Written By: Tony Covey

Earlier this evening we received confirmation that The adidas Group (parent company for TaylorMade-adidas, Ashworth, and Adams Golf) has decided to close Adams Golf headquarters in Plano, Texas and to consolidate business operations at TaylorMade Headquarters in Carlsbad, California. Additionally,15% of the golf division’s global workforce, including what I’m told is a majority of Adams Golf employees, has been laid off.

A company spokesperson declined to comment on specifics, but confidential sources are telling us that the cuts include a high-ranking member of TaylorMade’s golf ball R&D Team.

Here is the official statement from TaylorMade-adidas Golf:

“We recently announced that a reorganization of our company was being planned.  This restructuring includes the consolidation of our Adams Golf business currently located in Plano, TX to our global headquarters in Carlsbad, CA.  We are also realigning our workforce at TaylorMade to better meet the needs of our business and ultimately, our consumers.  This includes investing in new areas to strengthen our brands and strategically approach our future to reinforce our leadership in the industry.”

I know. It’s not particularly informative.

For those tracking TaylorMade’s financial situation, the moves come as little surprise. Profits are off significantly from last year, Dick’s Sporting Goods golf business basically imploded under the weight of excessive TaylorMade and inventory, and as a result the parent company is forecasting further declines in its golf business for the remainder of 2014. The Q2 report was a disaster. There really weren’t any better options.

Profitability Challenges

“We also have decided to take strategic measures to tackle our profitability challenges at TaylorMade-adidas Golf and in Russia/CIS.” – Herbert Hainer, adidas Group CEO

At best the disintegration of Dick’s Golf Business was bad PR for TaylorMade, and worse still it has caused serious damage to the company’s bottom line and likely its reputation. One of their marquee athletes (Dustin Johnson) is taking a leave of absence from the game under apparently dubious circumstances, and for the coup de grâce, just last week adidas released it Q2 2014 which rather explicitly cast TaylorMade-adidas Golf division in the role of 10-ton financial boat anchor.

These are not happy times at TaylorMade.


Just the Facts

It’s been suggested to me that when it comes to the financial reporting of the golf industry it’s best to either hire an expert, or stick to the absolute letter of the facts.

That’s probably sound advice.

Granted, I did manage to get through a 2-day Finance for Managers course at a previous job (next up, Spelling for Writers), but realistically that no more qualifies me for the task at hand than staying at a Holiday Inn Express last night.

So in the interest of not letting opinion creep into a realm of absolute fact, for the next few paragraphs we’ll stick to the bullet points from the adidas quarterly report (download HERE). That said, one probably doesn’t need to be a top-tier Wall Street analyst to realize that when the letter from the CEO to shareholders begins “It is with disappointment that…” what comes next ain’t gonna be good.

Mainly As A Result of Double-Digit Sales Declines. . .

While there were some unquestionable bright spots in that previous mentioned adidas financial report – things like a strong World Cup, a new sponsorship deal with Manchester United, and solid growth at Reebok-CCM Hockey – nearly every bit of good news was tempered by bad news from the golf division. The refrain mainly as a result of sales declines (sometimes double-digit sales declines) at TaylorMade-adidas Golf is found numerous times in the report.

I encourage you to read it in its entirety, but in the interest of avoiding TL;DRs, here are some of the unfortunate facts gleaned from the adidas Group financial report:

  • TaylorMade-adidas Golf sales were down 18% in Q2, and 27% year-to-date
  • That amounts to a €236 million (~$315 million US) decline from the first six months of 2014
  • Currently-neutral sales in North America were down 20%, mainly due to double-digit decreases at TaylorMade-adidas Golf
  • The gross margin of TaylorMade-adidas Golf negatively impacted the group’s gross margin by 40 basis points.
  • Given the challenges with TaylorMade-adidas Golf, the adidas Group expects a double-digit decline in other businesses compared to our previous projection of a stable performance. (Note: Other Business is the internal division in which adidas places TaylorMade-adidas Golf )


Simply put, TaylorMade is having a really bad year, and its parent company (The adidas Group) doesn’t think it’s going to get better anytime in the immediate future.

How Did We Get Here?

By now most of you are well aware of what happened to get us (and TaylorMade to this point). The industry was forced to weather it’s second consecutive brutal winter (the adidas report mentions the late start to the season in the Northeast). As you know from our story on the Dick’s debacle, there’s more inventory in the retail channel than anyone can reasonably hope to sell in a timely fashion. There are some numbers (although not everybody agrees) that suggest consumers are buying less equipment, but nobody is arguing that the bulk of what they’re buying isn’t heavily discounted. TaylorMade’s profit margins are down.

If you want to, you can throw in something about the decline of the American middle class and a general lack of consumer confidence too. The bottom line is that the golf industry is hurting right now, and TaylorMade’s wounds are as deep as anybody’s.

By the adidas Group’s own admission (it was discussed during the earnings call), it was slow in responding to the downturn in the market. The retail channel was already flooded, but TaylorMade kept on releasing new gear while refusing to discount their flagship lines.

The company recently reversed course on its promise not to discount SLDR (now as low as $369) until the next big thing was ready. The disappointing YTD results mandated the change in policy, but most would agree that it waited too long to have any meaningful impact on the market.

What’s TaylorMade Going to Do About It?

The question is actually what is adidas going to do about it?


In actuality, a few things have already been done. While big changes (like the closure of Adams HQ, and substantial layoffs) are expected as a result of the less than stellar financial results for the year to date, the reality is that things at TaylorMade-adidas Golf have been in a perpetual state of flux since the end of the first quarter.

In April, TaylorMade’s longtime CEO, Mark King was appointed to the position of President of adidas Group North America. Ben Sharpe moved over from his position of Executive Vice President of adidas Golf and Ashworth to takeover for King. Coincidentally or not,  Bob Maggiore, TaylorMade’s Cheif Marketing Officer, and the man widely credited with creating the aggressive marketing strategy that helped TaylorMade ascend to the top of the golf industry, also left the company.

That’s barely the beginning. The adidas Group plans to take an aggressive approach to restoring the expected levels of profitability for shareholders.

How will they do that?

Here’s what adidas Group CEO Herbet Hainer had to say about what’s going to happen next.

“At TaylorMade-adidas Golf, given the inventory that is still in the market, we will carefully look at new launching introduction timings. In addition we will begin restructuring program at TaylorMade-adidas Golf to align the organizations overhead to match lower expectations for the golf industry’s development. Combined I expect these measures will impact second half operating profit by €50 million to €60 million. As the dominant market leader, we take these initiatives now to secure our lead, and to be the first mover in reinvigorating the market. Our innovation pipeline is full and we are set to go, whenever we feel the market is ready.” – Herbert Hainer, adidas Group CEO

In layman’s terms, some serious shit is about to go down…and I suppose it just did.

Inventory Reduction: Mr. Hainer suggested that as the market leader TaylorMade has a responsibility to the market itself. At a minimum the Group sees a need to help “clean the market“. What that likely means is another round of deep discounts for consumers. adidas has effectively written of the golf business for the rest of 2014, so there’s absolutely no reason not to undertake a major effort to unclog the channel. Arguably this is good news for the golf industry.

Additional TaylorMade Product is 2014 is Unlikely: You can’t rationally argue that the channel is flooded and then funnel more gear into the marketplace. PING has new product. Callaway has new product. Titliest has new product on the way too. Rather than fight for whatever premium dollars are left to be grabbed, it appears TaylorMade will do the responsible thing and hold off any significant product launches until 2015 – even with both SLDR Driver and SpeedBlade due for a refresh this fall. Instead of hyping new gear, the focus will be on clearing the shelves of existing product (see above).

Come 2015, TaylorMade will be ready to go (see that bit about the innovation pipeline).

Restructuring: It’s an ugly word that can mean a variety of things, none of them are good, and nobody does it when business is booming. The Group’s goal is to come up with €50 million to €60 million worth of operating profit by the end of the year. For those too lazy to do the conversion, we’re talking about somewhere between $65 and $80 Million USD worth of expenses that adidas wants off TMaG’s books.

Where is all that money going to come from? It’s murky, but we can make a few educated guesses.

No new product means reductions in related manufacturing, shipping, and advertising costs. There’s a savings there, but nothing that gets you close to $80 million bucks. Multiple sources speculated that the bulk of savings would need to come from salary reductions.

Today that speculation has become reality as the company reduced the size of its golf division’s workforce by 15%. We don’t have an exact headcount, but we estimate the number of employees let go is between 200 and 250.

It’s stomach churning. Worse still, we’re being told that very few high salary positions were cut, so another round of layoffs isn’t outside the realm of possibility.

The Shutdown Of Adams Golf

One way to reduce cost is to eliminate duplicate positions. When the balance sheet looks good it’s less of an issue to have redundancies in areas like HR, finance, and IT. When the balance sheet doesn’t look good, positions perceived as redundant are often among the very first to be eliminated. That appears to be, in part, what’s happening at…or perhaps to Adams Golf.

In the interest of avoiding any confusion; the Adams Golf brand hasn’t been eliminated. The company’s headquarters in Plano, TX will be shuttered (metaphorically…maybe literally), but some members of the current Adams staff are expected to relocate to Carlsbad to manage the brand from TaylorMade headquarters.

Since Adams falls under the TaylorMade umbrella it’s hard to know exactly what their numbers look like. Sources are telling me that Adams is currently running $10-15 Million in the red. When TaylorMade purchased Adams over two years ago, many believed the shutdown of the Plano location was a foregone conclusion anyway. With adidas looking to reshape a leaner and meaner golf division with a reinvigorated emphasis on profitability, maintaining the Texas location makes zero practical sense.

The closure of the Adams facility in HQ is unfortunate, but it’s just the latest example of the consolidation taking place within the golf industry.

Unfortunately, There’s Likely More To Come

This is likely only the beginning of what is shaping up to be major changes at the current #1 company in golf. We’ll provide additional details as soon as they emerge.

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