Nike announced yesterday that they are getting out of the golf equipment business and planning to focus on apparel and footwear only in their golf line. Now there are many articles chronicling the details behind this huge announcement or at least the few details that we know. In a nutshell, Nike will no longer be making golf equipment, instead just clothing and shoes, Tiger, Rory and the rest of their staff will now have to find new equipment to play and the entire golf industry seems somewhat speechless. This is huge news for a number of reasons in the golf business but in a way I am not shocked as it appears as though Nike is cutting its losses in golf and getting out while they can.
It is no secret that the golf equipment business is tough sledding even if you are leading the charge. Fellow professionals and retailers can attest to the small margins and large financial commitment it takes to stock equipment that has become very expensive for the average customer. Nike saw their equipment sales flattening or even slightly dropping while their clothing and shoes continued to profit and decided to cut the dead weight and focus solely on a money maker. Its smart business as far as I'm concerned. It is also very likely that other major businesses will follow in Nike's footsteps as well. Adidas has already reportedly been shopping parts of its golf division, including Taylormade. Early in May of this year a story from Golf Digest quoted Herbert Hainer, CEO of the Adidas Group as saying: “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,”. This sounds very similar to Nike's announcement the only difference being Nike is completely discontinuing their equipment while Adidas is selling Taylormade. Could Nike potentially BUY Taylormade essentially trading their bottom of the market club line for one of the industry leaders if not THE industry leader in equipment?? There is a good chance that if Adidas does not want the burden of Taylormade sales, it is doubtful that there competitor would just washed their hands with the equipment business would want it either. That is not to say it won't happen, a guy can dream right?
The sale of Nike also leaves its vast line up of Tour players without a club manufacturer. This list of names include Rory McIlroy, Paul Casey, Tony Finau, Michelle Wie, and oh yeah, Tiger Woods! Tiger's agent Mark Steinberg, said that he will be pursuing a new club maker for his client immediately but that Tiger will remain a loyal ambassador for Nike now and in the future. Tony Finau, who was signed by Nike in January of this year, was also quoted as saying that it is highly unlikely that he will be playing Nike in 2017 and it appears he was as taken back as anyone about the news and had no idea the announcement was coming. Rory McIlroy signed a 10 year, $250 million contract with Nike back in 2013 and made the switch to their equipment all the way through the bag right down to the golf ball. Now 3 years into that contract it appears he, and the rest of the Nike staff will have to do it all over again. That said, it is hard to feel for these guys as I am sure Nike has to honor their contacts and now they will have a chance to sign with other equipment companies and bring home even more money on top of their current Nike deals.
Where will these pros land? The equipment gear head in me cannot wait to see the answer to that question! Billionaire Bob Parsons of Parsons Xtreme Golf said he received no less than 30 phone calls from Nike staffers within an hour of Nike's announcement. He also said that he is not in any rush to make any sudden moves stating that he is going to let the golf world digest this information and get a lay of the land as this announcement has caught everyone off guard. However, my guess is that if given the opportunity to sign Tiger Woods, any sane business man would do anything to make that happen and Bob Parsons is a very proven business man. Could Rory go back to the glory days of playing Titleist? Again, I think given the opportunity, Titleist would leap at the opportunity to put Rory back on their staff list.
The next few months in the golf equipment industry has potential to drastically alter the landscape of the business. Rest in peace Nike Golf.