by Pete Wlodkowski, AmateurGolf.com
BEAVERTON, Oregon (August 3, 2016) -- I must say, this one even caught me by surprise.
Today will go down as the day when Nike exited the golf equipment business, electing to focus on it's golf apparel and shoe lines. The company announced that it will "accelerate innovation in its Golf footwear and apparel business and will partner with more of the world’s best golfers."
In short, that means that Nike Golf will transition out of equipment — including clubs, balls and bags. What's especially surprising is that this is a complete shutdown -- no mention was made of selling the golf equipment and ball assets for another company to take over. That's probably because Nike is so brand conscious that allowing another company to run the golf business (especially at the low valuation it would likely garner) isn't worth the potential brand dilution. Where other smaller golf brands have been sold off to retailers in the past, Nike wouldn't be interested in the fire sale price and headaches that would bring.
But before they made their first club almost 15 years ago, the company was already doing well with golf footwear, so you'll continue seeing the swoosh at golf shops everywhere.
“We’re committed to being the undisputed leader in golf footwear and apparel,” says Trevor Edwards, President, Nike Brand. “We will achieve this by investing in performance innovation for athletes and delivering sustainable profitable growth for Nike Golf.”
As for the athletes, they have contracts which will be honored but the chance of another golfer deal like Rory's "10 years for $250 Million" are slim to none.
“Athletes like Tiger, Rory and Michelle drive tremendous energy for the game and inspire consumers worldwide,” says Daric Ashford, President of Nike Golf. "...We’ll continue to ignite excitement with our athletes and deliver the best of Nike for the game.”
Although AmateurGolf.com has never been affiliated with Nike Golf, I've been impressed with some of their equipment, and the company's ability to resonate with younger golfers. As a matter of fact, I know some juniors who are part of Nike's equipment program that are going to be looking for an alternative.
When an event of this magnitude transpires, there are winners and losers. Before I close out let's take a look at how that pans out. We wish Nike employees who may be laid off, and other people and businesses effected all the best.
1.) ESTABLISHED GOLF COMPANIES LIKE TITLEIST, CALLAWAY, PING, AND OTHERS: Although Nike's golf club, ball, and bag sales are likely in the $300-400 Million range (the entire golf division including balls and apparel has done $700 million the last two years) that's still a good chunk of gear that will be purchased from someone else. Although short term, some of their off-priced drivers, fairways, and irons will be priced to move and could have the opposite effect.
2.) UPSTARTS (Like PXG): PXG (Parsons Extreme Golf) has been signing Tour pros and clubfitters in a frenzy, and their momentum gets bumped a little bit.
1.) NIKE EMPLOYEES: Clearly, there are going to be layoffs and this will resonate through the sales force in the U.S. and distributors around the world.
2.) CONTRACT MANUFACTURERS: Nike has long outsourced it's golf ball manufacturing to Bridgestone (I'm not sure if they still do) and that means a good piece of business gets lost.
3.) TOUR PROS WHO DON'T HAVE DEALS LIKE RORY AND TIGER: No word on what will happen to players like Tony Finau, who told Golf Digest, "I just heard in the last hour so it's a little bit of a shock, to say the least. I love the equipment I'm playing now ... it's pretty likely that this time next year I won't be playing Nike clubs.
4.) OTHER GOLF BALL MAKERS: Callaway could see a sales increase, particularly with the recent success of their Tour staff and the comeback of their brand in general. Now the No. 2 golf ball at retail, they have one less competitor to worry about.
4.) TITLEIST's IPO (Maybe): While the loss of a golf ball competitor (that's where the profits are) is good news, the doomsday feeling of Nike's announcement could tamper investor's appetites a bit. Mostly though, Titleist's sales and profit numbers are going to determine the success of the IPO and long term market cap of the newly independent company.
I previously reported on the adidas' impending sale of TaylorMade Golf. They had plenty of excuses, that basically boiled down to "golf isn't growing fast enough."
Fair enough. But these big footwear companies carry huge market caps, and must react quickly to anything that dilutes their profits. On June 28, Nike reported flat sales and profits that dropped 2%. Their shares have dropped 12.5% year-to-date. (That's about $10 billion in lost value.)
So before we all say "golf is dying" -- and you're going to see some headlines again -- maybe we should all just settle down and relax. Golf isn't going anywhere. Did you watch the Open Championship and PGA? Good stuff.