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Home TaylorMade continues to struggle

There was a time not that long ago when TaylorMade adidas Golf defied gravity. Company revenues continued to swell as the peer group struggled just to keep pace. While it appeared this could go on forever, reality has set in. The old adage of what must go up, must come down has in fact come into play for the business. Further evidence surfaced as its parent company, adidas, reported its third quarter operating results. The golf division represents a small portion of total sales back to adidas, which makes it somewhat easy, if not convenient, to hide behind the veil of the corporate parent when times get tough. Nevertheless, the few details released make it challenging to spin that the golf business is improving for this once, be it now fleeting, darling child.

jasondayThird quarter sales at TaylorMade were 159 million euros, up 21 million euros from a year ago when the company reported 138 million euros in revenues. On the surface the increase doesn’t look that bad. However, its being compared in part to a soft number and during the reporting period TMaG released its highly touted M1 driver along with its PSi and PSi Tour irons. New product launches, which were largely absent in 2014 due to an over exhausted retail channel, help to create the illusion that business is on the upswing. Also factor in the surge of Jason Day’s profile, in part due to him impressive performance at the PGA Championship in August, but also in the world ranking system. He reached #1 when he won the BMW Championship, in September, which also coincided with the first win by the M1 driver. Neither event, however, seemed to made a difference to TaylorMade’s third quarter performance.

TaylorMade’s nine-month sales are 678 million euros, an increase of only 5 million euros, from 2014 when it came in at 673 million euros. Clearly the sales increase, year-to-date, is fueled by the third quarter product launches, which at this point appear to be missing the mark with retailers and consumers. Granted it’s late in the season for golfers to be buying a new driver or set of irons. However, the revenues reported represent shipments to retail as it prepares for future anticipated sales of the items. It doesn’t reflect sell through to the consumer.

In his letter to shareholders, Herbert Hainer, CEO of the adidas-Group, stated, “Revenues at TaylorMade adidas Golf increased 6% during the quarter. And while this year-over-year improvement also reflects a cleaner trading environment and first operational improvements, it is to a large degree the result of easier comparisons with the prior year.” To amplify this point in order to make it even more evident how far TMaG has fallen recently, third sales peaked for the golf division in 2012 at 283 million euros. In 2015, the sales volume is nearly 50% of what it was in 2012! Nine-month sales in 2015 are now reminiscent of 2009’s volume, when TMaG reported 633 million euros and a far cry from two years ago when it reached 1 billion euros duringm1 the same time frame! The world is in a different place in 2015 compared to 2009! TaylorMade would clearly like to turn the clock back to a happier time, yet it’s future was nearly as bright as some might have once thought.

“And this is why, no matter what the outcome of the strategic review, which we expect to be concluded during the first quarter of 2016, will be - we continue to press ahead with our far-reaching restructuring plan, which aims at achieving operating efficiencies across the four pillars of manufacturing, assemble, margin and marketing working budget. In addition, TaylorMade adidas Golf will continue to work on the redesign of the organization through streamlining of its global business and processes. As part of this, TaylorMade adidas Golf will reduce its global workforce by 14% by the end of the year. While this will negatively impact the profitability by a low double-digit million euro amount in the fourth quarter, the immediate result will be a more nimble organization, which will have a positive effect on the Group’s profitability from 2016 onwards. And I am absolutely convinced that these measures, combined with our industry-leading product line up, will bring TaylorMade adidas Golf back to the top of the golf world,” Hainer said.