Adidas to Sell Ailing Golf Division to Focus on Clothing

Adidas CEO Hainer Explains Sale of Golf Division
  • Talks planned to dispose of TaylorMade, Adams and Ashworth
  • Sportswear co. to retain Adidas Golf shoe and apparel brands

Adidas AG is starting talks with potential buyers for the bulk of its golf unit, abandoning a business it’s had nearly 20 years but which is dragging on profitability.

In addition to TaylorMade, the German sportswear maker will also seek a buyer for Adams golf clubs, and Ashworth polos and cardigans after a nine-month strategic review, the company said. It will keep Adidas-branded golf shoes and clothing -- about 40 percent of the unit, whose first-quarter sales fell 1.7 percent to 275 million euros ($316 million).

The businesses on sale could fetch 470 million euros, John Guy, an analyst at MainFirst Bank AG, wrote in a note. Adidas shares fell 1.5 percent to 111.70 euros as of 11:46 a.m in Frankfurt.

Outgoing Chief Executive Officer Herbert Hainer is cleaning up Adidas’s operations as he sets the table for Kasper Rorsted, who takes the reins in October. Adidas got into golf when it bought French ski and skate company Salomon in 1997, but younger consumers are staying away from the game, and it isn’t popular in emerging markets like China and India. Sales plummeted 13 percent last year as the industry has been beset by discounting.

‘‘The golf market is not growing at the moment but it’s also not falling further,” Hainer said during a call with reporters. The portion Adidas plans to keep is producing solid returns and the company is cutting labor and manufacturing costs, the CEO said.

The company hired Guggenheim Partners LLC last year to look at options for the business. Golf equipment may have posted a nearly 100 million-euro loss last year, analyst Guy estimated.

Meanwhile Adidas is focusing on its best sports: soccer, running and gym training. Overall sales rose 17 percent during the quarter to 4.77 billion euros, padded by gains of 23 percent in North America, 24 percent in Western Europe and 28 percent in the Greater China region. Soccer-related sales were up 25 percent and Hainer said Adidas won’t sell its CCM hockey equipment business, a move it had considered.

‘‘It is early days, but the strategy here looks to be bearing fruit,” Graham Renwick, an analyst at Exane BNP Paribas, said in a note. ‘‘This leaves further fuel for investment into marketing and other revenue-driving initiatives.”

The sportswear maker is benefiting from two upcoming summer soccer tournaments, the European championships in France and the Copa America in the U.S. -- plus a fashion shift that’s put Adidas models back in style. Hainer called out the woven, bouncy NMD shoe as the quarter’s ‘‘clear highlight.”

The Reebok unit recorded 6 percent currency-adjusted sales growth, its twelfth consecutive increase.

Shares of Adidas have gained nearly 50 percent over the past year, making the stock the best performer in Germany’s 30-member DAX Index.

The company reiterated increased group earnings and revenue forecasts for the year. It had boosted its sales and profit forecast April 27 for the second time in less than three months. Operating margin widened to 10.3 percent of revenue in the first quarter, from 8.9 percent a year earlier.

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