Sporting goods giant Nike Inc. announced that it was exiting the golf equipment business as its main golfer Tiger Woods continues to rehabilitate from injuries.
Krystina Gustafson of CNBC.com writes about what the announcement means for competitors:
TaylorMade is also due for a shakeup. Though there aren’t plans to shutter the brand, Adidas will not aggressively compete for marketshare as it tries to find a buyer, Jefferies analyst Randal Konik said. The company has already cut back on sponsorships, which is likely a way to boost its profitability ahead of a sale, Konik noted. Adidas on Thursday reported a 4 percent lift in TaylorMade sales during the first half.
Callaway is already No. 1 in U.S. market share for clubs, Konik said. But TaylorMade is ahead in drivers and woods.
Golf participation has been on the decline, contributing to an 8 percent sales drop at Nike last year. Nike’s golf business has been contracting since its peak of $792 million in 2013. But those figures are starting to stabilize, with the number of rounds played this year edging slightly higher, according to Golf Datatech.
“Interesting that Adidas, Nike and [Under Armour], which are all great overall brands that we have a lot of respect for, appear to have moved to the same strategy,” Callaway CEO Chip Brewer told CNBC. “For those of us with commitment, momentum and specialist focus in the equipment space, we see it as an opportunity. We remain humble and hungry though!”
Mike Stachura of GolfDigest.com notes Nike will focus on footwear and apparel:
Nike, which reported flat to down annual sales in its overall golf business the last two years at just north of $700 million in annual sales (which includes shoes and apparel), has been in the golf business since 1984, but only introduced its first clubs in 2002 with the Pro Combo set of irons. Its sales in 2013 and 2014 were nearly $800 million.
Today’s announcement comes just a few days after the company’s 2016 line of clubs was extraordinarily reduced in price. That included $400 Vapor Fly drivers reduced to $150 and $250 Vapor Fly fairway woods to $100.
The company has struggled to become a leading player in the equipment business, with market shares in woods and irons that were routinely one-tenth those of leaders Callaway and TaylorMade.
The company was known for non-traditional equipment designs over the years, including the cavity back Slingshot irons, square drivers named Sumo that reached the USGA’s limit for moment of inertia and golf balls called Mojo that were marketed in a psychedelic box. The company had groundbreaking equipment technologies, including sole channels and cavities in its metalwoods, shorter-shafted but larger headed hybrids that were like mini-fairway woods and golf balls that utilized a lightweight, ultra-resilient polymer resin material in their cores called RZN while the majority of the industry’s golf balls feature cores made exclusively of polybutadiene rubber.
Lara O’Reilly of Business Insider notes the business has struggled as Nike’s golfers sputtered:
Nike created its first line of golf apparel in 1984, but it only really began booming when it signed a 20-year-old Woods in 1996 and invested heavily in major advertising campaigns placing him at the center.
A study carried out by the Tepper School of Business at Carnegie Mellon University in 2009,reported by CBS News, found that in a decade of sponsoring Woods, Nike’s golf ball unit alone added $91 million in additional revenue and $60 million in extra profit. When Woods endorsed Nike, 4.5 million new customers followed, according to the study.
But during Woods’ monthslong hiatus from golf after the 2009 scandal, the entire golf ball category lost $10.2 million in revenue, the study said. Woods’ period of leave also saw ticket and sponsorship sales slump 15 to 20%.
Fast-forward to today and Woods, who re-signed with Nike in 2013, hasn’t played golf for an entire year, and his performances at the most recent majors have been dismal compared with his previous standards, as ESPN reported.
Nike’s other big golfing asset, Rory McIlroy, hasn’t won a PGA Tour event this season. The winners of the past eight majors haven’t been Nike athletes.
