Adidas delivered a strong quarter, despite headwinds based on the same quarter last year. The primary weakness was in its golf division, which it might dump. The golf market has grown difficult for nearly every company that does business in the segment. Adidas has decided to admit that, and others are likely to follow.
Overall, its quarterly results were strong, though short of spectacular:
adidas Group currency-neutral sales increase 5% in the second quarter of 2015 In the second quarter of 2015, the adidas Group delivered a robust financial performance with strong top-line improvements despite difficult comparisons after record World Cup related sales in the prior year period.
Also:
Group operating profit increased 8% to € 234 million (2014: € 217 million), representing an operating margin of 6.0%, down 0.4 percentage points from the prior year level (2014: 6.4%)
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The company was not shy about the speed with which it wants to drop golf:
As a reaction to the persisting challenges at TaylorMade-adidas Golf, the adidas Group has initiated a major turnaround plan for its golf business. The set of measures is aimed at enhancing the company’s pricing, promotion and trade patterns, as well as optimising the supply chain and product costs. Furthermore, the Group targets a reprioritisation of the global marketing spend and significant operating overhead savings at TaylorMade-adidas Golf. In addition, the adidas Group has engaged with an investment bank for the purpose of analysing future options for the company’s golf business, in particular the Adams and Ashworth brands.
TaylorMade is one of the premier brands in golf, along with Nike Inc. (NYSE: NKE) and Callaway. Apparently, the golf market is so poor that it cannot support three major brands, at least not profitably.
Golf experts have suggested that people in the 20s and 30s don’t want to play the rule-laden, 18-hole rounds that their parents did. Maybe rounds should be cut to nine holes. Or, as some people have suggested, the holes should be made bigger.
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Adidas is not waiting to see if any of those new options will bring more people to the sport. It has gambled that the market is not strong enough for it to make much money.
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