German sportswear group adidas "is considering a sale of its struggling golf brands after hiring an investment bank to explore options for the division," according to Ashley Armstrong of the London TELEGRAPH.
Adidas revealed the "possible sale of its golf business, which includes the TaylorMade, Salomon, Ashworth and Adams brands, as it battles against the sport's declining popularity." The number of golf courses in the U.S., which accounts for around half the global golf market, "has fallen steadily for the past eight years."
The sports group said that the golf unit "had seen double-digit sales declines in most of its categories, with particularly sharp falls in metalwood and irons." Adidas "has already overhauled top management at the golf business, including appointing David Abeles as its new chief executive in March, and launched a restructuring programme last year" (TELEGRAPH, 8/6). In London, James Shotter reported adidas said that it "had hired Guggenheim Partners, the investment bank, to consider options for its golf business, after the unit’s sales slumped 26 per cent year on year in the second quarter." Adidas said that the review "would look in particular at its Adams and Ashworth brands, and that the German group was also aiming to improve TaylorMade’s 'pricing, promotion and trade patterns, as well as optimising the supply chain and product costs.'"
Bank analyst Herbert Sturm said that "the decline at the golf unit was 'disappointing' and 'much worse than expected,' adding that it 'could cause short-term price pressure'" (FINANCIAL TIMES, 8/6). REUTERS' Thomasson & Poltz wrote investors "have criticized adidas for responding too slowly to the declining popularity of the sport, flooding the market with new products that it then had to discount heavily." Adidas CEO Herbert Hainer admitted that two new golf clubs -- the R15 and the AeroBurner drivers -- "had not sold well and competitors had been raising their game, but said he had high hopes for another new club which it will be launching soon" (REUTERS, 8/6).
TAKING A CLOSE LOOK: BLOOMBERG's Aaron Ricadela reported "divesting the entire division is an option," though adidas is primarily discussing options for its lower-priced Adams clubs and Ashworth clothing brands. Hainer: "We definitely want to look into all corners of the golf business. So far we are mainly talking about Adams and Ashworth." UBS analyst Fred Speirs said that TaylorMade "could be worth 80 percent to 100 percent of its 2015 sales on an enterprise value basis."
Andrew Taussig, a senior managing director at Guggenheim in N.Y., "is working with adidas to analyze the golf unit." Taussig has a history with adidas, having advised Reebok on its '06 sale to adidas for about $3.8B (BLOOMBERG, 8/6). CNBC’s Seema Mody said adidas’ earnings report is a "breath of fresh air" as the company is "seeing a jump in greater China sales." Mody: "So many companies this earnings season had been referencing China as a pain point, but they actually see growth in that region despite the volatility we’re seeing in the market as well as in the economy." Mody noted football and basketball "continue to dominate with the younger audience" in the market, which could explain why golf sales are struggling. Mody: "But we'll see what happens because traditionally in America golf is very popular" ("Worldwide Exchange," CNBC, 8/6).
