Why Golf Continues to Challenge Footwear Companies

It’s no secret: the golf business is on the decline. While the slump is nothing new, with earnings season well underway, the proof of a continual decline is in the pudding.

Companies with sizeable golf divisions continue to report a drag due to the faltering sport—once the hottest ticket in town with one of the highest paid and most recognizable mega athletes, Tiger Woods, leading the charge.

Adidas Group has tried to revamp its struggling TaylorMade-Adidas Golf unit for some time now but the rebound continues to pose challenges. In Q1, ended March 31, 2015, the unit posted a 6 percent sales gain year-over-year but continued to decline, by 8.6 percent, in currency-neutral terms.

“As we have learned our lesson from the past, we will definitely not sacrifice the long-term success of our TaylorMade-Adidas Golf business for short term goals,” said Herbert Hainer, Adidas’ CEO on the May 5 conference call. “Instead we will very closely monitor the industry and only slowly increase the volumes we’re bringing to the market.”

Dick’s Sporting Good’s CEO Edward Stack asserted that the company would remain in the golf business, on its Q1 conference call on May 19, however he was less optimistic about a quick turnaround for the sport.

“I think the golf business is going to continue to be difficult,” said Stack. “I don’t think there’s a lot of growth in it, although there are some good things happening in the business today, and a lot of it’s coming from the PGA tour [and] some of these young guys that are out there playing are going to be very helpful to the game. We’ll have to wait and see longer term how it plays out, but some of the things happening out on tour are really very good for the game.”

Stack alluded to one of the common factors blamed for golf’s decline—its failure to attract the younger demographic which includes Millennials.

“There really has not been anyone to replace Tiger in terms of generating excitement in the sport with Millennials,” said B. Riley & Co. analyst Jeff Van Sinderen. “There are some good up and coming players, but not of Tiger’s prior champion, excitement generating type, in my opinion.  Not sure what it will take to turn the cycle, but I don’t see it happening in the near term.”

Matt Powell, sports industry analyst with NPD Group, has written extensively about the sport’s decline, particularly among Millennials, due to its expensive, exclusive and time-consuming nature. He shared Van Sinderen’s gloomy outlook for the sport.

“Boomers are aging out of the game and Millennials are not picking it up,” said Powell. “This is a permanent situation that I do not see reversing.”

Under Armour Inc. has been singing a much more upbeat tune regarding golf as its big bet signing Jordan Spieth paid off in a hug way when he gave a record-setting performance at the Masters, where he became the first player to win wire-to-wire since 1976.

“Our team did a great job of outfitting Jordan for the Masters, and it provided terrific visibility for our golf apparel and footwear,” said Under Armour’s CEO Kevin Plank on the company’s conference call in late April. “When we signed him, we knew he had the ability to help drive our brand beyond just golf and that we needed to align our product stories with his aggressive, young and fearless personality. We’ve come a long way in the category in the last two years.”

Regarding golf-related footwear specifically, the segment saw a solid resurgence around 2010 with the help of professional golfer Fred Couples who made headlines during the opening rounds of the Masters Tournament at Augusta National Golf Course when he wore Ecco shoes without spikes.

Experts say the footwear industry may have to wait a while for another solid jolt to the golf shoe business.

“I believe the [golf] market should pick up—albeit in few years—with interest in new pro players; better product; better economics and demographics for Millennials; and we hope weather cooperates at some point,” said Morningstar analyst Paul Swinand.

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