recently released its 2014 first-half financials, and it isn't
pretty for TaylorMade. The apparel maker reports sales at the
subsidiary are down 18%, year over year, excluding
foreign currency effects. While other segments like Reebok
continue to grow, TaylorMade's woes could force Adidas to
revamp its golf business. So why did sales fall off a
The industry is struggling
The company cites two driving factors behind the decline. The
first, it reveals, is "poor retail sentiment," and it's not
surprising. To say the golf industry has issues would be putting
it lightly. An estimated 400,000 people quit the game in
2013, and more than 150 American golf courses were closed during
the year, according to Bloomberg.
Costly equipment, high greens fees, and professional lessons
make golf more expensive to play than many other sports. But
accessibility may be an even bigger weakness. Roughly speaking,
the U.S. offers one public course for every 27,000 people.
Alternatives like basketball and soccer have fewer barriers to
Look no further than
to see more proof that this space is struggling. The company
recently reported second-quarter sales down 7%, with the
biggest declines coming in its woods (-27%) and golf balls
(-9%). When asked about the industry in a conference
call, Callaway CEO Chip Brewer remarked, "It's my
opinion that a lot of the PR is highlighting issues that are not
new. The participation and some of those trends have been
concerns for the industry for some time."
He's right. The warning signs began all the way back at the
turn of the century. In every year between 2000 and 2008, the
number of U.S. golfers either fell or stagnated,
New York Times
reports. And over the past decade, participation has dropped from
30 million players to 25 million, CBS News says. It may be
unreasonable to expect an industrywide turnaround unless golf
undergoes major structural changes, or the next generation's
Tiger Woods convinces fans to play instead of watching the sport
The product life cycle may be too quick
Adidas lists "slow liquidation of old inventory" as a second
problem. Translation: Retailers and pro shops are stuck with too
many TaylorMade products, which they then must sell at a
discount, if at all.
While poor sentiment is partially responsible, the company's
product life cycle may be too swift. The schedule fluctuates, but
industry sources tell me TaylorMade's clubs are typically
upgraded annually, sometimes more frequently.
Its RocketBallz brand, for example, received an update in
2013, a year after becoming golf's best-selling wood.
New technology is often the reason for a change, but it can
confuse customers. A 2009 MyGolfSpy
poll, in fact, indicates 81% of respondents
believe TaylorMade releases new products too often.
Naturally, an inventory backlog can also result from this
strategy, as buyers flock to new gear instead of older models.
It's this exact phenomenon that's plagued
Dick's Sporting Goods
, TaylorMade's biggest retail partner, of late -- the
company fired more than 500 of its pros last month. An inability
to sell the four different drivers TaylorMade
unveiled in 2013 is partially to blame, ESPN
reports. Ping, by comparison, released three driver models in the
past two years combined, while Titleist introduced just
Looking ahead, sales declines will lead to lower financial goals
and restructuring. Adidas CEO Herbert Hainer discussed
the former in a recent press release.
"It is with disappointment that after such a great summer of
sport, I have to report that our group has not been able to meet
the high expectations we laid out in our Route 2015 agenda,"
Hainer said last week. Route 2015's estimates
originally called for $23 billion in sales by next
reports. Now projections show Adidas should fall at least $2
billion short. Key competitor
broke the $27 billion mark last fiscal year.
Adidas also says it will restructure TaylorMade,
according to Reuters
The specifics of the plan are unknown, though it's thought
the company will focus on lower-priced clubs and gear. If
the product life cycle is lengthened in the process, that would
be a win-win.
The bottom line
While the golf apparel market could be healthier,
Bloombergestimates there's still $25 billion in consumer spending
up for grabs each year. TaylorMade is down now, but it's
certainly not out -- it boasts the PGA Tour's most popular
driver, and is one of the largest golf brands in the world. The
company that revolutionized the metalwood three decades ago
can certainly adapt again.
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Why Did TaylorMade Sales Fall Off a Cliff?
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