adidas Trying To Offload TaylorMade

adidas finally tells us what we already knew: they’re looking for buyers for TaylorMade If the golf equipment industry was a family, we the consumers would be the children,...

adidas finally tells us what we already knew: they’re looking for buyers for TaylorMade

If the golf equipment industry was a family, we the consumers would be the children, and TaylorMade and adidas would be the parents, and things have been awkward at the dinner table for a while now. Mom (adidas) isn’t happy with dad (TaylorMade) anymore. He doesn’t make enough money, he’s losing more and more respect in the community, and mom is determined to not go down with him. They keep telling you everything is fine, but you’ve noticed that mom is going out a lot more lately, and dad has been buying suitcases . . . the breakup was imminent.

The way adidas sort of slid the news of shopping buyers for TM into their Q1 results press release is very fitting of how the entire situation has evolved. Amidst all of the positive growth numbers and increasing margins, there is constant reference to those gains offsetting “the severe headwinds from negative currency effects as well as lower product margins at TaylorMade-adidas Golf.” Ouch, and that theme continues as the brightest spots for their golf arm are illustrated as minimizing declines.

“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 Herbert 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.”

There it is . . . FINALLY!

TaylorMade Statement JDAY

What does this mean for TM?

That is a hard question to answer. TaylorMade is still king of the hill in the driver market, but competition in that segment has picked up. They aren’t nearly as dominant as they once were. It also needs to be noted that their sales have been heading towards stabilization, and they are getting their act together — CEO David Abeles pointed this out in his January email, the one where he said TaylorMade wasn’t being shopped around town.

The Company still has value, but who is going to sign a check, and what would they be signing it for? There isn’t a lot of information available about possible suitors, but it’s unlikely to be an existing equipment manufacturer. Golf companies rarely get into the game of absorbing other brands only to minimize competition, and while Under Armour’s name has been tossed around  they certainly are showing that they want to be considered a legitimate athletic brand — personally I’d expect them to develop in-house clubs before purchasing TM.

Expect private capital to be a large part of the buyer pool, but who knows how much the going price will be.

The entire adidas press release can be found here.

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