Preliminary results for Callaway Golf indicate that its sales inched up by 2 percent to $1,018 million in 2006, generating net earnings of about $23.1 million, compared with $13.3 million in the previous year. Leading the sales growth were the Callaway Golf and Odyssey brands, which grew by 9 percent. Conversely the Top-Flite and Ben Hogan brands struggled through a 31 percent decline in turnover. The gross margin is estimated to have been roughly 39 percent, or 40 percent excluding special charges, against margins of 42 percent in 2005.
The company will formally report its annual and 4th quarter results on Feb. 8. Included in the earnings projections are $5.4 million in equity compensation, $2.7 million for the integration of Top-Flite, $2.0 million for restructuring initiatives announced in September and $1.4 million for gross margin improvement initiatives. Not including these charges, Callaway’s pro forma diluted earnings would be about $34.6 million.
Callaway’s management said at a recent analysts’ conference organized by the ICR Exchange that 2007 will be the year where it should regain product leadership, citing several awards received by editors of the Golf Digest magazines for some of its new products. The Callaway brand is #2 in drivers, but says it is closing the gap with TaylorMade in the segment, and that it has gained market share in the USA in woods, balls and accessories.
The company has developed a 3-year product development cycle to introduce more discipline and predictability into new product launches, which will take place at the beginning of the golf season rather than in July. New back-up suppliers should alleviate shortages of hot products in the future. Growth is predicted this year in the women’s and youth segments. Geographically, the company sees growth in China and Eastern Europe.
