Callaway Golf Co. ended the second quarter in the red due to a $174 million impairment charge related to the Jack Wolfskin goodwill and trade name. It posted a net loss of $167. 7 million for the period, versus net income of $28.9 million for the year-ago quarter. The management said the charge was due to the impact of Covid-19 restrictions and a weaker euro than expected. Nonetheless, it remains positive on the potential of Jack Wolfskin’s apparel business and strategy.

The group’s sales declined by 34 percent to $297.0 million, hampered by store closures and currency headwinds, which affected revenues by $2 million. Retail saw double-digits losses. However, e-commerce sales soared by 50 percent, boosted by a strong performance by its golf and lifestyle apparel brand, TravisMathew, and Jack Wolfskin.

After the lockdowns eased, the company experienced a sharp recovery in June, when sales increased by 8 percent overall, including a 21 percent increase in the golf equipment business as compared to June 2019. The pace of recovery in the apparel business also exceeded the group’s expectations but has been slower than that of golf.

The company highlighted progress in the transition to its new “superhub,” which will consolidate the company’s three distribution centers in California, Indiana and Texas into one site in Texas by the end of the third quarter.

Given the uncertainty surrounding the pandemic, the group said it remains focused on stringent cost management, and has suspended its quarterly dividend. Excluding the Jack Wolfskin impairment charge, it achieved a reduction of about 30 percent in planned operating expenses and capital expenditures through efforts to reduce discretionary spending and infrastructure costs on a worldwide basis, including voluntary reductions in compensation for the members of the board of directors, the chief executive and senior management.

During the quarter, the U.S. recorded a 31 percent decline in revenues to $171.7 million. In constant currencies, sales in Europe fell by 38 percent to $50.1 million. They tumbled by 57 percent to $24.6 million in Japan, and in the rest of world, they declined by 15 percent to $50.6 million. The management noted Jack Wolfskin’s recovery in Germany and China.

Golf club sales were off by 30 percent to $156.0 million, while ball sales dropped by 21 percent to $53.9 million and apparel sales plunged by 50 percent to $36.3 million. Meanwhile, gear and other sales went down by 37 percent to $50.7 million. The TravisMathew brand was hard hit in the U.S., although its sales rebounded at the end of the quarter.

Overall, the company’s gross margin decreased by 5.2 percentage points to 41.1 percent, weighed down by lower sales and costs associated with idle facilities during the U.S. government-mandated shut-downs.

Adjusted Ebitdas, which excludes interest, taxes, depreciation and amortization as well as stock compensation charges, declined to $89 million, against $159 million last year.

The management did not release any guidance for the full year, but said that the Covid-19 pandemic will continue to negatively impact its business, with sales headwinds and gross margin pressure through 2021.