Nike Golf never profitable, Even with Tiger

EKELLY · July 5, 2017

That's not exactly true! They just weren't making ENOUGH profit to justify continuing. They still had a NET profit, it just didn't meet Nike standards!!......Same with Taylor Made, hence the sale from Adidas. If TM wasn't making $$, they wouldn't have signed RORS to the new deal. BUT, big money players have never really translated to club sales......

Shilgy · July 5, 2017

That's not exactly true! They just weren't making ENOUGH profit to justify continuing. They still had a NET profit, it just didn't meet Nike standards!!......Same with Taylor Made, hence the sale from Adidas. If TM wasn't making $$, they wouldn't have signed RORS to the new deal. BUT, big money players have never really translated to club sales......

That's what I read as well. The shareholders felt the margin was not good enough. I guess compared to China made shoes and clothing selling at insane margins the hard goods seemed too slim.

mallrat · July 5, 2017

I'm not sure if they were or weren't making a profit but they were not smart fiscally and the bigger issue was return on investment. An example is they would but in $250 mil into R&D and fixed costs in hopes to break even at best when they could put $25 million into soft goods to make $500 million (not actual numbers).

Now for their poor fiscal spending, look at the Rors putter, I think they sold it for $399 or something. I believe the putter cost $160 to make and then for some god awful reason they approved a box that cost them $80. So instead of a $5 box and putting the $75 towards the bottom line they were just throwing that $ away.

mst_coastie · July 5, 2017

I think it comes down to a factor that others have mentioned, the hard goods market is simply to capital intensive. Large outlays are required, and without the associated returns, its simply not worth the inventory investment. At today's pace, companies must release new equipment at least once a year. This requires R&D plus tooling and manufacturing cost, all without the same "guaranteed" market that Nike is fortunate to have with its other product lines. Furthermore, when a sector is not your main focus, and not a significant contributor to your EBITDA, then there is really no reason to continue, unless there is some indication that the equipment sales boost sales in other sectors, or the division is projected to contribute to earnings in the future.This appears that it was not the case for Nike, so they discontinued the business line.

What this may show is that the golf equipment industry in general is not the best investment. Just look at TMag, Adams, etc.

nsxguy · July 5, 2017

Is it just me, or are the old Nike staffers playing better with their new equipment? Just saying' ;)

Rory went from winning majors to not making the cut at majors. Tiger went from playing to golf to watching golf after his switch from Nike. And a few guys still use their Nike clubs. Just saying ;)

Ya gotta do better than that.

I'm no fan of Nike golf equipment but Rory went from hurting himself messing around with soccer to not making the cut in majors and Tiger was never himself after divorcing from Nike.

Just sayin'

rumpypumpy · July 8, 2017

What this may show is that the golf equipment industry in general is not the best investment. Just look at TMag, Adams, etc.

Add PXG to the list... soon

mst_coastie · July 8, 2017

What this may show is that the golf equipment industry in general is not the best investment. Just look at TMag, Adams, etc.

Add PXG to the list... soon

It will be interesting to see. Their high margin business model is certainly a departure from the traditional (it will also be interesting to watch brands like Callaway who are also trying to enter this higher-end higher margin sector).

I'_rather_be_golfing · July 8, 2017

What this may show is that the golf equipment industry in general is not the best investment. Just look at TMag, Adams, etc.

Add PXG to the list... soon

PXG isn't gonna be on the list anytime soon. They don't mass produce their irons like the other companies do. They don't have products sitting on the floor waiting to be bought. Probably best they keep themselves to special orders only. They will do fine.

EKELLY · July 8, 2017

What this may show is that the golf equipment industry in general is not the best investment. Just look at TMag, Adams, etc.

Add PXG to the list... soon

I'm curious to see how they pan out. You need to sell a large amount of clubs to be profitable, unless ole Bob is okay with a break even venture.....

mst_coastie · July 8, 2017

What this may show is that the golf equipment industry in general is not the best investment. Just look at TMag, Adams, etc.

Add PXG to the list... soon
PXG isn't gonna be on the list anytime soon. They don't mass produce their irons like the other companies do. They don't have products sitting on the floor waiting to be bought. Probably best they keep themselves to special orders only. They will do fine.

Even if they don't, there are still significant PPE outlays, in addition to its inventory of raw materials, assuming they truly make all clubs to order (I am not familiar with their operations, however, I highly doubt they mill new heads every time they sell a new set of clubs, they likely have a factory filled with parts waiting to be assembled to the customer's specs). I know you were speaking specifically of having products on retailers shelves, however, I am unfamiliar with how golf retailers handle their inventory. If they simply buy it from the manufactures, then this makes zero difference.

To reiterate my previous point, the golf equipment market is relatively capital intensive, especially compared to the soft goods market. Therefore, it makes perfect sense that we are seeing established companies exit the market as demand decreases (and the rate of new club releases from other manufactures drives up costs). In the old days, it would be relatively easier for a club manufacturer to stay in business, since club models would not change at the rapid pace we see today and the clubs themselves were significantly less advanced.

But, what do I know. This is all just pure conjecture based on my limited exposure to the industry.