Callaway Returns to Profitability

CALLAWAY GOLF COMPANY

Callaway Golf Company (NYSE: ELY) announced yesterday sales and profit increases for the 2014 fiscal year ending December 31 compared to the previous year making 2014 the first profitable year since 2008.

Sales for 2014 were up 5% to $887 million compared to $843 million in 2013 and net income increased to $16 million versus a loss of $9 million in 2013. Significantly, the result of cost control put in place, gross profit as a percentage of sales rose 3% while operating expenses rose only $1 million to $327 million.

Chip Brewer

Callaway President and CEO Chip Brewer

“We are pleased with our results for 2014,” said President and Chief Executive Officer Chip Brewer in a prepared statement. “Notwithstanding challenging market conditions for the golf industry as a whole, we were able to grow sales, increase our market share and return to profitability for the first time since 2008 – a significant milestone for us in our turnaround.”

Reported product category sales increases: woods +8%; irons +12%; golf balls +4%; accessories +2% as well as growth in every geographic segment: United States +5%; Japan +3%; Europe +11%; Rest of Asia +7%; Other foreign countries +1%.

Analysts note the competitive nature of the golf equipment business with club sales dominated by TaylorMade-adidas Golf a division of German-based holding company adidas AG (OTC: ADDY) and ball sales by privately-held Acushnet Company’s Titleist brand. The Callaway product line in the previous golf season did make inroads into the TMaG lead and for 2015 there is a highly touted version of the popular Big Bertha model driver receiving attention from the media and golfers.

“Given the strength of our product line for 2015, which was well received at the recent PGA show in Orlando, and anticipated additional improvements in our operations, we expect for 2015 on a constant currency basis not only sales growth and market share gains, but also further improvements in gross margins and profitability. Golf is a momentum business and fortunately momentum is now on our side.”

According to the company for the next fiscal year, “On a constant currency basis, net sales are estimated to increase by approximately 1% – 4%.  This growth is being driven by an estimated 5% – 6% growth in the Company’s core channel business, partially offset by a change in product launch timing and a reduction in closeout sales compared to 2014.”

Images courtesy of Callaway Golf

PGA Show Attendance Up

2015_DemoDay_400x300As it does each year the 62nd PGA Merchandise Show provided an opportunity to see lots of innovative, interesting and useful products…and as is often the case an overall feeling of optimism concerning the state of the golf business was not uncommon.

The Show, called “The Major of the Golf Business” open only to industry members, ended last Friday Jan. 23 with more than 1,000 companies having exhibits taking up 1 million square feet in Orlando’s Orange County Convention Center.

“The PGA Merchandise Show creates an extensive array of opportunities for a growing number of PGA Professionals, golf buyers and industry leaders,” said PGA of America President Derek Sprague. “The PGA Show’s continued growth and support from all of the major brands, coupled with the energy and enthusiasm we saw throughout the week, is a terrific start to 2015.”

PGAMRCH_TEMP_FORFUTURELOGOSJust over 200 exhibitors were new to the Show and comments from first timers were typically upbeat.

“This is the place to be, isn’t it?” said Adam Heindorff, founder of Links & Kings, an accessories company specializing in high-end leather headcovers and bags. “I can see how being here is key for building relationships, finding new customers and establishing your branding. I can show people our entire collection in person, in a way you can’t do over the Internet or out of your trunk.”

New and improved products are the life blood of any industry but for golf a more significant sign was the healthy increase in attendance by the sometimes unsung people on the front line, PGA of America Professionals. According to Reed Expositions, the company that runs the Show, six percent more PGA Professionals made the trip to Orlando than last year while overall attendance was up one percent to over 41,000.

Those walking the ten miles of aisles and attending the educational seminars came from all 50 states and 79 countries with the top five (outside of U.S.) being Canada, United Kingdom, Japan, Korea and Sweden.

A concerted marketing campaign to grow the number of PGA Professionals and key buyers attending the PGA Show, created a more valuable business-to-business environment. Put simply, there were more qualified buyers on the floor to impact exhibitor business.

Also a positive sign was the nine percent increase, to over 7,000, attending the Outdoor Demo Day on Tuesday Jan. 20 restricted to invited golf retailers and media at Orange County National Golf Center in nearby Winter Garden, Fla.

No one believes everything is rosy for golf industry sales and profit prospects given the continued slide in golf participation but it is encouraging to see at least some positive signs as reflected in this year’s Show attendance.

Image courtesy of Montana Pritchard/The PGA of America

Big Names Highlight PGA Show

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It’s tagged “The Major of the Golf Business” or sometimes “Disneyland for golf nuts.” The annual conclave of the everyone who is anyone in the golf industry and those who want to be someone, is a must-attend however you characterize the week long extravaganza in Orlando. Officially named the PGA Merchandise Show, as usual manufacturers used stars from the PGA Tour and LPGA Tour to bring attention to their exhibits including Bubba Watson, Derek Sprague, Suzann Pettersen, Graeme McDowell, Greg Norman, Kristie Kerr, Annika Sorenstam, Lydia Ko and Lexi Thompson plus other well know insiders such as instructors Martin Hall, Michael Breed and David Leadbetter.

PGAS_2015

Over the coming months we will report to you the background and lowdown about the newest equipment, accessories and technology on display. However it is significant and though this year did have its share of “latest and greatest,” the primary impression after talking with several dozen industry insiders was optimism for the coming season. That contradicts the often contrary opinion cited in the media and there may be a healthy portion of Pollyanna wishful thinking but it does represent an upbeat look at the business of the game we all love.

PGAMRCH_TEMP_FORFUTURELOGOSAccording to PGA President Derek Sprague, ““There has been a lot of buzz and sustained crowds conducting business on the Show floor this week. The PGA Show has created an optimistic feel for the golf industry going forward this year.” Comments one might expect from a man in his position but by any measure positive and forward looking.

The general manager at PGA Worldwide Golf Exhibitions (the people actually run the Merchandise Show) Ed Several said there was a healthy increase in attendance at Tuesday’s Outdoor Demo Day with the momentum carried over to the Show as equipment, apparel and accessory manufacturers launched new lines, while the return of live Fashion Shows drew attentive crowds.

A PGA Professional, one of the forty thousand plus at the Show and a long time attendee voiced typical comments. Eric Sandstrum the head professional at Brattleboro Country Club in Vermont said, “The excitement and new products seen at the PGA Show will create a buzz in our golf shop this spring. I come here every year, and it sets the tone and gives us new ideas for the season ahead.”

Among the many presentations were a report of the status of the golf course under construction for the much ballyhooed return of golf to the Olympics in 2016, plans for the KPMG Women’s PGA Championship now being run by the PGA of America and a new web initiative, GolfforHer.com.

Images courtesy of the PGA of America

10 Rounds with Voice Caddy T1

The use of GPS technology to determine distance to the green has been around for some time and now Voice Caddy, makers of the clip-on device that reports distances verbally, has introduced the T1 Hybrid Golf Watch. The T1 doesn’t report yardages by voice but does show front, back and middle of the green distance on a large, readable display. 

Having it strapped on for ten rounds it quickly became a part of my equipment to be referred to without a second thought. Once switched into golf mode there are no more buttons to push, in fact if using it just for the distance measurements, the next time you have push a button is when you finish the round to switch it back to being a watch. As with all the GPS devices I have tested, the first time out with the T1, I checked the readout against a laser range finder and it matched very well after taking the exact pin location into account. In other words if the T1 showed 148-yards to the center of the green and the laser showed 151, pacing from the center to the pin was within a yard or so of 151. This brings up an interesting point though. How accurate does a distance measurement have to be? 

Having played for a lot of years, most of them with a low single digit handicap, I still don’t think I have a swing that allows me to be confident of hitting the ball to a super precise distance—say within a yard or two. Or put another way, all things being equal, whether it’s 148 or 151 with a decent lie and no wind to factor in, I’m still hitting an 8-iron. Period. If you’re better than that good for you, I hope you make a lot of money on Tour. 

The T1 comes with some 30,000 courses preloaded with Voice Caddy providing updates at no cost. Plus there are some other useful features such as a scorecard and score history to track your game and a very handy swing tempo readout. The T1 even can tell you how fast you are walking, the distance traveled and calories burned. 

The price is $169 in either white or black and it is available at VoiceCaddy.com.