Callaway Golf saw its sales increase by 14 percent to $153.3 million and its net loss narrow by 27 percent to $30.4 million for the fourth quarter of last year, driven by buoyant U.S. sales and a robust increase in global sales of golf balls.
Although the performance was adversely impacted by exchange rate changes, it wraps up a strong year for Callaway, which is claiming significant market share gains in the U.S. and international markets. Chip Brewer, Callaway's chief executive, said in a conference call that market share figures through November placed Callaway as the number one selling hard goods brand for Europe, with an increase of 2.2 percentage points to 20.7 percent for the year.
The Callaway group's sales in the seasonally weak fourth quarter were up by 19 percent in constant currencies. They included a 38 percent sales increase to $68.9 million in the U.S. market, while net sales in Europe moved up by 11 percent to $21.5 million, with a rise of 20 percent in constant currencies.
Callaway's sales in Japan shrank by 10 percent to about $34.8 million for the quarter, which was still a decline of 5 percent in constant currencies. Sales in other Asian markets gained 14 percent to $18.0 million, an increase of 20 percent in constant currencies, and sales in other foreign countries advanced by 9 percent in constant currencies, although they dipped by 7 percent in dollars to $10.2 million.
The quarterly performance was pushed up by a sales jump of 46 percent to $30.0 million for golf balls. Sales in reported terms increased by 10 percent for irons, by 52 percent for putters and by 8 percent for accessories, while they declined by 5 percent for woods.
Callaway's sales declined by 5 percent to $844 million for the full year, but they would have increased by 1 percent without exchange rate changes. Sales were weakened by a strategic decision on launch timing, which reduced sales in the first quarter, while Asian market conditions were less favorable than anticipated.
European sales fell by 7 percent to $125.1 million for the year but that amounted to a rise of 7 percent in constant currencies. Callaway's turnover slipped by 17 percent to $138.0 million in Japan and by 22 percent to $70.3 million in other Asian countries. The U.S. market compensated for some of these declines, with a sales rise of 6 percent to $446.5 million.
Callaway's sales of drivers shrank by 18 percent to $222.2 million for the year, while iron sales gained 3 percent to $205.5 million, putter sales advanced by 6 percent to $86.3 million, ball sales were up by 4 percent to $143.1 million and accessories were down by 6 percent to $186.6 million.
The group's gross profit margin hit 42.4 percent for the year, an improvement of 2.0 percentage points. Callaway ended the year with profit of $14.6 million, compared with $16.0 million the previous year.
At the same time, Callaway said its Japanese subsidiary intends to start a joint venture this year with its Japanese apparel licensee since 2002, TSI Groove & Sports Co, a leading apparel manufacturer in Japan. The joint venture is to be named Callaway Apparel, to manufacture and sell Callaway-branded apparel, footwear and headwear in Japan.
The move indicates that the company has finalized its turnaround and is gearing up for sustainable expansion. Callaway said that it would step up its activities in PGA tour marketing this year, and predicted that its market share in golf clubs and balls would continue to rise.
The Californian golf company added that it would explore acquisitions, albeit without significant details. Brewer said that Callaway's balance sheet has been reinforced this year through the elimination of convertible debt.
The company points to stabilizing participation, growing enthusiasm for the PGA Tour and average selling prices that appear to be increasing in key markets. Then again, Callaway suggested that the golf industry may not have entirely cleared up the inventory issues that plagued it in previous years, despite a clear improvement in retail inventories.
Callaway is projecting a sales increase from 1.5 to 4.5 percent in constant currencies for this year, which would reach between $845 million and $870 million. Gross margins are predicted to reach 43.5 percent, up by 1.1 percentage point, with operating expenses of $345 million and pre-tax income of $20 million to $30 million.
