Every Monday, I write a newsletter breaking down the business in golf. Welcome to the new Perfect Putt members who have joined us since our last newsletter. Join 10,000+ intelligent and curious golfers by subscribing below.
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Hey Golfers —
Let’s cut straight to it.
Topgolf's same-venue sales were down 11% in the third quarter.
Why is same-venue important? It provides us with accurate results of existing venues. Imagine your local McDonald’s that has been around for decades. That restaurant would be comped as same-venue. A Topgolf venue that has been around for less than one year is not considered in their same-venue results.
Topgolf topline sales actually grew by 1.3% in the third quarter.
Where is the discrepancy? New venues. For Topgolf to achieve that growth, it opened venues that added to topline sales.
To understand the pulse of Topgolf’s health — we need to look at same-venue sales.
And it isn’t good. Topgolf has seen five consecutive quarters of same-venue sales decline.
The initial thought as to the reason for the decline is a reversion to the mean. Topgolf saw explosive growth post-pandemic.
But there is a rub to that. The same venue numbers are worse in 2024 than they were in 2019. This means Topgolf venues that have been around before 2019 have seen a decline in sales.
2024 vs 2019.
Q1 — 6%
Q2 — 0%
Q3 — (4%)
The numbers appear to be more concerning than a reversion to the mean. It appears that golfers are less interested in visiting a Topgolf than they were in 2019.
But it isn’t necessarily a consumer issue. Topgolf breaks out its customer base into two buckets.
1- 2 bay (consumer)
3+ bay (corporate events)
Three+ bay same-venue sales are down significantly.
Q1 — (16%)
Q2 — (9%)
Q3 — (19%)
Topgolf called out a ‘corporate ban’ that some companies have placed on events in their earnings transcripts, which would result in companies not booking 3+ bays at Topgolf. This is likely part of the issue.
But just looking at the numbers — it isn’t a great story to tell.
Wall Street sees it similarly. Callaway’s stock price is down 42% year to date. The S&P 500 is up 24% year to date.
Callaway is aiming to spin or sell the Topgolf business by mid-next year. The thought is it will happen by July 1st.
We’d think that the market would react positively to the news, but that isn’t the case. Callaway’s stock price is down over 20% since the announcement in September.
Topgolf is dragging Callaway down in the markets. The company’s market cap is now just $1.57 billion. Topgolf alone was valued at around $2 billion when the merger occurred.
How did Callway perform in its other segments for the third quarter?
Equipment — 0%
Active Lifestyle (apparel) — (11.1%)
These were not great results, especially considering that golf rounds were up 1.7% through September.
Acushnet shared a different story with its third-quarter results.
Golf clubs grew by 32.9%. Golf balls declined by 2%. And overall sales were up 4.6%.
Are the Topgolf results a reflection of the golf industry? No.
The industry remains healthy. I’d even wager that Topgolf's results aren’t necessarily a result of the golf entertainment industry. Off-course golf is an important part of the golf ecosystem. Topgolf is an important part of the golf ecosystem.
The story isn’t done being written yet. But it appears that the Topgolf story is a story of growing too fast. Has the emphasis on Topgolf within Callaway been reflected poorly in its core business? It doesn’t appear that is the case, although Callaway’s executive team may answer that question differently.
Bottom line — Topgolf isn’t performing well. As a personal opinion, I sincerely hope Topgolf claws its way back. It is a complex business to operate, but it is an important business to operate within golf.
Have a great Tuesday. We will talk to you next week!
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The Top Golf near me (Spring, Texas - Houston area) has a constant 2 hour wait on a Friday night. I've met people that work there and they have told me that the bar/restaurant area is always packed on the weekends, regardless if anyone is playing golf or not.
I've been a handful of times and I think it's a great concept but I also find it kinda expensive, meeting a friend and having an overpriced burger and beer in our 2 our time slot works out being more expensive than playing a regular round of golf.
So now it's only something I'd do if I had friends or family visiting from out of town and it's something they wanted to try out.
I would imagine our local Top Golf is down over same year in some part because it was closed for renovations for several weeks. I wonder if this is true for other venues? Anecdotally, I find wait times less when I go with my daughter (my son and I play on course golf). I usually go with her on a weeknight.