Adidas To Sell Golf Brands

Adidas Group is selling its TaylorMade, Adams and Ashworth golf brands to focus on its core footwear and clothing categories, the company announced today.

The German sporting goods firm intends to focus its efforts in the golf segment on “further strengthening its position as a leading provider of innovative golf footwear and apparel through the AdidasGolf brand,” it said in a statement.

Adidas will enter into concrete negotiations with interested parties for the sale of the remainder of the loss-making division, consisting mainly of the TaylorMade brand, a market leader in golf equipment, as well as the Adams and Ashworth brands.

“TaylorMade is a very viable business. However, we decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market,” said Adidas Group CEO Herbert Hainer.

“With its leadership position in the industry and the turnaround plan gaining traction, which is clearly reflected in the top- and bottom-line improvements recorded in Q1 as well as recent market share gains, I am convinced that TaylorMade offers attractive growth opportunities in the future,” he said.

“At the same time,” Hainer added, “the planned divestiture will allow us to reduce complexity and focus our efforts on those areas of our business that offer the highest return and where we can have the biggest impact in reaching our consumers and winning their loyalty for the Adidas and Reebok brands.”

The announcement came as Adidas published final results for the first quarter, in which revenues soared 22 percent to 4.8 billion euros, or $5.29 billion, the highest quarterly revenue in the group’s history, thanks to best-selling sneaker models including the Stan Smith, the Superstar and the Adidas Originals NMD.

Preliminary results were published on April 27.

“This quarter’s accomplishments show that we flew off the starting blocks in 2016,” said Hainer. “Our product and marketing initiatives are resonating extremely well with consumers across all regions and in performance and lifestyle categories alike. This gives us every confidence that 2016 will be a record year and will lay the foundation for the long-term success of the group.”

In January, the German activewear brand named Kasper Rorsted its new CEO. He is to join the company in August and succeed Hainer on Oct. 1 after a two-month transition period. Hainer had come under pressure from investors last year after a string of profit warnings.

Adidas said the first-quarter performance was driven by accelerating momentum at both its Adidas and Reebok brands.

Revenues at Adidas grew 25.5 percent on a currency-neutral basis, helped by double-digit rises in the training, football and running categories, as well as Adidas Originals and Adidas Neo. Sales at Reebok were up 6.5 percent, while revenues at TaylorMade-Adidas Golf fell 1.4 percent, dragged down by declines at Ashworth and Adams.

By region, revenues in Western Europe jumped 24.7 percent in currency-neutral terms. North America rose 21.6 percent, Greater China grew 30.2 percent, and Russia/CIS eked out a 1.8 percent gain. Revenues in Latin America grew 18.7 percent, Japan jumped 44.4 percent and MEAA posted a 17.2 percent gain.

The group last month raised its guidance for 2016. It said net income from continuing operations should increase between 15 percent and 18 percent, up from previous guidance of 10 percent to 12 percent. Sales in currency-neutral terms are expected to grow 15 percent versus a prior forecast of 10 to 12 percent.

Today, it also lifted its outlook for the gross margin, which is expected to decline this year due to increased costs for the group’s Asian-dominated sourcing as a result of less favorable U.S. dollar hedging rates and rising labor costs.

Adidas said it now expects to be able to limit the gross margin decline to a maximum of 50 basis points compared to the prior-year level of 48.3 percent, versus previous forecasts of a decline of 50-100 basis points.

This reflected the positive effects from a more favorable pricing, product and regional mix at both Adidas and Reebok; a revision of the group’s channel mix; and higher product margins at TaylorMade-Adidas Golf.

All dollar rates are calculated at average exchange rates for the period in question.

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