NEXIT: Nike getting out of golf equipment business

In it’s own version of “Nexit”, Nike Golf announced Wednesday that it plans to “transition out” of golf equipment, instead focusing solely on its footwear and apparel business.

No specified timetable for the transition was announced. The decision means that Nike will soon stop producing clubs, balls and golf bags.

“We’re committed to being the undisputed leader in golf footwear and apparel,” Nike brand president Trevor Edwards said in a statement. “We will achieve this by investing in performance innovation for athletes and delivering sustainable profitable growth for Nike Golf.”

The decision on equipment was like waiting for the other shoe to drop as Nike had made several moves over the past few months that on the surface seemed puzzling but upon further analysis likely signaled a major shift in their priorities. Advertising on equipment at many media outlets was cut or re-purposed earlier in the year, while the company’s own website indicated a shift to “lifestyle” (read: footwear and apparel) at the expense of hard goods.

Recent layoffs in both the U.S. and Canada of key people on the equipment side of the business made more sense in light of this latest announcement. Among the casualties were Canadians Mike Francis, Vity Gomes and Mike Kelly, all working in the U.S. and John Sibley, who ran Nike’s equipment business unit here in Canada.

Nike signaled its intention to be a major player in the golf industry when it signed a young Tiger Woods to an equipment and apparel contract in 1996. That deal and subsequent extensions paid Woods a reported $25 million per year. Other signings of major stars have helped the brand grow since then, most notably Rory McIlroy, who was inked to a 10-year deal in 2013 worth a reported $200 million.

McIlroy’s win at the 2014 PGA Championship remains the most recent major title for a player using Nike equipment.

Last month Nike announced that golf sales fell 8.2 percent to $706 million for the fiscal year that ended May 31, making it the lowest-performing business segment of the company over that time period. According to corporate filings, Nike Golf sales peaked in 2013, with revenues of $792 million.

While Woods has been the brand’s most notable representative for the past two decades, he hasn’t hit a competitive shot in nearly a year while recovering from multiple back procedures. According to Woods’ agent, Mark Steinberg, plans are already underway to find Woods’ next equipment provider for his eventual return to competition.

“Clearly he and I need to be thinking about a change on the hard goods side,” Steinberg said. “He and I have discussed at length the plan for that, and feel comfortable with what we’re going to do going forward. But clearly there’s likely going to be a change.”

In addition to Woods and McIlroy, other notable pros currently using Nike equipment include Michelle Wie, Suzann Pettersen, Brooks Koepka, Tony Finau, Russell Henley, Paul Casey and Jhonattan Vegas. Charl Schwartzel, another major winner under the Nike label, announced days ago that he was switching to start-up PXG clubs, a move that seemed very curious in the midst of the season but makes more sense now.

Perhaps the biggest casualty in all of this will be schools, colleges and universities where Nike maintained a strong presence with sponsorship programs. A lot of kids developed brand loyalty to Nike through their school and those kids too will be looking for a new label, at least for clubs and balls.

Nike had some notable winners in the equipment category since their inception, perhaps none more so than their Sasquatch driver. The distinctive design and unique sound of the square headed version were unmistakable if you saw or heard them on the course or the range. Slingshot irons, VaporFly woods and drivers and RZN golf balls are some other names that made quite a splash when they were launched. All of that innovation was driven by their design team in Fort Worth, Texas under the direction of Tom Stites. They operated out of a unique facility called The Oven.

There was no mention in the Nike press release about the fate of The Oven, its employees or all of the design patents and trademarks that they had developed. It’s unthinkable that Nike would sell any of its intellectual property to a competitor or new player in the equipment business but after the McIlroy signing a few years ago, it was unthinkable that Nike wasn’t committed to the equipment business long term either.

(UPDATE: We’re hearing from various sources that all of the hard goods personnel, including those at the Oven have been let go as of Friday August 5.)

With adidas announcing their intention to sell TaylorMade earlier this year and now Nike exiting the equipment business to focus on footwear and apparel, the unbundling of equipment and soft goods is almost complete. Titleist, with their FootJoy division, remains the only significant player left in both sides of the business.