroBurner.  Could you put each in chronological order?  I don’t think Hainer could do it if his job depended on it.