Callaway is eyeing growth from increasing product diversity through Topgolf and apparel, outlining how the off-course game and pandemic-driven activewear and outdoor boom are shifting its sales makeup while continuing to grow golf equipment. The company announced preliminary first-quarter results in conjunction with its annual investor day. First-quarter revenue totaled $1.04 billion, coming in $15 million over the high end of guidance and up 60 percent year-over-year. Each segment saw growth in the quarter, with equipment benefiting from club and golf ball demand aided by supply chain improvements, especially late in the quarter. Topgolf also exceeded guidance, rebounding quicker than anticipated, with comps up 2 percent over 2019. Apparel and gear also posted positive results.
Annual revenue growth projections from 2021 through 2025 are guided at 10 percent to 12 percent, as Topgolf sees 18 percent-plus gains and the other segments grow at high-single digits. Callaway’s adjusted Ebita is expected to grow at 15percent to 18 percent with a mid-teens margin, exceeding $800 million in 2025, driven by 25 percent-plus growth for Topgolf and 10 percent-plus for other segments. The company expects its ongoing diversification to pick up through its four-year outlook. Sales in 2016 split at 84 percent equipment and 16 percent apparel, gear and other, shifting in 2021 to equipment and Topgolf each at 38 percent and apparel, gear and other at 24 percent. By 2025, this is projected to see Topgolf at 46 percent and equipment and apparel, gear and others each at 27 percent.
Callaway sees its pandemic spike as a structural change for golf equipment, with no significant downturn in the forecast. The segment is guided up 10 percent for 2022, followed by a stabilizing year in 2023 and low to mid-single-digit growth through 2025. The segment is expected to generate high free cash flow to help fund expansion in other segments. According to the most recent data, the company continues to gain market share in balls, hitting a new all-time high of 21.9 percent in March. Callaway sees positive signs for long-term equipment demand, with surveys showing new and returning lapsed players gained during the pandemic are committed to sticking with the game. It considers the new hybrid work environment eliminating the time commitment headwind that killed participation stickiness in past boom periods. While Callaway holds the top market share position for women golfers, now 25 percent of the market and heading to 30 percent, it is investing in its underperforming areas, including clubs, bags and headwear, where each point of share gain translates to a $10 million-plus incremental opportunity.
Callaway also announced at its investor day that the group’s Jack Wolfskin brand will refocus on its outdoor roots, with the tagline “We Live to Discover.“ More on this in our sister publication The Outdoor Industry Compass.
