Nike’s exit from hardgoods signals shift in golf market

Nike’s exit from hardgoods signals shift in golf market

Equipment

Nike’s exit from hardgoods signals shift in golf market

Editor’s note: This story originally ran in the Aug. 22 issue of Golfweek magazine.

Nike Golf finally figured out how to move some golf clubs. In the days after the athletic behemoth announced Aug. 3 that it would cease production of clubs, balls and bags, Nike’s 2016 club models were deeply discounted and selling quickly.

Drivers previously listed for as high as $500 suddenly dropped to $150 at most websites and shops.

“Price moves product,” said Scott Peters, founder of Golf & Ski Warehouse, a New England retailer, a week after Nike’s announcement. “We put it at half price, and it has been flying.”

Peters said Nike wasn’t taking orders to refill retailers’ shelves, and he expected to run out of Nike hardgoods by the end of August.

So that appears to answer the question of how quickly Nike could liquidate its hardgoods, but many other questions arose in the wake of the company’s exit from the club market.

What does Nike’s decision mean to the golf industry? For Nike?

Who will sign Nike Golf’s marquee staff players, notably Rory McIlroy and Tiger Woods? What will be the effect on recreational golfers?

Start at the recreational level. Aside from the current liquidation, Nike’s absence from the club market likely won’t mean much. In 14 years of selling clubs and 18 years of selling balls, Nike never gained significant market share or convinced enough consumers that it was a serious golf brand.

“They never found their secret sauce,” said Pete Line, general manager of Carl’s Golfland, a Michigan retailer. “They never really had that one product that really took off.”

Nike’s expertise, of course, is in apparel and shoes, and the Beaverton, Ore.-based company plans to continue making such products for golfers. In the year leading up to the announcement, much of the company’s marketing efforts focused on softgoods, so the decision to abandon hardgoods didn’t come as a complete surprise.

“I’ve been talking about it all year,” said Casey Alexander, senior vice president and analyst at Compass Point Research & Trading, who tracks the golf industry. “Not one time did you see an ad for Nike clubs or Nike golf balls. Not one time.”

In its 10-K annual report released May 31, Nike announced an 8-percent drop in golf revenues from fiscal 2015 to fiscal 2016, from $769 million to $706 million. Revenue for the golf unit was $792 million in 2013. Nike did not break out hardgoods versus softgoods, and company officials were unavailable to comment.

“It just goes to show how tough the market is,” said Tom Stine, co-founder of Golf Datatech, which tracks industry sales. (Stine was a co-founder of Golfweek, but no longer is involved with the media company.) “It’s a steady market. It isn’t going anywhere, but if there’s one less competitor, then there are more dollars to go to the other companies.”

Retailers are not immune to industry woes, either. Bloomberg recently reported that Golfsmith is searching for a buyer and considering Chapter 11 reorganization. Other big-box retailers, such as Dick’s Sporting Goods, have scaled back on golf, and Sports Authority has gone under.

The National Golf Foundation, which tracks rounds played, has reported that the number of U.S. golf participants dipped from 24.7 million in 2014 to 24.1 million in 2015, continuing years of declines, and occasional monthly upticks in rounds played won’t change the plans of growth-minded athletic manufacturers. Nike and Adidas are the two largest sporting-goods manufacturers in the world, and both soured on golf.

“Ten years ago I said this business was going to collapse down to a core four, at best: Callaway, Titleist, TaylorMade and Nike,” Alexander said. “I just got one of the names wrong. It turns out Nike is out and Ping is in.”

Nike hasn’t been alone in its recent struggles. Parent company Adidas put clubmaker TaylorMade Golf up for sale in May after revenue declines in seven of nine consecutive quarters. TaylorMade is bullish about its future – and the golf industry – despite past struggles, and it says it has recorded a 24-percent increase in sales year-on-year in the second quarter. The success of its M family of clubs has fueled that rebound, the company says. The M family is the kind of hit that Nike never found with any line of clubs.

“We’re excited by the golf equipment category and the future opportunities it presents for performance-driven brands like ours,” said David Abeles, chief executive and president of TaylorMade-Adidas Golf, in a written statement. “We’re fully committed to continuing to create industry-leading innovations across all segments; from our tour professionals to competitive amateur golfers alike who want the best performance equipment.”

Changes also are coming for Acushnet, parent of Titleist and FootJoy, which filed for an initial public offering in June. Callaway returned to profitability in 2014 after years in the red.

Any consolidation to the industry isn’t good news for Tour players, as there will be less competition among fewer equipment companies spending sponsorship dollars. Several Nike staffers at the Travelers Championship were stunned by the company’s announcement, and they were unsure about what it would mean for their contracts or with what company they might land.

“I envisioned myself playing Nike equipment as long as I played,” Patrick Rodgers said. “Obviously it’s a pretty big shock, but I’m still proud to be a part of Nike. It will just be apparel and footwear.”

Nike’s two biggest stars, McIlroy and Woods, expressed remorse – especially for Nike Golf employees who were laid off – on Twitter, but they didn’t hint at a new direction. Even for them, and assuming that Woods returns from repeated back injuries and McIlroy returns to major-winning form, it could be difficult to find another set of pockets quite so deep.

Companies always are eager to prove their wares on Tour, but Tour validation means nothing if product doesn’t move at retail. Peters relayed an observation shared by many about how those iconic Nike swooshes paid off: “Some guy who wears a Nike shirt and Nike shoes won’t have a single Nike club in his bag.”

Ultimately, that led Nike to take its golf balls and go home.

– Adam Schupak and David Dusek contributed to this report

 

The rise and fall of Nike Golf

1984: Nike steps into golf with its Turnberry shoes.

1985: Seve Ballesteros is the first Nike-sponsored Tour player.

1993: Nike secures naming rights for the PGA Tour’s developmental tour, formerly known as the Ben Hogan Tour.

1996: Nike signs new pro Tiger Woods to an endorsement contract.

1998: Nike introduces four models of Precision, the company’s first ball.

1999: Glen Day is the first player to win a Tour event with a Nike ball, the Nike Precision Spin Control.

2000: Woods switches to a Nike ball, the Tour Accuracy.

2002: Nike releases its first clubs at retail, and Woods switches to Nike clubs.

2005: Nike signs new pro Michelle Wie.

2008: Golf-industry veteran Cindy Davis becomes president of Nike Golf, replacing Bob Wood.

2013: Nike signs Rory McIlroy.

2014: Daric Ashford, a softgoods expert and Air Jordan veteran, replaces Davis as president of Nike Golf.

2016: Nike stops making clubs, balls and bags.

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