Golf Industry NIKE nike free run

A Look at the Golf Industry NIKE

At the end of June, Adidas (OTCPK:ADDDF) Women Nike Free 3.0 V2 was on top of the leader board in the golf industry. Fortune Brands (FO) had recently sold off their Cobra brand, allowing TaylorMade Adidas golf to become the biggest golf company in the world. On top of that, Callaway Golf (ELY) came out around the same time and warned that second quarter numbers might not be as good as previously expected.

TaylorMade was on top of the world, and appeared to be running away like Tiger at the 2000 US Open. As earnings have started coming in throughout the past two weeks, we have seen a mixed bag; first, Callaway reported single digit sales growth, but showed trouble in Japan (despite strong results throughout the rest of Asia), a key market for international growth.

Then, Fortune Brands came out two days later and reported slightly better sales growth overall, with double digit growth in key international markets. It was beginning to look like Callaway size (and lack of excess cash) was holding them back from key international exposure, and that the big boys (Nike (NKE), Adidas, and Fortune Brands) were claiming stake to their piece of the growing global market.

With that being said, I was expecting Adidas to come out with numbers similar growth, and probably highlight double digit growth in international markets. Instead, it looks like they may have stepped up to the tee and sliced one into the trees.

For Q2 2010, TaylorMade Adidas golf reported million in sales, up from million for the same period last year. However, on a currency neutral basis, the company reported a 1.5% decline in sales year over year, which is coming off of weak comps. For the first half of the year, the picture looks better, with YOY sales increasing 5.7% on a currency neutral basis.

Unfortunately for investors, Adidas doesn breakdown their golf results by region (much like Nike, they list business results by region as a whole, not individually). From listening in to the conference call this morning, CEO Herbert Hainer suggested that expanding margins helped the businesses considerably (up nearly 600 basis points to 44.6%), a similar trend to what Callaway reported. However, since this isn broken down for the golf business, we can only speculate on whether this is being driven by TaylorMade, Rockport, or CCM. Mr. Hainer also suggested that a terminated licensing deal from last year represented a low double digit million euro figure, which affected 2010 results by roughly 1%.

On a positive note, irons and balls both grew over 30% in the quarter, and TaylorMade now holds more than a 10% share of the putter market due to the success of the new products brought to market this season. Despite the advances in these categories, it is what management didn discuss that should stand out to Adidas shareholders: metal woods. As noted on their website, is the clear market leader in metal woods. On top of that, TaylorMade forged a 30% share of the market (referring to the US) and a large lead over its closest competitor. Yet despite these strengths, the CEO did not mention the category once on the call, their best category of all. As an investor, this might be something to watch out for in the future.

For the rest of 2010, Adidas has reported similar guidance to what we have seen from both Callaway and Fortune Brands: low single digit growth. As I noted in a recent article, this may not seem like much, but it is better than nothing in an industry that was obliterated last year. When Adidas looked like they were pulling away at the end of Q1, today results bring them right back to earth.

With three of the four biggest players reporting, it appears that the golf industry has remained highly competitive. Overall, it appears that Adidas Men Nike Flyknit Trainer Anti-Fur and Fortune Brands continue to lead the industry, with Callaway at a close third heading into the back half of the year. When Nike reports their results on September 23rd for the final piece of the pie, we will have a better nike free australia idea of the industry outlook. Until then, keep hitting em long and straight.