The athletic wear giant said Wednesday that it will stop producing golf clubs, balls and bags. Nike's announcement shouldn't come as a shocker to anyone holding a business degree.
Nike's sales at its golf business fell 8% to $706 million for the fiscal year ended May 31. Excluding the impact of the strong U.S. dollar, sales dropped 6% from the prior year. It was the worst-performing business for Nike in terms of sales last fiscal year.
Weak sales for Nike golf -- which represents about 3% of total sales for the apparel and footwear giant -- had become a recurring theme in recent years, with sales falling 2% in fiscal 2015 and flat the previous year. Injury-prone golf legend Tiger Woods -- who put Nike golf on his back in the early 2000s -- has been spotted less in riveting final rounds of PGA Tour events (he has not played a PGA tournament yet this year, and doesn't plan to). Meanwhile, fellow Nike product endorser Rory Mcllroy lacks the star power of Woods.
And Nike has experienced sluggish sales of golf equipment despite people playing more rounds of golf, which is spurring sales of new drivers, shoes and irons. Earlier this year the National Golf Foundation reported that, for the first time since 2012, the number of golf rounds played in the United States increased in 2015. Helped by a warmer-than-average winter, golf rounds played increased 5.5% in the first three months of 2016, according to Golf Datatech. In March alone, rounds played boomed by 13.2%.
TheStreet takes a look at several golf-related stocks to potentially own while Nike shifts its strategy.
Golf great Phil Mickelson swings a Callaway Big Bertha driver.
Current share price: $11.22
Share price performance year to date: +19% vs. +5.8% for S&P 500
Shares of the maker of Big Bertha drivers surged as much as 7% on Thursday following news of Nike's decision, with good reason. Nike's departure from golf equipment may only add fuel to a resurgent Callaway Golf, who has benefited under the watchful eye of new leadership that has bolstered product innovation and marketing.
Sales increased in all product categories for Callaway during the second quarter, led by a 14.9% surge in golf balls. It probably also helps that long-time Callaway Golf pitchman and PGA star, Phil Mickelson, is still playing very well -- unlike Nike's broken down Mr. Woods.
Callaway declined to comment for this story.
Jason Day's rising popularity has helped bring Adidas' Taylormade brand back from the dead.
2. Adidas (ADDYY)
Current share price: $81.92
Share price performance year to date: +69% vs. +5.8% for S&P 500
Adidas-owned Taylormade has had a comeback amid new products such as the M2 driver and irons. According to Adidas, the TaylorMade equipment brand saw sales surge by a double-digit percentage -- excluding the impact of currency -- in the first half of the year. The company also said sales for its broader golf business increased in the first half of the year, driven mostly by footwear.
Investors will like only have a short window of opportunity to capitalize on Adidas' momentum in golf equipment, however. Adidas launched a review of its golf business a year ago, and said in May it would sell TaylorMade and its Adams business, which also sells golf clubs and other equipment. It's also exploring the sale of its Ashworth golf shoes and clothing brand.
But at the moment, adding Adidas to the portfolio would give an investor exposure to not only a solid golf business but also a resurgent sneaker business, in large part thanks to fashionable collaborations with music star Kanye West.
Dick's Sporting Goods' Golf Galaxy chain may be happy to see Nike equipment vanish.
Current share price: $51.79
Share price performance year to date: +46% vs. +5.8% for S&P 500
Share price performance year to date: -3.4% vs. +5.8% for S&P 500
Share price performance year to date: +25% vs. +5.8% for S&P 500