Investors are betting on golf's decline
Stocks that have exposure to the sport are seeing increased short interest lately.
Rather than playing the long game, Markit, a data analysis firm based in the U.K., says that these "short sellers" have been keen to play this near-term trend. Short-selling is an investment tactic where a speculator borrows a financial instrument, such as a stock, and sells it in the hope of buying it back later at a lower price, thereby making a profit. Markit measures this short interest by calculating the amount of shares that are out on loan.
"With an aging customer base and slimming margins, companies with large exposure to the golfing sector have seen their stocks come under pressure in recent weeks," said Simon Colvin, a research analyst at Markit.
Most notably, German sportswear conglomerate Adidas (ADDYY) sounded the alarm bell in a recent earnings release.
The firm said that revenues for its golf segment declined 18 percent in the first half of 2014, compared to the same period last year. It cited the "continued weakness in the golf market, where retail inventories remain high and participation continues to decline." Markit says that short interest in Adidas surged by over a third in the wake of that news, with 4.2 percent of the firm's shares now out on loan. Its stock has tanked 16 percent since issuing the news.
German rival Puma has also highlighted a decline in golf equipment sales due to the weaker "golfing environment" as short sellers move in on its stock.
Sixteen percent of the company's freely traded shares are out on loan, twice the number seen a year ago, according to Markit. Nike (NKE), meanwhile, has highlighted that sales of golfing equipment have stagnated since last year, whereas all of its other categories have seen modest sales growth. Nike shares have survived the drubbing with a gain of 1 percent so far this year, but Puma's stock has slipped 19 percent since January.
Snobbery and elitism?
A series of metrics has helped to paint a dismal future for the sport. Colvin notes that the Sports & Fitness Industry Association estimates that participation rates for 18-to-34 year-olds has fallen over the last five years.
He also highlights statistics from industry monitor Golf Datatech which state that the number of golf rounds played in the U.S. fell by 5 percent last year. One bright spot comes from England Golf, with the amateur golf governing body, which reports that a "massive" 110,000 people in England got into golf in the year ending March 2014. That's more than double the figure for the previous 12 months, it said.
Golf is often accused of snobbery and elitism, with the game requiring time and financial investment compared to more fast-paced alternatives. Many pundits have tried to offer a reason for the drop in interest. As well as the costs involved, the modern distractions of social networking as well as the recent poor form of Tiger Woods may be to blame.
California-based Callaway (ELY) is another company that has been affected by this downturn. It draws the entirety of its revenue from golf and nearly twice as many of its shares are now out on loan compared to the start of the year, according to Markit. The firm's shares are down by 9 percent year-to-date.
Meanwhile, Dick's Sporting Goods (DKS) is one company that has offered a swift response in the face of this trend lower for the sport. In July it decided to let go of more than 500 professionals that worked at the company's stores. It also detailed a restructuring plan for its golfing unit in August as it dumped its old inventory and highlighted negative sentiment towards the sector.
"We have eliminated specific staff in our golf area within our Dick's Sporting Goods stores. These changes are necessitated by the current and expected trends in golf. We will invest these cost savings into other aspects of our store operations and into the growth areas of our business," CEO and Chairman Edward Stack, said in the earnings release on Aug. 19.
Short sellers have since closed nearly all their positions with the demand to borrow its shares falling to a three year low, according to Markit.
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Golf isn't as elitist as polo, but it's spent the last decade or so trying. It makes me so angry I could just throw my drink across the lawn.
It use to be that golf was considered a game for exercise and relaxation.
Today everyone rides a cart as close to the ball as they can and by the time their round is completed their blood pressure is higher than it was before they started. Sooo- What's the point?
Go to any public golf course, and what kinds of people do you see? Old people and kids on the high school golf team. Rarely do you see ANYONE in the 30-50 year old range. Why? Is golf too expensive? Is everyone too busy working to make ends meet to stop to play golf? Do less people want to spend time what little free time they have with their families?
I don't know. But golf can't keep going like it has been. If it does, then the older golfing generation will be the last one to step on the course.
The Golf Channel (owned by NBC) had a story last week about making golf fun. Even the USGA is behind the concept; let go of the formality of the "rules" unless you're playing in a tournament or maintaining a handicap; go out and have fun. Don't spend more than two minutes looking for a ball. Concede the obvious putts.
Part of the problem is golfing 18 holes does cost a lot of money and takes a lot of time. One solution? Golf nine holes.
The article talks of golf becoming unaffordable...
in a capitalist nation of low-wage or unemployed people, I can't imagine people can't afford $1000 worth of gear or $50+ green fees..
The only way to grow an economy is with wages.
Low wage Republican greed is a time-again proven economy killer.
I switched to disc golf years ago. It's mostly free, costs less then $100 for starter equipment and the culture is more relaxed. When having a bad day in disc golf, your disc will still fly.
There is zero pretentiousness in disc golf. It attracts professionals and hippies alike and we all get along great. I play about 4 time a week for a very modest cost (mostly gas).
Try joining your local disc golf community. You'll be surprised how welcoming they are.
Tom in NC
well you know this is Bull...... The stores would never be considered as ones that actually HAD golf "professionals" in their staff in the first place......
"""a swift response in the face of this trend lower for the sport. In July it decided to let go of more than 500 professionals that worked at the company's stores."""
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