TaylorMade Woes

[Speedliner]

TaylorMade Woes

I think a business model that obsoletes product in just a handful of months isn't sustainable.

In a high-growth market maybe, but in a steady or declining one not so sure. For awhile maybe you can generate artificial growth, but eventually you train customers not to care about the next big thing. Especially with drivers where they're up against regulated limits now.

How much innovation was truly in Jetspeed, Optiforce,... Good to have more and new...for consumers...but hard for companies to convince folks to spend $400 on a new driver every year...unless they're THPers that is.

Irons are more interesting these days.

 

[tequila4kapp]

In total seriousness, they should consider giving the excess equipment away to youth / HS / Colleges. They would get a tax write-off on everything, instantly create a gazillion new TM users (read: future consumers), have credibility on their "grow the game" movement, and create a ton of good will. Then they have to change their release cycles so as to avoid this situation in the future.

Stating the obvious - there are going to be some phenomenal deals coming soon on TM gear. And unfortunately, the days of quickly discounted TM gear may go away if the company ever learns its lesson and stops releasing stuff so quickly.

 

[lilbilly]

while sales at TaylorMade-Adidas Golf declined 18 percent

That's quite a statement in and of itself.

Restructuring in order in any business when that happens.

 

[Hawk]

Intresting i am sure if it is happening at TM others OEM's are feeling similar pain

Not really the case.

I think a business model that obsoletes product in just a handful of months isn't sustainable.

In a high-growth market maybe, but in a steady or declining one not so sure. For awhile maybe you can generate artificial growth, but eventually you train customers not to care about the next big thing. Especially with drivers where they're up against regulated limits now.

How much innovation was truly in Jetspeed, Optiforce,... Good to have more and new...for consumers...but hard for companies to convince folks to spend $400 on a new driver every year...unless they're THPers that is.

Irons are more interesting these days.

Except Callaway followed Optiforce with their biggest success in years. Also, they didn't drop a 1/2 million Opti's on the market - mostly to one big retailer (that's a made-up number fyi) and then make them disappear in 90 days.

 

[Hawk]

Releasing frequency is not the issue. No industry that I can think of has been crippled by that alone. Releasing too much of it or more than you can sell is the problem. Especially when you are all-in with a Dick's or some place like that.

 

[stevie-a]

Maybe they can launch a new ad campaign where DJ can help get rid of all the old white gear?

All of the white "gear" is going up his nose.... Ok, ok....nothing has been proven, but there's been WAAAAY too much (white) smoke coming off that fire.

 

[lilbilly]

Not really the case.

I'm sure not to the extent of TM, but it'd be interesting to see the numbers across all the major companies. Even just a % of growth or decline.

 

[TNTCigarguy]

Releasing frequency is not the issue. No industry that I can think of has been crippled by that alone. Releasing too much of it or more than you can sell is the problem. Especially when you are all-in with a Dick's or some place like that.

That is business 101 you learn freshman year in college. You cannot have one customer make or break your sales.........

And now for example I just got an email about TM's new driving iron. Didnt even know they had released it.

 

[annsguy]

I expect everyone in the business will have a wake up call with the Taylor Made news.Heck we all love new product but too much is too much.Probably fewer releases with bigger promo pushes to help insure success. Actually could be good for Taylor Made. I am sure they have enough good ideas in the development pipeline that they can simply slow down and make sure they are sending winners out there.In the meantime I guess there will be some great deals out there for all of us. All the more reason to pay close attention to the awesome reviews and advice provided right here at THP.

Callaway did have some effect I think, which resulted in some reactionary releases that contributed to a loss of credibility on TMag's part imo.

As for other big releasers - PING, Mizuno, Adams are in that club as well. The latter two obviously aren't carrying a ton of clout though - at least in the US market in Mizunos case and outside hybrids in Adams' case.

 

[salisboss]

That is business 101 you learn freshman year in college. You cannot have one customer make or break your sales.........

And now for example I just got an email about TM's new driving iron. Didnt even know they had released it.

Are you sure that's not driving iron version 2... I kid.

 

[Hawk]

I expect everyone in the business will have a wake up call with the Taylor Made news.Heck we all love new product but too much is too much.Probably fewer releases with bigger promo pushes to help insure success. Actually could be good for Taylor Made. I am sure they have enough good ideas in the development pipeline that they can simply slow down and make sure they are sending winners out there.In the meantime I guess there will be some great deals out there for all of us. All the more reason to pay close attention to the awesome reviews and advice provided right here at THP.

It won't change release cycles elsewhere imo, because it's not the root cause of the issue.

It's inventory management. They have dominated using the release cycles that many criticize, especially with their high end products (R1, SLDR), but excess inventory going back almost two years staring with the RBZ 2 (see my post above) + two completely dead release cycles in JS and SLDRs have them swimming in it.

 

[stevie-a]

As a carryover effect, I wonder if this will have an impact on the Adams line....? It was only going to be a matter of time before the staggering release cycle of TM caught up with them, so I wonder if they'll go back to the 2-year cycle they previously employed -- R5, R7, R11...etc.

 

[katman]

It's not releases. Other companies have released a bunch of stuff and done ok. Instead, it's a bunch of releases with massive buy-ins that were poor product lines.

That's part of it but I'm afraid to say that the bold part isn't exactly true. Nobody in golf manufacturing is doing well right now. Golf has been in a STEEP decline for nearly 6 years. In 2008, the carpet was pulled out of participation rates. TM tried to defend by releasing a lot but Callaway, and others have been hurt as well. Then the retailers started sending stuff back and everything started to go poorly. TM has been hit faster than others because of what you said but the only ones doing well right now were companies that were tiny to begin with.

Need proof? Call five mid-level public courses in your area and I'm willing to bet that they have Foot Golf available now. The courses need the revenue.

People say Cobra is doing well...well, Puma (owns Cobra) is tanking. Nike is only down a little bit but their golf division is pennies to them and they've stayed very tight.

Not sure why...cost, Tiger Woods' woes, disc golf, who knows? But now is not a great time to be a golf manu while so many people stop playing (or never learn).

 

[JB]

I expect everyone in the business will have a wake up call with the Taylor Made news.Heck we all love new product but too much is too much.Probably fewer releases with bigger promo pushes to help insure success. Actually could be good for Taylor Made. I am sure they have enough good ideas in the development pipeline that they can simply slow down and make sure they are sending winners out there.In the meantime I guess there will be some great deals out there for all of us. All the more reason to pay close attention to the awesome reviews and advice provided right here at THP.

I have stayed out of this thread and will continue to for a number of reasons, but I can assure anybody that release cycles is not the issue. Quite a few companies release as much as this brand has over the last 36 months. There is not a ton of difference for the consumer if a company releases 12 products in January, or 4 in January, 4 in July and 4 in November.

I won't comment on anything other than with the place this company is in, the restructuring is going to have a lot of people looking for employment in my opinion and I have some people I call friends there. But cutting 100million or so in costs is a lot more than just about any company in this niche has had to do recently that I can remember.

 

[Hawk]

That's part of it but I'm afraid to say that the bold part isn't exactly true. Nobody in golf manufacturing is doing well right now. Golf has been in a STEEP decline for nearly 6 years. In 2008, the carpet was pulled out of participation rates. TM tried to defend by releasing a lot but Callaway, and others have been hurt as well. Then the retailers started sending stuff back and everything started to go poorly. TM has been hit faster than others because of what you said but the only ones doing well right now were companies that were tiny to begin with.

Need proof? Call five mid-level public courses in your area and I'm willing to bet that they have Foot Golf available now. They courses need the revenue.

People say Cobra is doing well...well, Puma (owns Cobra) is tanking). Nike is only down a little bit but their golf division is pennies to them and they've stayed very tight.

Not sure why...cost, Tiger Woods' woes, disc golf, who knows? But now is not a great time to be a golf manu.

It has not been a banner year (or two actually) for the industry, but they aren't experiencing anything like this.

 

[JB]

That's part of it but I'm afraid to say that the bold part isn't exactly true. Nobody in golf manufacturing is doing well right now. Golf has been in a STEEP decline for nearly 6 years. In 2008, the carpet was pulled out of participation rates. TM tried to defend by releasing a lot but Callaway, and others have been hurt as well. Then the retailers started sending stuff back and everything started to go poorly. TM has been hit faster than others because of what you said but the only ones doing well right now were companies that were tiny to begin with.

Need proof? Call five mid-level public courses in your area and I'm willing to bet that they have Foot Golf available now. The courses need the revenue.

People say Cobra is doing well...well, Puma (owns Cobra) is tanking. Nike is only down a little bit but their golf division is pennies to them and they've stayed very tight.

Not sure why...cost, Tiger Woods' woes, disc golf, who knows? But now is not a great time to be a golf manu while so many people stop playing (or never learn).

This is not really accurate information.
Check the earnings of TaylorMade over those last 6 years that you used as an example.

 

[stevie-a]

Releasing frequency is not the issue. No industry that I can think of has been crippled by that alone. Releasing too much of it or more than you can sell is the problem. Especially when you are all-in with a Dick's or some place like that.

I won't totally dispute what you are saying, however, release frequency leads to the release of too much....unless you are speaking of a product that is a necessity -- while some of us will dispute whether golf clubs are a necessity or not, the reality is having a new driver option every 6-12 months is not a sustainable marketing strategy. Once we find something that works, we aren't going to be readily willing to swap just because a guy on TV says we should...and that leads to having too much of something.

 

[tgtt]

So they'll cut back on releases to allow current inventory to move and use standard TMAG aggressive marketing to generate months of buzz for next release and it'll be a huge hit. The rest of industry tries to follow and we will see a shift for club releases. TMAG still wins.

 

[Hawk]

I won't totally dispute what you are saying, however, release frequency leads to the release of too much....unless you are speaking of a product that is a necessity -- while some of us will dispute whether golf clubs are a necessity or not, the reality is having a new driver option every 6-12 months is not a sustainable marketing strategy. Once we find something that works, we aren't going to be readily willing to swap just because a guy on TV says we should...and that leads to having too much of something.

Even during all this, SLDR did very well at almost $400 a pop. Cell phones continue to release frequently and do well, if they aren't RIM (bad product/inventory/etc). Shoes are another example.

The underlying inventory issues are the problem. Not only do they have massive amounts of the lines I mentioned earlier, they have hybrids and fairway woods that tanked from those lines as well. The key difference betweeen TM and all the other companies out there that also release in a similar way (or more frequently) is that they managed/forecasted well.

So they'll cut back on releases to allow current inventory to move and use standard TMAG aggressive marketing to generate months of buzz for next release and it'll be a huge hit. The rest of industry tries to follow and we will see a shift for club releases. TMAG still wins.

Don't think it will be that easy.

 

[annsguy]

I do not believe the biggest of the big guys,T.M. AND Cally will change their release cycles.I just think they will be as sure as they can be that they are bringing winners to the market. I do think the guys in the next tier down may be forced to. They probably have been putting a huge burden on their R&D staff to try to keep up with the big guys.In a time when business is not stellar they are not hiring more staff but they are putting more stress on the team to bring more ideas to market.That can kill production and moral.
I agree this will mean folks will lose jobs which is very sad in the current economy. I know it has already happened with the Adidas Golf footwear and apparel business where the business has been bad for awhile.A good friend of mine was let go almost as quickly as he got there. I am sure the folks who work in Carlsbad and elsewhere are all concerned. And that stinks.

 

[tpluff]

"restructuring" is never good. What appears obvious to me is the constant pushing of new product into the market while having too much stuck on hand is killing them.

This was the dig that the DSG article had at a "major manufacturer." It's no secret what they are doing. I just feel like they are missing something and coming back down to earth in terms of sales.

 

[tgtt]

TaylorMade Woes

I do not believe the biggest of the big guys,T.M. AND Cally will change their release cycles.I just think they will be as sure as they can be that they are bringing winners to the market. I do think the guys in the next tier down may be forced to. They probably have been putting a huge burden on their R&D staff to try to keep up with the big guys.In a time when business is not stellar they are not hiring more staff but they are putting more stress on the team to bring more ideas to market.That can kill production and moral.
I agree this will mean folks will lose jobs which is very sad in the current economy. I know it has already happened with the Adidas Golf footwear and apparel business where the business has been bad for awhile.A good friend of mine was let go almost as quickly as he got there. I am sure the folks who work in Carlsbad and elsewhere are all concerned. And that stinks.

Club limitations was gonna get us to fewer releases eventually anyway. COR limits shifted focus to better shafts and now they're all fighting for optimal launch conditions. There isn't anything left to do without new materials or rule changes. We all got so excited for the gravity core which "only" changed spin a few hundred RPMs to help achieve those optimal launch conditions. Just a guess but I think driver releases move to at least an annual release if not longer.

 

[katman]

This is not really accurate information.
Check the earnings of TaylorMade over those last 6 years that you used as an example.

To clarify, steep decline in golf meant participation. Yes, from 08 to 2012, TM did well (I did a stock analysis on Adidas last year). The compound annual growth rate on TM was over 13%, but that was cherry picking to use that year as a post. First, they had some of their more successful releases but also they acquired Adams and dropped a bunch of extra revenue into the division. From 08 to 11, their compound annual growth rate was 8%, which was OK but not the stellar double digit performance they reported in 2012. Sadly, since 2012 they've declined heavily and the writing was on the wall in 2013. By EOY 2013, CAGR was down to -5% and my initial estimates on it now is down 23% by the end of the year, annually, since 2012 (just a guess though so please don't take my word for it).

I think they made some mistakes but the biggest issue is not TM but the industry which is currently in a state of decline. A company with great growth for a number of years (relative to peers) in a declining industry (even if temporarily declining) almost always gets hit the hardest because they cannot sustain 13% growth rates.

So, if my post was unclear, I apologize. But my point was that I don't think it was their poor releases as much as it was inevitable given the current state of the industry (retail golf manufacturers) and TM was especially positioned to be hurt more than most. Of course, Jetspeed didn't help.

 

[JB]

To clarify, steep decline in golf meant participation. Yes, from 08 to 2012, TM did well (I did a stock analysis on Adidas last year). The compound annual growth rate on TM was over 13%, but that was cherry picking to use that year as a post. First, they had some of their more successful releases but also they acquired Adams and dropped a bunch of extra revenue into the division. From 08 to 11, their compound annual growth rate was 8%, which was OK but not the stellar double digit performance they reported in 2012. Sadly, since 2012 they've declined heavily and the writing was on the wall in 2013. By EOY 2013, CAGR was down to -5% and my initial estimates on it now is down 23% by the end of the year, annually, since 2012 (just a guess though so please don't take my word for it).

I think they made some mistakes but the biggest issue is not TM but the industry which is currently in a state of decline. A company with great growth for a number of years (relative to peers) in a declining industry (even if temporarily declining) almost always gets hit the hardest because they cannot sustain 13% growth rates.

So, if my post was unclear, I apologize. But my point was that I don't think it was their poor releases as much as it was inevitable given the current state of the industry (retail golf manufacturers) and TM was especially positioned to be hurt more than most. Of course, Jetspeed didn't help.

Missing one big piece of the puzzle. The golf decline was happening before 2012. Right smack dab in the middle of the major decline, the company posted record earnings. In my marginally educated opinion, this is not as much about the decline of golf as a few are making it out to be. I think most major business outlets did a story on it, because TaylorMade put out a press release on record earnings the same day another company had to make changes.

I wish I could share more, but I dont think its my place. I do believe Hawk has done a great job of illustrating what has been happening.

 

[KnightLightPro]

Poor liquidation of old inventory is something that stands out to me.

This kind of jumped out at me as well. That and the fact they pushed out so many lines this year.