By Ed Travis
Our window on the finances of golf equipment companies is not wide since most firms are part of larger corporations or held privately and financial information is unavailable. Therefore, the only view comes from the published reports of the two publicly traded corporations who also happen to be the largest in the industry.
Second quarter results for Acushnet Holdings Corp. (NYSE: GOLF) makers of Titleist clubs and balls and FootJoy golf wear and Callaway Golf Company (NYSE: ELY) whose brands include Odyssey, Ogio and Travis Mathew both were negatively impacted by the global pandemic.
This of course was not unanticipated; the bigger question being how soon the industry can recover.
Acushnet sales in the second quarter were down 35.1% compared with the same period in 2019 while net income fell by 94.0%. Callaway reported sales had decreased by 34% in the quarter and profits were $5 million before deducting a $174 million charge related to acquisition of Jack Wolfskin compared with $35 million the year before.
David Maher, Acushnet’s President and Chief Executive Officer, was quoted in the financial report, “After a challenging start to the second quarter, the game of golf, with its outdoor field of play and ease of social distancing, has been in high demand in recent months and the broader golf community has done great work to safely welcome golfers back from shutdown and accommodate increased interest in the sport. Following the re-opening of our production facilities and distribution centers in late May, we have seen strong demand across all segments of our business, and most notably for Titleist golf balls, which have directly benefited from increased rounds of play.”
Chip Brewer President and Chief Executive Officer of Callaway said in a press release, “The golf equipment business is recovering very quickly. Once COVID-19 regulatory restrictions began to ease late in the second quarter, there was a demonstrable pent-up demand to play golf, an increase in new and returning golfers, and an uptick in new orders from both consumers and retailers. The pace of recovery in the apparel business also exceeded our expectations but has been slower than that of golf. As a result of the impact of COVID-19, along with a weaker euro than originally anticipated, during the second quarter we incurred a pre-tax non-cash impairment charge of $174 million related to the Jack Wolfskin goodwill and trade name. Nonetheless, we remain positive on the ability of the Jack Wolfskin business to contribute significantly to our overall apparel business and strategy. Over the long-term, we continue to believe strongly that our scale and global reach in the active lifestyle category, highly regarded brands, and sector expertise will create a compelling revenue growth opportunity with improving profitability, which will generate meaningful value for shareholders.”
With essentially all golf courses open for play recent data indicates the number of rounds has shown double digit growth and Callaway says equipment sales in June had increased significantly. Compared with June 2019 they were up 21%.
More play means more sales of clubs and balls, but will it be in time for smaller equipment makers who lack the financial and management resources of the larger firms?