Callaway Golf’s third-quarter sales were down by 8 percent to $175.6 million. The gross margin slipped by 3.3 percentage points to 27.9 percent. The company suffered from increased charges, the negative impact of some fixed operating costs and non-cash inventory charges related to its former Ashworth apparel license, and ended up with a net loss of $18.3 million, up from a loss of $13.4 million in the same period last year.
All segments except accessories had lower sales in the quarter; for that unit, revenues were up by 4 percent to $49.4 million. Woods suffered the largest sales decline, down by 25 percent to $26.9 million. Golf balls dropped by 14 percent to $35.1 million; putter sales fell by 8 percent to $15.8 million; and irons were off by 2 percent to $48.4 million.
By region, quarterly sales in dollars showed a 13 percent slip in Europe to $23.4 million and a 19 percent drop in the U.S. to $76.2 million. In Japan, turnover jumped by 26 percent to $36.7 million and the rest of Asia ticked up by 2 percent to $21.5 million. Revenues in China went up by 35 percent.
Going forward, management projects that India, Southeast Asia and GPS devices will be more significant contributors to its overall business once the global golf category fully recovers.
Callaway says the recovery of the golf market that it expected this year hasn’t fully materialized, due to the general economic uncertainty, a possible double-dip recession in the U.S., and turmoil in the Eurozone and Japan. That said, the company is taking steps to maintain profitability for the next fiscal year – which it expects to improve economically overall – even if category “sluggishness” persists, and points out that it has been able to maintain, if not slightly grow, overall market share in the current climate. It projects full-year savings of $16 million this year and $115-125 million overall by the 2013 fiscal year from its initiatives. It would not give specific guidance for the current fiscal year.
In response to a question, the management said the company would consider marketing cheaper equipment under another label “if we can make money at it,” but has no intentions of “cheapening” the Callaway brand name. It said the rate of promotional retail activity for golf equipment has declined and should continue to wane into a 2011, a positive sign for the overall business.
