Everything You Need To Know About Adidas’ Sale Of TaylorMade Golf, Plus Abercrombie Wants Out

by 12 months ago

morning brew

Here’s your hand-crafted Brew for May 11th — the 70th anniversary of B. F. Goodrich’s tubeless tire. The cars might drive themselves these days… but some things don’t change.

QUOTE OF THE DAY“He’s a seller/fking a” — That’s the five-word text that got Citigroup trader David Madaras fired in 2014. His defense in court? Timing. Veryyy unfortunate timing. We won’t spoil the surprise.

Market Snapshot

  • Stocks continued to rise on Wednesday, as oil climbed above $47 and the volatility index (VIX) dropped to its lowest reading in 23 years.
  • Gold climbed to its highest level in weeks amid North Korean plans for a nuclear test. U.S. treasury yields rose slightly, while French and German bond yields were down overnight.

Adidas Tees Off

Earlier this week, all-things-golf manufacturer TaylorMade inked a $100 million sponsorship deal with championship golfer Rory McIlroy (one of many pros reppin’ TM). But that’s not at all: yesterday, TaylorMade’s German parent, Adidas (-1.77%), said it’s selling the most popular U.S. golf brand (and the rest of its golf portfolio) for $425 million.

The usual suspects, like Nike, Under Armour and Puma, turned up their noses to the deal. So at the end of the day, it was KPS Capital Partners that ended up with the deal. KP-who?

The $5.7 billion industrial and manufacturing private equity firm will get all of Adidas’ golfing assets: TaylorMade, Adams and Ashworth.

Why would Adidas take TaylorMade out of its bag?

TaylorMade may boast the highest revenue of any golf supplier, but has also seen three straight years of sinking sales.

And the sport of golf ain’t helping…fewer people are golfing on traditional courses (probably a combo of the slow pace, the upfront cost and the perception), and that means they’re buying less equipment. But there could be a saving grace: The ‘Top Golf Effect.’

It turns out booze-fueled, high-tech driving ranges are more fun than sweaty afternoons on the links, and their business was up 11% last year. And after all, golf still is a $70 billion industry.

These stats must have enticed KPS to enter the golf game, but we’re still not entirely sure how the brand fits in next to chassis manufacturers and ‘equipment solutions’ (excuse our PR-speak). Maybe now we will see Rory McIlroy’s face gracing heavy machinery instead of Omega watches and video games?

KPS took its shot, Adidas your turn

‘Creating the New’ sounds like a hallmark card, but Adidas’ five-year plan is all about reviving retro styles. (Sneakers = good retro. Golf = bad retro, apparently.) A revamped ‘Superstar’ was the best-selling shoe in the country last year, so Adidas is selling off extremities to focus on its new niche.

It looks like you can expect more (yes, more) reborn sneakers from Adidas in the near future, but the company has its work cut out to catch Nike’s 45% market share in athletic footwear.

Hulu Is Here to Stay

And it’s taking cable TV execs with it. Yesterday, the streaming service (that’s partially owned by some big boy cable conglomerates) poached Joel Stillerman from AMC Networks (-0.96%) to head up everything content: original movies, TV, cat videos, data stuff, you name it.

Stillerman knows a thing or two about what people want to watch, having spent nearly a decade overseeing AMC hits like “Mad Men,” “Breaking Bad” and “The Walking Dead.”

This news comes just a week after Hulu officially entered the streaming wars with its $40-a-month live TV app. Looks like Hulu is here to cut cords and take names.

Snap Crackles and Drops

Shares of Snapchat’s parent company tanked 25% yesterday after-hours, after its first ever quarterly earnings report failed to impress…to say the least. CEO Evan Spiegel said that Silicon Valley’s ghost-faced sweetheart lost $2.2 billion over the last four months, mostly from post-IPO stock-based compensation (translation: bonuses…$750 million to Mr. Spiegel…he’s doing JUST fine).

There is some good news—Snapchat added 8 million daily active users last quarter and increased its revenue by 286% over the previous year—but both were below analyst expectations. Combined, Snapchatters sent three billion snaps the past four months, or more than 32 million every day. That’s a lot of brunches.

Abercrombie Wants Out

The dimly-lit, pungent-smelling mall chain you dragged your parents to for years is finally giving up. Abercrombie & Fitch (+12.23%) has hired New York investment bank Perella Weinberg to help it find suitors. Rumor has it rivals Express (+1.81%) and American Eagle (+3.37%) are interested.

The 709-store brand’s revenue shrunk by 79% last year as Americans increasingly say no to malls. Thnks fr th Mmrs (#TBTto2007), A+F, even if they weren’t so great.

Airbus Lands in Atlanta

The French plane maker has opened a drone shop called Airbus Aerial in order to compete with American companies already making drones, like Boeing (-1.25%), Lockheed Martin (-0.76%) and Northrop Grumman (-0.55%).

Drone services—like aerial inspections and Amazon (-0.41%) deliveries—could be worth over $127 billion by 2020, and Airbus (-0.34%) wants its slice of the (drone-delivered) pie. Now all they need is some smart engineering, a little luck and…a lot of help from Uncle Sam.

What Else Is Happening…

Economic Calendar

Water Cooler

Dynamic Pricing: Love It or Hate It, It’s Here to Stay

But, you probably do hate it. So, what is dynamic pricing? It’s basically when retailers change (typically raise) prices based on a number of factors that determine demand (think Uber surge pricing).

Sounds pretty awful, right? Retailers love it because it maximizes producer surplus (shoutout Econ 101), and it’s only going to get worse thanks to artificial intelligence:

  • First, an algorithm determines prices based on historical data. Then, it measures live data and compares them to past periods with similar variables. Finally, the algorithm finds a price that suits the predicted demand. Easy peasy, right?
  • So, what does it mean for you? Higher prices when you’re most desperate. For example, many gas stations that use dynamic pricing raise prices toward the end of the day because this is when people most need gas.
  • There are countless other examples: Staples uses AI to change prices for 30,000 products on its website per day, and Amazon was actually one of the first sites to use AI-enabled dynamic pricing. We’ve got our eyes on you, Bezos.

The Breakroom

Interview Question of the Day

How many square feet of pizza are eaten in the U.S. each year?

We’re back to brainteasers today…kind of. Now, there’s no definitive answer to this question (don’t you worry…Brew Crew made a healthy contribution to the total), but there are proven ways of estimating the amount. Check your logic here.

Startup of the Day

Today’s coolest company isn’t exactly new, but it is doing something other clothing sellers haven’t been able to pull off lately—turn a profit. Mail-order fashion startup Stitch Fix was launched six years ago and has been profitable since 2014. Turns out consumers are hungry for personalized, hand-curated fashion—to the tune of $730 million per year. Who knew that people would rather have FedEx bring clothes while they stay in bed? (Definitely not us)

Stat of the Day

3.56 million retweets — ‘Nugget boy’ now has the most popular tweet ever, with more RTs than Ellen’s famous Oscars photo. Wendy’s held up its half of the deal, but didn’t say how many nuggets a viral tweet is worth. We’ll keep you updated on the retweets-per-nug conversion.

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