Topgolf Callaway Brands beat earnings and sales forecasts for its first financial quarter but trimmed profit forecasts as corporate bookings at its Topgolf venues tailed off slightly at the end of the three month period.
Topgolf Callaway’s key Q1 numbers
Revenue rose 12.2 percent to $1.17 billion against consensus estimates of $1.14 billion and the company’s own forecast of $1.135–$1.155 billion.
Net income fell 71 percent to $25 million due to higher interest rates and increased interest related to new Topgolf venues and forex headwinds hitting operating income. Adjusted Ebitda decreased 7.4 percent to $157.2 million.
Topgolf total segment revenue increased 25.3 percent to $403.5 million, including an 11 percent rise in same-venue sales.
Chief executive Chip Brewer said the company is still on track to open 11 new owned and operated venues in 2023 with one scheduled to launch in the second quarter, and the balance coming in the second half of the year.
“For the full year, same venue sales are now forecast to be up mid-to-high single digits, a little lower than expected due to corporate events trending lower starting late in the first quarter,” he said.
Topgolf club sales boosted by sponsored athlete wins
Golf Equipment segment revenue fell $24.3 million to $443.7 million, mainly due to the inventory catch-up in retail operations in the same quarter last year that did not recur in 2023 and foreign currency headwinds versus last year.
Brewer said Callaway’s new Paradym line of clubs was “doing extremely well” after launching in February. The brand was also boosted by Jon Rahm’s win at the Masters tournament and Rose Zhang’s victory at the Augusta National Women’s Amateur Tournament – along with the latter setting the record for the most weeks as the No.1-ranked women’s amateur.
“Turning to equipment sales specifically. The market started the year a little behind our initial expectations of flat to slightly down for the full year. But we view this as totally understandable given the economic climate and how many entry-level sets were purchased over the last few years,” he said.
“Fortunately, our product performance is at or slightly ahead of our expectations. We see these factors essentially balancing each other out. Overall, we feel good about the health of our core golf consumer.”
Jack Wolfskin and Activewear help deliver TopGolf Callaway a “nice quarter of growth”
In Active Lifestyle, revenue increased 28 percent to $320 million, driven by strong brand momentum at both TravisMathew and Jack Wolfskin.
Brewer said Jack Wolfskin performance in China, a key market, outperformed expectations during the quarter and continues to trend positively. However, he added that business for the brand in Europe was challenged by difficult business conditions and high customer inventories, “but still delivered a nice quarter of growth”.
“Overall, we’re pleased with the brand’s direction, the quality of the products, and despite uncertainty on market conditions in Europe for the balance of this year, we remain confident in the long-term outlook,” he said, adding that TravisMathew continued to successfully expand its women’s launch during the first quarter and also recently introduced active apparel.
Inventory increased to $930 million at the end of the quarter of 2023, compared to $552 million a year earlier and $959 million at the end of 2022. The company expects to hit more normal levels by the end of this year.
TopGolf Callaway marginally reduces forecast for FY2023
Looking ahead, 2023 sales are forecast to come in at $4.42–4.470 billion, compared with a previous estimate of $4.415–4.47 billion. Forecasts for Topgolf revenues were held at $1.9 billion.
The lower end of annual adjusted Ebitda was ticked up to $625 million from $620 million, with the upper end held at $640 million.
