Strong sales of Titlest golf clubs boosted Acushnet's revenues for the fourth quarter of 2016, despite the negative impact of the bankruptcy and liquidation of Golfsmith and other less specialized sporting goods retailers in the U.S. The company's club sales increased by 3.0 percent over the year-ago quarter to $329.8 million, or by 1.3 percent in constant currencies, thanks to an increase of 19.2 percent - or 15.5 percent in constant currencies - in sales of Titleist golf clubs. The gains were driven by strong demand for the new model 917 drivers and fairways launched in the quarter and continued growth in Vokey wedges and Scotty Cameron putters. However, this was offset by lower sales of irons and hybrids.
Sales of FootJoy golf wear declined by 9.5 percent, or by 10.1 percent in constant currencies. This was primarily due to the off-course U.S. retail channel disruption caused by the bankruptcy last September of Golfsmith, the largest specialty golf retailer in the U.S. In early November, liquidations began at 59 Golfsmith locations.
Meanwhile, revenues from Titleist golf balls dipped by 5.2 percent, or by 6.2 percent on a currency-neutral basis, weighed down by the disruption of the off-course U.S. retail channel and the fact that its Pro V1 and Pro V1x balls are in the second year of their two-year product cycle. The company also recorded a drop of 11.8 percent - or 13.2 percent on a constant-currency basis - in sales of Titleist golf gear.
In the U.S., sales dropped by 3.6 percent, affected by soft market conditions and the reorganization efforts of Golfsmith. Abroad, Acushnet posted strong year-on-year gains, with revenues rising by 9.6 percent. On a constant currency basis, such sales would have increased by 6.2 percent, with Korea up by 10.5 percent, Europe, the Middle East and Africa (EMEA) up by 8.8 percent and Japan up by 14.3 percent.
The company's gross margin went down by 0.8 percentage points to 50.9 percent, while the Ebitda margin gained 2.4 percentage points to 11.6 percent. The net loss attributable to Acushnet, which went public last year, reached $0.2 million, down from a loss of $20.4 million a year earlier. The size of the change was primarily due to the recognition of a loss in the fourth quarter of 2015 of $13.8 million on the fair value measurement of common stock warrants and lower interest expense in the fourth quarter of 2016.
For the full year, Acushnet's sales reached $1,570 million, up by 4.6 percent over 2015 in dollars and by 4.5 percent on a currency-neutral basis. A currency-neutral decrease of 3.7 percent for Titleist golf ball sales was offset by gains of 9.8 percent in Titleist golf clubs, 3.6 percent in FootJoy golf wear and 5.5 percent in Titleist golf gear.
The U.S. was flat at $604.5 million for the company, and its sales in EMEA rose by 5 percent to $210.1 million. In constant currencies, sales were down by about 10 percent in EMEA and up by 8 percent in Japan and by 21 percent in Korea. They declined by one percent in the rest of the world.
The annual gross margin inched down by 0.8 percentage points to 50.8 percent. Adjusted Ebitda grew by 6.4 percent to $228.4 million. Net income reached $45 million in 2016, turning around from a $1 million loss in the previous year.
The management feels that the worst is over for the U.S. golf market, which has largely stabilized. Golf retailers are off to a good start in 2017, and the global golf market is seen growing at an average annual rate of one to two percent.
Issuing guidance for 2017, Acushnet said it is expecting sales in the range of $1,565 to $1,595 million. On a currency-neutral basis, sales are projected to increase by between 1.8 percent and 3.7 percent, with an increase of 2 to 4 percent in local currencies, generating adjusted Ebitda of $220 million to $230 million.
As previously reported, the company filed for an initial public offering in June with the U.S. Securities and Exchange Commission (SEC) to raise up to $100 million for the group of investors around Fila Korea, which bought the golf equipment company from Fortune Brands for $1,230 million in 2011. Last Nov. 2, Acushnet completed this IPO at $17 per share, and the current share price is similar now.
