Golf Is Dead (Again) Files: Nike, Golfsmith Edition

Two years ago, golf was declared a dead or dying sport because one company bet on three drivers in a year. One big retailer fired its workforce of professional golf instructors/fitters because it bought into a stupid bet. Yet somehow the kneejerk takeaway was not one of befuddlement at the ignorance of it all, but that golf was a dying sport and industry. Some of us didn't agree.

Since then, one of the subsequent Taylor Made CEO's admitted they'd made changes to avoid a repeat, and the retailer's CEO, declared that he never lost an affinity for the golf market.

With news that Nike was ending its manufacture of golf balls and equipment, the golf-is-dead narrative made its way to the lede of Bloomberg's Nick Turner, Matt Townsend story.

Nike Inc., the world’s largest maker of sporting goods, will stop selling golf equipment, striking another blow to a pastime hurt by slowing participation rates in recent years.

The only blow, and it is a significant one, is to the employee base of Nike Golf and to the golf pros who may have their endorsement deals reduced, including the lavishly compensated Rory McIlroy, reports James Corrigan. (Players expressed their sympathy for staffers here, reports G.C. Digital, while Tiger set off a firestorm by saying Nike helped him win a Grand Slam, reports Alex Myers.)

Outside of that?

Golf will still be played next week in the Olympics in spite of the animals, viruses and other issues. It might even come off as a welcomed addition to the games.

Not a single golf round or vacation was cancelled on the Nike news, at least that we know of.

Callaway's stock rose.

Taylor Made reported a profit and maybe got a tad more attractive to a buyer with a little more market share out there.

Analysts predicted good deals for those willing to take some Nike off of retailer shelves.

Bob Parsons says his phone was ringing off the hook Thursday, Michael Chwasky reports for golf.com. As Charl Schwartzel found out, there is life after Nike.

Furthermore, it turns out we should have seen this coming, writes Jason Lusk at Golfweek.com

“I’ve been talking about it all year,” said Casey Alexander, an analyst with Gilford Securities in New York who tracks the golf industry. “Not one time did you see an ad for Nike clubs or Nike golf balls. Not one time…

“Ten years ago I said this business was going to collapse down to a core four at best – Callaway, Titleist, TaylorMade and Nike. I just got one of the names wrong. It turns out Nike is out and Ping is in. … The effects of this have been happening already in the marketplace. If you’ve been to an Edwin Watts or Golf Galaxy and you look for Nike Golf, you will find the most miserly display of mish-mash equipment imaginable. There’s just nothing there.”

Rob Sauerhaft at Golf.com also talked to Alexander at length about what this means and he offered this:

The equipment business has held pretty steady over the years in the $4 to $4.5 billion range. Having a 5% market share company get carved up by others doesn’t signal the end. It used to be that there were secondary competitors and tertiary competitors. Now, the secondary competitors are being flushed out. But it’s not a sign of the end of the business.

The key: prospects for massive growth are not great, but the business is steady enough. Which, we know, Wall Street finds utterly useless if not cause for hysteria.

But should that irrational mindset be a barometer for the health of the sport?

I'd prefer to know how golf ball sales are going if we are going to use the "business" to determine the health of golf, because that would at least point to something all golfers can't survive without.

From Daniel Roberts' Yahoo Finance story on the Nike news:

Acushnet, which owns ball-maker Titleist and shoe brand Footjoy, filed for IPO this summer and is looking for $100 million or more to finance the offering. But its sales fell in 2015 to $1.5 billion and it posted a loss. It’s unlikely it can afford a big acquisition any time soon.

But that news could also factor in several things that have nothing to do with ball sales.

All of the Nike news was accentuated by this Bloomberg story from Lauren Coleman-Lochner
and Kiel Porter, who says Golfsmith "is considering filing for bankruptcy as it looks for a new owner, according to people with knowledge of the situation."

Golfsmith hired the investment bank Jefferies LLC to solicit buyers for the roughly 150-store chain, without success so far, said the people, who didn’t want to be identified because the process isn’t public. The company also hired Alvarez & Marsal to help it restructure, according to the people, who said that a sale could come as part of a Chapter 11 filing.

The Austin, Texas-based chain is the latest casualty of a struggling golf industry, which hasn’t recovered from a downturn in U.S. participation over the past decade. Nike Inc. announced on Wednesday that it would no longer sell equipment for the sport, and Adidas AG is trying to offload most of its golf brands.

After a few calls today, I learned Golfsmith's primary issue is with terrible leases and real estate issues involving many of its locations. Bankruptcy would make it easier to get out of such deals or to restructure them.

Again, not a great statement about golf as a business because more robust sales would mask those contracts. But as seen through the constant-growth-or-else lens, it's just one more thing suggesting this is also very much a business issue more than a golf issue.

There is no question golf faces all sorts of issues in a world with rapidly changing business, recreational and media consumption trends. But as with prior examples in the golf business world, pinning the blame on a sport that has been around for 400 years, when we can point to obvious market overcrowding and bad deals, seems short-sighted.