It was encouraging to read upbeat remarks from the leaders of golf's two biggest publicly traded companies, Callaway (here) and Acushnet (here) each summarizing their third quarter 2017 earnings report calls with analysts.
Callaway announced big gains in all areas:
In the third quarter of 2017, as compared to the same period in 2016, the Company's net sales increased $56 million (30%) to $244 million. This increase was led by increases in all operating segments, namely Golf Clubs (+ 21%), Golf Balls (+20%), and Gear, Accessories and Other (+72%) as well as increases in each reporting region, namely the United States (+33%), Europe (+23%), Japan (+28%), Rest of Asia (+28%), and other countries (+23%). The increase in the Golf Clubs and Golf Balls segments reflects the continued success of the Company's EPIC line of products as well as the Chrome Soft golf ball franchise. The increase in Gear, Accessories and Other primarily reflects the successful acquisitions of the OGIO and TravisMathew brands which were completed in 2017.
As a result of this significant increase in sales, as well as a 110 basis point improvement in gross margins, the Company recognized a significant improvement in profitability during the third quarter of 2017. Due to the seasonality of the Company's business, the Company often reports a loss for the third quarter. However, in the third quarter of 2017, the Company reported an $11 million increase in operating income to $6 million as compared to an operating loss of ($5) million in the third quarter of 2016.
CEO Chip Brewer's outlook:
"Looking forward, we are pleased that our year-to-date performance has allowed us to increase our full year sales and earnings guidance," continued Mr. Brewer. "We also continue to be cautiously optimistic about the golf industry overall, thanks to what we believe are improving fundamentals. Lastly, our brand momentum remains strong and we believe we are the #1 club and # 1 hard goods market share brand in every major region around the world."
Other than not knowing what Acushnet (Titleist/Footjoy) COO David Maher meant with a mention of "a strong pyramid of influence validation," I could understand the earnings report and the numbers sounded positive, despite a small decline in golf ball sale profits chalked up to promotional pricing as they shift to a new product line.
CEO Wally Uihlein, on the state of business:
"We are encouraged to see that the global golf industry continues to structurally improve through the first nine months of 2017. While near term, US demand trends have been impacted as the focus shifted to important life priorities in areas hit by the recent hurricanes, it is good to see many areas are recovering well as a sense of normalcy returns.
"We are confident that our proven strategy, dedicated associates and valued trade partners will enable us to leverage a stronger industry and extend our success over the long term."
In the third quarter Acushnet posted sales of $347 million, up over 2% on a reported basis and up near 3% on constant currency. For the first nine months of 2017, sales of $1.209 billion were off 2.7% from last year or 2% on constant currency. Adjusted EBITDA for the quarter was $32.2 million, up 15% from last year and $182.5 million for the nine month period, a 4% decline.
At the segment level, golf ball sales were off 3% for the quarter and 2% year-to-date, both on constant currency. New Pro V1 golf balls have posted sales and share gains through the first three quarters of the year as golfers have embraced the new and improved Pro V1 and x models.
Sales of our performance models have declined as these have been most impacted by competitive promotional activity in what is the back half of their two year product lifecycles. We see this promotional activity largely as a byproduct of the retail correction as golf ball companies come to terms with the new inventory and retail square footage realities of the market.