Callaway generates double-digit sales gains across all segments, raises FY outlook

In reporting record second-quarter results paced by revenue and operating income growth from its Topgolf driving range venues, Callaway said pricing and other business improvement implemented during H1 have enabled the company to “outrun the ubiquitous inflationary pressures, unfavorable foreign currency exchange rates and staffing challenges.” 

Net income increased 14.9 percent to $105.4 million from $91.7 million in the second quarter ended June 30. Operating income was 20.2 percent higher at $129.0 million versus $107.3 million. Total revenues grew 22.1 percent to $1,115.7 million from $913.6 million, with all three segments – Topgolf, golf equipment and the newly named active lifestyle (previously apparel, gear and other) – reporting double-digit sales gains. Driven by strong social and corporate events, Topgolf’s quarterly operating income increased 82.6 percent to $44.2 million from $24.2 million. Segment revenues were 24 percent higher at $403.7 million versus $325.4 million.

Callaway continues to expect the segment, which will add 11 owned and operated venues and two international franchises by year-end, to generate mid- to high-single-digit sales growth for the FY. But the segment’s H2 operating margin is forecast to contract due to venue opening costs.

Meanwhile, sales of golf equipment, sparked by strong demand for clubs and balls and improved supply and stock at retail, rose 12.6 percent in Q2 to $451.9 million from $401.3 million. But currency fluctuation negatively impacted segment operating income, which rose 2.2 percent to $100.3 million. Callaway says it’s pleased with current conditions in the golf market, including the sell-through rate for its Rogue ST drivers and Chrome soft golf balls that achieved a 27.7 percent share in the period. The company has taken price increases but witnessed no consumer pushback to the hikes. 

Within the Active segment, all four brands – TravisMathew, Jack Wolfskin, Callaway and Ogio – each reported double-digit sales gains. Overall Active revenues were up 39.2 percent to $260.1 million from $186.9 million as the segment’s quarterly operating income rose 43.3 percent to $22.5 million. TravisMathew is forecast to generate more than $50 million in adjusted Ebitda and more than $300 million this FY. Jack Wolfskin had double-digit sales growth despite difficult macroeconomic conditions in China and Europe.

In reporting the results, Callaway increased its FY22 guidance. The full-year adjusted Ebitda forecast is raised by 1.8 to 3.7 percent to a range of $555 to $565 million from prior guidance of $535 to $555 million. The annual revenue forecast has increased slightly to $3.945 to $3.97 billion from $3.935 to $3.97 billion. Annual Topgolf sales are projected to rise 25 percent. The FY revenue forecast for golf equipment calls for a low- to mid-single-digit increase. Sales in the Active segment, which is still expected to surpass $1 billion in annual sales this FY, are forecast to rise in the mid-teens this year. H2 total revenues are projected to increase 15 percent, with adjusted Ebitda for the six months expected to increase approximately 20 percent to a range of $178 to $188 million versus $153 million in H2/21.