Acushnet and Callaway Signal Strength
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Hey Golfers —
The demand for golf continues to impress.
Acushnet and Callaway reported their financial results for the first quarter last week. Revenue results weren’t overwhelmingly impressive — Callaway saw topline revenue decline by 2%.
So why do both companies signal strength for the industry?
Before we dive in — here is some context on golf rounds. Rounds had a stellar start to the year in the United States on the back of an incredible March — up 21%.
The golf industry was set up for success in the first quarter due to better weather. And golfers took advantage of it.
Acushnet wins. They continue to perform and provide positive results — and they did that in the first quarter.
Acushnet's net sales were up 3.1% in the quarter. The story with Acushnet for the first quarter was broken down by region. The United States was the only growth region for the quarter, and it grew by double digits.
Interestingly, Japan and Korea showed double-digit drops in the quarter. South Korea is an important region for the golf industry — I will touch more on it later.
Acushnet breaks its revenue into four different segments — three of the four saw growth in the first quarter.
Titleist Golf Clubs — up 12.8%
Titleist Golf Balls — up 8.3%
Titleist Golf Gear — up 1.8%
FootJoy Golf Gear — down 6.3%
During Acushnet’s earnings call, they mentioned golf clubs' solid gains in the United States, Japan, and Europe. FootJoy saw growth in the United States but declined in international markets.
Acushnet’s demand for the first quarter was quite strong when you peel back the onion — a positive sign for the industry.
A note on EMEA and Japan.
U.K. golf rounds were down due to poor weather — Acushnet doesn’t seem too concerned about the EMEA region's poor performance.
Japan was down nearly 20% in the quarter, but it was hammered by the currency exchange rate. The Yen is currently down 10% to the USD this year.
Callaway’s results were more of a mixed bag in the quarter.
Here’s the bad news: Topgolf continues to struggle with same-venue sales — they were down 7% in the quarter. That makes it three consecutive quarters of declining same-venue sales. Callaway says that Topgolf performed in line with expectations — but that doesn’t mean it is positive news.
Corporate events continue to be a challenge for Topgolf, which was down 16% in same-venue sales during the quarter. Below is a good look at the corporate vs. non-corporate breakdown for Topgolf.
With Topgolf making up nearly 37% of Callaway’s total revenue for the quarter — those poor same-venue sales are bringing Callaway’s total revenue number down.
I believe in Topgolf and its enormous opportunity to introduce people to the game of golf — it is a net positive for the industry. However, the business model has been challenging.
Topgolf must see low single-digit growth in its same-venue sales to be a long-term sustainable business. Callaway says it will likely see declining Topgolf same-venue sales for the second quarter and eventually turn positive in the third quarter.
Topgolf held Callaway fitting events at venues across the country during Masters week. They did not disclose the results of the fitting events. Part of me believes that if they were a success, they would have communicated this to bring positive news to investors — that is pure speculation on my end. But to make this Topgolf acquisition hum, they need to explore and leverage these types of synergistic opportunities.
Callaway owns Travis Matthew and Jack Wolfskin and groups them under a bucket called Active Lifestyle. The revenue segment was down over 15% on the quarter, representing nearly a $50 million decline.
Here’s the good news.
Callaway saw golf equipment sales rise slightly over 1% for the quarter. The company saw good demand in the United States. However, due to bad weather in the U.K., they also had poor performance.
Callaway had currency issues in Japan — similar to Acushnet.
Back to Korea.
Sales were down double digits for Callaway. And they were battling currency issues.
The Korean market intrigues me because it is such a large piece of the global golf business. During their earnings call, Acushnet called out poor weather — golf rounds were down 9% on the quarter.
I asked a golf industry executive in Korea for more clarification on Callaway and Acushnet's poor results. He mentioned a reversion to the mean post-Covid and believes they will bounce back.
The story really boils down to better-than-average weather in the United States' first quarter and golfers getting out to play — a positive sign for the industry.
Have yourself a great Monday. Talk to you next week!
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It wasn't too many years ago that Taylor Made was being criticized for bringing out a "new" club every year and what it was doing to pricing models. Now almost everyone is doing it. At these price points, it is not surprising to see equipment sales slowing when products show little differentiation from the previous year's models. 10k not withstanding. And last year's models from TM or Cally or Cobra or Ping, even 2022 models, are still in good supply at GG or PGASS. I think we will continue to see that category drop as the economy continues to soften and consumers' credit cards are tapped out.
Also there is no place on H&B to enter an email address. Looks like they are missing on their end. Unless I am really lost.