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Adidas Downsizing Golf Business to Increase Focus on Footwear

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Despite an otherwise rosy first quarter which saw revenue grow by 22 percent, Adidas Group announced during its Q1 earnings call that it was planning to sell off most of its struggling Golf division.

Adidas revealed that it is seeking buyers for its TaylorMade golf equipment brand, as well as its Adams and Ashworth brands, and would instead consolidate its golf footwear and apparel sales under the Adidas Golf name.

Adidas previously stated its intention to sell TaylorMade last summer, although this was later contradicted by TaylorMade Adidas Golf CEO David Abeles, who denied talks of a sale in an internal email in January. On Wednesday however, Adidas Group CEO Herbert Hainer confirmed that TaylorMade was indeed going to be sold so that Adidas could better focus on its core footwear and apparel businesses.

“TaylorMade is a very viable business. However, we decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market,” said Hainer. “With its leadership position in the industry and the turnaround plan gaining traction, which is clearly reflected in the top- and bottom-line improvements recorded in Q1 as well as recent market share gains, I am convinced that TaylorMade offers attractive growth opportunities in the future. At the same time, the planned divestiture will allow us to reduce complexity and focus our efforts on those areas of our business that offer the highest return and where we can have the biggest impact in reaching our consumers and winning their loyalty for the Adidas and Reebok brands.”

It’s been a tough few years for the TaylorMade-Adidas Golf business, which has seen sales steadily trend downwards. Last year the brand posted sales of 902 million euros, down from 1.34 billion euros in 2012. Founded in 1979, the golf equipment brand was acquired by Adidas in 1997.

As Adidas expanded its golf business, it purchased the Ashworth brand and its debt for $72.8 million in 2008, and the Adams brand in 2012 for $70 million. In its Q1 report, Adidas stated that declines at Ashworth and Adams were such that they offset any growth that happened at the core TaylorMade and Adidas Golf brands, where business decreased 1 percent on a currency neutral basis.

The company also revealed plans to shut down 16 of Adidas Neo stores in Europe in order to re-position the teen brand for the European wholesale channel.

From a brand perspective, currency-neutral Adidas revenues grew 26 percent in Q1, driven by double-digit sales increases in the training, football and running categories as well as at Adidas Originals and Adidas Neo. Adidas brand momentum was particularly strong in North America, Greater China and Western Europe, where revenues were up 31 percent, 30 percent and 26 percent, respectively.

With currency-neutral Reebok sales increasing 6 percent versus the prior year, the brand recorded its 12th consecutive quarter of growth. The brand’s performance was supported by double-digit growth in Western Europe, Greater China, Latin America, Japan and MEEA.

Adidas Group increased its 2016 financial outlook based on the strong momentum it experienced in Q1. Group sales are expected to grow around 15 percent on a currency-neutral basis in 2016.

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