Callaway Golf's second-quarter sales were essentially level with 2014, recording a 1 percent drop, but grew by 6 percent on a constant-currency basis, despite headwinds from unfavorable changes in foreign currency exchange rates and international market conditions that were softer than expected, particularly in Asia. The company posted sales of $231 million for the second quarter of 2015, as compared to $232 million in last year's second quarter. Changes in foreign currency exchange rates negatively affected second-quarter sales by around $16 million. In Europe reported sales dropped by 11 percent to $35.2 million but grew by 5 percent in constant currency.
The company's gross margin recorded a massive improvement in the second quarter, jumping by 4.9 percentage points to 44.1 percent due to more favorable product pricing and a mix of higher-margin products as well as improved operational efficiencies. This rise in gross margin more than offset a slight increase in operating expenses. As a result, the company was able to considerably improve its earnings, with net income rising from $3.4 million in the second quarter of 2014 to $12.8 million.
By region, in constant currencies, sales in Japan rose by 19 percent to $35.2 million but the Rest of Asia saw revenues decline by 20 percent to $19.0 million. In the U.S. second-quarter sales grew by 8 percent to $122 million. By product category, also in constant currency, irons posted the largest sales increase, with revenues up by 20 percent to $59.3 million. Golf balls also performed well, posting an 11 percent increase to $40.9, with growth led by Chrome Soft and Soft Fast core technology. Sales of woods grew by 1 percent to $49.4 million. Putters lost 2 percent and recorded quarterly sales of $24.4 million.
For the six months ended June 30, 2015, the company reported sales of $514.7 million, as compared to $583.8 in the first six months of 2014. In Europe reported sales dropped by 15 percent to $76.9 million but were flat in constant currency. The company's reported net income for the six months dropped from $58.7 million to $48.6 million.
In consideration of the company's significantly improved gross margin in the second quarter, the company has revised its full-year earnings estimates to $0.01-$0.06 earnings per share, as compared to its prior estimate of a loss of $0.03 to earnings of $0.04 per share. However, the company has lowered its full-year sales guidance from its prior estimates of $840-$860 million to a revised estimate of $830-$840 million. The gross margin for the full year is expected to be 42 percent.
