TaylorMade No Longer #1 in Golf

Written By: Tony Covey

3 Reasons Taylormade Is Tanking

Since this time last year there have been reports that several major adidas shareholders want out of the golf business altogether. That means likely selling off Adams Golf, Ashworth and possibly even Taylormade.  While it may be a bit premature to talk about adidas unloading the entirety of its golf division, if recent trends continue, the likelihood is that adidas will look to completely exit the golf business.

If you’re wondering what the actual probabilities of that happening are, I can’t give you a number. What I can tell you is that despite promises to the contrary, little (other than personnel) has actually changed at TaylorMade.

1. The marketing has grown stale
2. The products are uninspiring
3. And perhaps most difficult to overcome, TaylorMade simply isn’t cool anymore.

You may not think that last bit matters, but in the golf industry, when you’ve lost your mojo, as TaylorMade has, it’s exceedingly difficult to get it back.

Just ask Callaway.

Of course, the resurgence at Callaway proves that with enough time, humility, and motivation to fundamentally change how your business operates, it is possible to recover.

Taylormade Tanks (The Sequel)

After a 2^nd quarter that showed double-digit declines from the previous year, the adidas Group has vowed to undertake major efforts to stabilize its golf division.

This isn’t a repeat from last August. It’s the sequel and, as often is the case with such things, TaylorMade Tanks 2 is worse than the original.

As you may recall, almost exactly one year ago, adidas Group CEO Herbert Hainer responded to double-digit declines in revenue at TaylorMade with the following statement and plan:

Apart from Adams HQ, what other action did TaylorMade-adidas Golf take?

With an eye towards clearing the retail channel of heavily discounted product from previous years, the company refrained from releasing any new product for the remainder of 2014. That was only the beginning.

There was a round of layoffs. Several long-time TaylorMade executives…holdovers from the Mark King era were dismissed. Internal teams were realigned, and realigned again (and again). Some prominent members of the TaylorMade team saw the writing on the wall and left of their own accords.

None of them appear to regret it.

The executive branch, marketing and PR departments…effectively gutted.

2015 rolled around and TaylorMade launched R15, AeroBurner, and RSi while the repurposed Adams brand launched red and blue.

The golf world mostly yawned, and when none of the above failed to turn the tide, adidas and TaylorMade CEO Ben Sharpe parted ways less than one year into his tenure. In a publicly-traded world, patience is an uncommon virtue.

Former TaylorMade guy, David Abeles was brought back to replace Sharpe. One of the last true bonafide TaylorMade guys, Executive VP Sean Toulon, left. The company was hit with another round of layoffs.

It has been a difficult year for those inside TaylorMade…those that are left, anyway.

For all of its efforts, what adidas got in return was a 2^nd straight year of double-digit declines in Q2 revenue, a 2^nd straight year of significant declines in retail market share, and the harsh reality that TaylorMade can no longer, by any reasonable measure, call itself the leader of the golf equipment industry.

The mighty has fallen far – and it may not yet have reached bottom.

How Bad is it Really?

From a numbers perspective, it’s bad. The two most meaningful bullet points from the latest report:

• Q2 revenues down 26% on a currency neutral basis
• Revenue down 17% for the year (hard goods down 13%)

If you’re wondering what, other than unstable leadership, poor marketing, and mind-blowing arrogance, is at the heart of TaylorMade’s most recent incarnation of its annual decline, the adidas report places the blame on “sales decreases in most categories, in particular metalwoods and irons”.

Revenues are down because sales are down. Obvious enough, right?

By Hainer’s own admission, R15 and AeroBurner didn’t resonate with consumers, and that’s reflected in TaylorMade’s tenuous hold on the #1 spot for driver market share. The company considers its #1 Driver in Golf position as a birthright, and that’s about to slip away (although I suspect it will continue to reference its Tour use long after the market position is gone).

PING’s G30 Trifecta (G30, LS Tec, and SF Tec) has outsold every other single driver family for that last 5 months. Callaway, the golf industry’s metaphorical phoenix, has usurped TaylorMade to lay claim to the #1 spot in fairways, hybrids, and irons.

How Much Has Changed in 2 Years?

How much has changed in 2 years? Here’s a brief summary.

And here’s the proverbial kicker: It’s actually worse than it looks.

TaylorMade’s grip on the #1 spot in total driver and total metalwoods sales is rapidly slipping away, and what little lead they have left is again being driven by sales of heavily discounted models from previous seasons.

Despite being Job #2 (after shutting down Adams), TaylorMade still has a comparative abundance of old, low margin, product sitting on store shelves. Burdened with the old, retailers didn’t buy nearly the amount of the new that TaylorMade had projected.

When the old eventually runs out, so too, I suspect, will be TaylorMade’s #1 position in the driver category.

In case it isn’t abundantly clear by now, let me spell it out for you; last year’s massive reorganization and restructuring plan failed miserably.

And so, as you might expect, adidas is hatching a new, improved, and more aggressive plan to fix the ongoing problems at TaylorMade-adidas Golf.

The summary version of the 2015 major turnaround plan…well, just read it for yourselves:

Clear enough? I didn’t think so. The most substantive portion of the plan is likely found in the preceding paragraph. Allow me to highlight the pertinent bits for you:

Translation: we’ve hired experts to tell us how much of the nearly 143 million we spent on Ashworth (2008) and Adams (2012) combined we can get back, and who might be actually be willing to give it to us.

Both brands failed to find an identity under TaylorMade, and now both appear likely to be jettisoned.

Adams most likely will eventually continue its slow death as a house brand logo for a national or even regional sporting goods chain. Ashworth, who knows, and more to the point; given how TaylorMade-adidas Golf has managed the brand since acquisition; who – other than perhaps Freddy Couples and John Ashworth himself – cares?

Do They Even Have What It Takes To Be #1 Again?

Given what we’ve seen over the last 2 years, TaylorMade doesn’t seem capable of reinventing itself as the lean, mean, profit machine adidas envisions. A year’s worth of restraint, reorganization and realignment, and the bottom line is still scribbled in increasingly darker red.

The products are disinteresting. The marketing is uninspiring, and most troubling, the systemic hubris that long ago convinced decision makers that just being TaylorMade is all that’s necessary to dominate an industry, vigorously persists.

For the last 2 years TaylorMade has been a portrait of insanity, and even if new leadership can somehow figure out how to stop heads from butting walls, it’s unlikely that adidas shareholders have the patience for a complete turnaround.

I’d wager that adidas’ long-term plan for TaylorMade is to stabilize the brand, offload it when there’s a semblance of upside, and let the new buyers worry about growth.

A 3^rd straight August promising big changes at a struggling TaylorMade almost assuredly won’t fly with adidas shareholders. If the latest and greatest plan to fix TaylorMade fails, the only realistic next step will be for adidas to rid itself of its greatest liability.

TaylorMade without adidas is a very different golf company and that would for a very different golf equipment industry.