Adidas sees recovery at golf business it hopes to sell

German sportswear group Adidas reported an improvement in second-quarter sales and margins at the golf business it is trying to sell, helping support the more bullish forecast for 2016 it gave last week.

The company, which had raised its 2016 guidance for a fourth time after posting strong preliminary quarterly results, said revenue at its golf business had risen 7 per cent, driven by double-digit growth at the TaylorMade brand.

Adidas which launched a review of its struggling golf business a year ago, said in May it would sell TaylorMade and Adams, which sell golf clubs and other equipment, as well as the Ashworth golf shoes and clothing brand.

On Tuesday, bigger rival Nike said it would stop selling golf equipment, including clubs, golf balls and bags, and focus instead on innovation in its golf footwear and apparel business and on partnering with more golfers. After peaking around 2000, when Nike endorser Tiger Woods was in his prime, the number of people playing golf in the United States has fallen sharply.

Adidas bought TaylorMade in 1997, developing it into the world’s biggest supplier of golf drivers. It bought smaller Ashworth in 2008 and Adams four years later. But sales of its golf unit were down in 2015 by a third from their 2012 peak.

Management overhaul

Adidas has overhauled top management and cut costs, helping boost product margins, which it said on Thursday should help the group’s gross margin for 2016. It now expects a gross margin of 48-48.3 per cent versus 48.3 per cent last year, compared with previous guidance for a fall of up to 50 basis points. However, it gave no update on the sales process.

Several private equity firms have looked at the business and decided against a bid, citing its losses and the sport’s waning popularity, sources close to the companies said.

Meanwhile, the core Adidas brand is booming after a big marketing splurge, with quarterly sales up particularly strongly in North America, greater China and western Europe, rising 32 per cent, 30 per cent and 30 per cent respectively.

Adidas reported double-digit increases in running, soccer and training, as well as at its Originals and Neo lifestyle units, addressing concerns among some investors that its success is too reliant on fickle fashion rather than on performance sports. – (Reuters)