Appointed as Callaway Golf's new chief executive four months ago, Tony Thornley is attributing the latest losses to a challenging golf market as well as the lack of a coordinated product and marketing plan that would respond to consumers' preferences.
Noting that Callaway is on track to save $50 million a year through various initiatives, to bring it back to profitability as of 2012, company officials said they are still planning to reinvest half of the savings in product, branding and marketing next year.
Acknowledging that TaylorMade has demonstrated a better focus, Callaway's new management says it wants to engage in a stronger dialogue with golfers in the key developed markets of the U.S., the U.K. and Japan. It is also studying alternatives to optimize contributions from its Ben Hogan and Top-Flite brands, whose sales have been declining steadily.
Callaway hopes to save about $35 million in operating expenses and $15 million in sourcing costs and sales discounts, with only $9 million going into the 2011 accounts.
Nevertheless, the company's results for the third quarter showed a net loss of $65.2 million, more than triple the loss of $20.9 million booked in the year-ago period. Net revenues decreased by 1.4 percent to $173.2 million, and the gross margin dipped by 0.6 percentage points to 27.4 percent, despite foreign currency gains.
While sales declined by 3.0 percent in the U.S. to $73.9 million, sales in the rest of the world remained flat at $99.4 million, but they were off by 7.0 percent in constant currencies.
Among the various product categories, only woods registered an increase, going up by 53.5 percent to $41.5 million. Sales were off by 21.4 percent to $38.2 million for irons, by 5.1 percent to $15.1 million for putters, by 7.3 percent to $32.7 million for golf balls and by 6.3 percent to $45.7 million for accessories.