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Home THE BIGGER THEY ARE, THE HARDER THEY FALL:

It was November of 2013 and TaylorMade-adidas Golf was making it look easy. In reporting its third quarter sales, it also pronounced itself the largest golf company in the world and boldly proclaimed there was more still for the taking. “Strong equipment sales combined with our growth in the footwear and apparel categories have us on track to surpass the unprecedented $2 billion sales barrier by 2015,” said then CEO and President, Mark King. That statement turned out to be false. King was subsequently promoted to running the adidas North America division for adidas Group based upon his track record at TMaG.

TaylorMade-adidas Golf’s parent company, adidas Group, reported revenues at its golf division declined 26% on a currency neutral basis, due to sales decreases in most categories, in particular metalwoods and irons. Reported revenues at TaylorMade-adidas Golf for the 2015-second quarter were 239 million euros, down 12% from a year ago when it recorded 272 million euros. Through six months, revenues are 519 million euros off 3.1% versus a year ago when it reported 535 million euros. On a currency neutral basis sales are down 17.3% for six months, adidas said. The current weak euro (1.0919) pegs the 2015 six month sales around $566.7 million, a far cry from King’s projections less than two years ago. Its important to point out that adidas acknowledged in its first quarter that currency translation effects positively impacted first quarter sales in euro terms. In other words currency swings in the first quarter helped to buoy, if not inflate, reported sales!

The pressure is so intense inside adidas, that management declared it 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 optimizing the supply chain and product costs. Furthermore, the Group targets a reprioritization 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 (Guggenheim Partners) for the purpose of analyzing future options for the company’s golf business, in particular the Adams and Ashworth brands. TMaG acquired the Ashworth brand in 2008 for $72.8 million and Adams Golf for $70 million four years later. “I know that some big shareholders have been lobbying to make adidas refocus on its best-performing segment, which is the adidas brand,” Cédric Rossi, an analyst at Bryan Garnier in Paris told the Wall Street Journal. “Today’s statement is probably an answer to that pressure.” Rossi added he thinks it is “too soon” for adidas to give up on its entire golf business now.

“Clearly, over the last couple of months, the business developments at TaylorMade-adidas Golf has not lived up to our initial projections. The current performance has shown that we need to go much deeper in order to bring TaylorMade-adidas Golf back on track. And this is exactly why we will make every effort to develop the right measures to drive the turnaround of our golf business. In addition, we have engaged with an investment bank for the purpose of analyzing future options for the company’s golf business, in particular the Adams and Ashworth brands,” said Herbert Hainer, Chairman of the Executive Board the Chief Executive Officer of adidas AG.

“But we are of course not going to wait for these results before starting to react to the challenges. In fact, over the last few weeks we have not only developed a major turnaround plan, we have also already started to implement it as we are fully aware that we don’t have any time to lose. The set of measures, which go way beyond out initiatives from last year, is aimed at enhancing the company’s pricing, promotion and trade patterns, as well as optimizing the supply chain and product costs. Furthermore, we will reprioritize the global marketing spend and generate significant operating overhead savings at TaylorMade-adidas Golf. The implementation of all these measures continue. The outcome has to be a more nimble and profitable company.”