BERLIN (Reuters) - German sportswear company Adidas ADSGn.DE aims to sell the bulk of its loss-making golf business to focus on shoes and clothing, it said after the core Adidas brand reported strong quarterly sales, particularly in the United States.
Adidas, which launched a review of its golf business last August, said on Wednesday that it would focus on selling golf shoes and clothing under the Adidas label and seek to sell TaylorMade and Adams, which sell golf clubs and other equipment, as well as the Ashworth golf shoes and clothing brand.
After peaking around 2000, when Tiger Woods was in his prime, the number of people playing golf in the United States, which accounts for half the global golf market, has fallen sharply.
“We expect this will remove the earnings volatility of an equipment business with higher fixed costs and lower sales visibility than traditional sportswear,” said UBS analysts, who have a “neutral” rating on Adidas shares.
Analysts speculate that a sale could prompt writedowns.
Adidas bought TaylorMade in 1997 as part of its $1.4 billion acquisition of French skiing label Salomon, developing it into the world’s biggest supplier of golf drivers. It bought smaller Ashworth in 2008 and Adams four years later.
The golf business achieved sales of 902 million euros ($1.04 billion) last year, accounting for about 5 percent of group sales and down by a third from a peak of 1.34 billion euros in 2012. The part of the business it is selling accounts for 60 percent of total golf-related revenue.
Analysts predict the business might draw interest from companies in Asia or a financial investor, rather than a rival such as Nike NKE.N, Puma PRTP.PA, Under Armour UA.N or Callaway Golf ELY.N, which might be wary of increased exposure to golf.
Several private equity firms have looked at the business and decided against a bid, citing its losses and the sport’s waning popularity, sources close to the companies have told Reuters.
Adidas made the announcement as it reported a 31 percent jump in quarterly sales of its core brand in North America, as a rise in marketing spend helped it to gain ground on rivals.
Adidas shares, which soared to a record high last week when it released strong headline quarterly figures and raised its 2016 outlook, were down 0.6 percent at 1508 GMT, against a 0.8 percent decline for the German blue-chip index .GDAXI.
Chief Executive Herbert Hainer said growth was driven by both fashion products such as its retro Stan Smith sneakers and training gear including its springy Boost running shoes, with U.S. sports gear sales up 50 percent in the quarter.
Total Adidas brand sales rose 26 percent, far outperforming the 6 percent of its Reebok fitness label, which some investors hope might also be put up for sale after Hainer is replaced as CEO by former Henkel boss HNKG_p.DE Kasper Rorsted in October.
Hainer reiterated his desire to hang on to Reebok, citing a booming fitness market.
TaylorMade sales returned to growth in the quarter, rising 6 percent, while Adidas golf sales were up 3 percent. But that failed to make up for double-digit declines at Ashworth and Adams.
Hainer said the unit is still making a small loss overall but is improving quarter to quarter.
Additional reporting by Lauren Hirsch; Editing by David Goodman