Callaway Up Big After Nike Announces It Will Stop Making Golf Clubs
Callaway Golf Co (NYSE: ELY) is up big Thursday, responding to the news that Nike Inc (NYSE: NKE) will stop manufacturing golf clubs. Nike will continue to sell golf footwear and apparel, similar offerings to what Under Armour Inc (NYSE: UA) currently makes for the golf industry.
Under Armour's golf apparel segment is actually growing, while Nike Golf saw an 8.2 percent decrease to $706 million in FY2016 — its worst segment.
Other companies have likewise experienced the golf trend's effects, as adidas AG (ADR) (OTC: ADDYY) has also announced it has put its struggling golf business up for sale.
As for Nike Golf, it rose and fell alongside Tiger Wood's popularity. His surge onto the golf scene prompted Nike to create a golf segment around him. As he disappeared from the spotlight, so did the sport's popularity.
Nike Golf was never particularly well received by the public or the professionals. The struggle that pros have experienced when they switched to Nike Clubs has been well documents over the years, from Tiger Woods to Rory McIlroy, and Phil Mickelson famously calling Nike clubs "inferior."
Nike ceasing production of its golf equipment stands to benefit competitors Callaway, adidas' Taylor Made and newly announced IPO Titleist. While the golf industry continues to see slumping participation rates and golf course closures, golf ball sales remain strong due to its consumable nature and have played a role in Titleist's decision to go public.
Callaway golf is up over 6 percent in early trading Thursday.
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