Finance Marketing Uncategorized

Adidas selling golf unit could be warning or opportunity for Under Armour

Under Armour has a difficult decision on whether to bid on Adidas' golf properties that are up for sale.

Adidas is looking for a buyer of its golf unit which includes Taylor Made, Adams, and Ashworth brands. The company simply isn’t making money in golf and is looking to streamline its operations. It helps that Adidas can shift its focus to its new upcoming NHL deal. Now that Adidas is exiting stage left, it usually leaves an opportunity for another company to scoop up its assets and have brand equity in golf rather easily. There’s only one major contender that makes sense, but Under Armour may not want to get involved in golf if past history and future trends are any indicator.

Nike obviously had some success in golf with Tiger Woods, but after Tiger’s decline it hasn’t done much. They still have some of the top golf players in the world signed to the brand, but now Nike receives less than five percent of its sales from golf. Building a business unit for one of the most famous and influential athletes of our time makes sense, but without someone of Tiger’s stature being the marketing focal point, the golf business is tough.

Under Armour has Jason Spieth, but Spieth is not Tiger Woods. He’s talented, young, and could win a bunch of majors, but he is not the force of nature Woods was when he was when he was winning what seemed like every other major tournament. UA can also look at the decline of Woods and figure out the investment might not be worth it. Golfers’ games can falter at a moment’s notice. Seems like a lot to invest if for some reason Spieth never recovers from his Masters’ meltdown.

It’s also a declining market. Golf is turning into a niche sport before our eyes. Participation is down across the board. The time commitment for 18 holes is tough. The general public isn’t taking to the game like they used to. That means selling into a market on the downtrend. If Under Armour doesn’t have a plan to combat these issues, buying Taylor Made isn’t a good investment even if its the easiest way into the golf equipment market.

Then again, it is the easiest way to leverage Spieth and compete with Nike, Rory McIlroy, and Tiger Woods’ eventual return. Under Armour has been at the forefront of new technology in both apparel and wearables. If the UA can get creative and enhance Taylor Made and the other brand offerings, it may be worth the risk — especially if they can get the brands on the cheap.

It’s a tough decision for UA as they could be the only buyer in the market outside of private equity shops. The problem is that UA probably won’t benefit from Taylor Made’s endorsement roster which includes Dustin Johnson and Jason Day. They may stick with the clubs, but its doubtful that Adidas would let them out of their golf-polo and hat apparel deals which remain in the German company’s long-term strategy.

Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.

Follow @MikeColange or @fog_sports on Twitter and like our Fields of Green Facebook page for updates

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