For the fourth quarter ended Dec. 31, Callaway Golf had an 8.5 percent increase in sales to $185.9 million, a rise of 3 percent on a currency-neutral basis. However, it also posted a net loss of $15.6 million, compared with a loss of $3.2 million in 2008, and the gross margin fell by 3.8 percentage points to 31.3 percent on discounting. The much larger net loss was attributed mostly to a $14 million gain in 2008 related to the reversal of a charge for energy derivative contracts. The operating loss was essentially flat at $28.7 million, compared with $28.6 million the year before.
By product category, increases were seen in putters (up by 109 percent to $26.9 million) and woods (up by 2 percent to $32.0 million), while irons and golf balls decreased, by 2 percent to $47.2 million and by 18 percent to $34.4 million respectively.
Japan led the regional segments with a 45 percent increase in sales to $49.1 million, and the rest of Asia followed with a 40 percent gain to $18.1 million. Europe saw growth as well, up by 11 percent to $22.0 million in U.S. dollars. Only the U.S., which fell by 14 percent to $76.5 million, had a quarterly sales drop.
For the full 2009 fiscal year, sales dropped by 15 percent to $950.8 million, or a 12 percent decrease in constant currencies. It had a net loss of $20.9 million against a profit of $66.2 million in 2008, while the gross profit plunged by 8.0 percentage points to 36 percent on heavy discounting.
All product categories suffered sales declines, with the worst performances coming from irons (down by 24 percent to $234.0 million) and golf balls (down by 19 percent to $180.9 million). Annual club sales slipped by 14 percent to $769.9 million as segment operating profit fell by 71 percent to $38.9 million; the golf ball business suffered a $13.9 million loss.
Regionally, even the best performers saw decreases, with Japan dropping by 2 percent to $162.3 million and the rest of Asia falling by 4 percent to $77.0 million. Europe dropped by 30 percent to $134.5 million and the U.S. had a decline of 14 percent to $475.4 million.
Callaway is cautiously optimistic for 2010, based on expected lower discounting, conservative inventory levels, foreign currency trends and good reaction to this year’s product lines. Currently, Callaway is estimating 4-10 percent growth in revenues to $990 million-$1.05 billion, and an increase in gross margin to 42-44 percent.
Historically, 60-65 percent of the company’s revenues are generated in the first half, a trend that should be repeated this year. Management says the 2009 selling environment taught the company to be more agile, and says 2010 should see a drop in the promotional climate but still more than in a traditional year. Callaway does project a benefit from golfers’ pent-up demand as the overall economy continues to stabilize. Overall, 2010 is seen as a better year for the golf segment, but not yet restored to its 2007 level. Clubs with retail prices of $299 will continue to dominate, with lower sales of $399 counterparts. Pre-orders have been in line with company expectations, down slightly from year-ago levels, but the decline has been offset by heavier at-once orders.
