Callaway Golf Company is suffering from the current economic climate, with sales dropping across all product categories and in all geographical regions for the first quarter ended March 31. Overall, revenues fell by 25.8 percent to $271.9 million, and net income plunged by 82.8 percent to $6.8 million. The gross margin decreased by 5.2 percentage points to 42.7 percent.
The company said that economic conditions cut down considerably on retail traffic, and store owners cut back on how much inventory they kept in stock. In addition, results from outside the U.S. were negatively affected by currency translations, cutting about $22 million from total sales figures. The gross margin was affected by these factors as well as lower average selling prices.
Turnover from golf clubs dropped by 27.1 percent to $224.5 million, while balls fared only slightly better, falling by 19.0 percent to $47.3 million. Sales of woods fell by 31.5 percent to $79.9 million; irons decreased by 32.4 percent to $65.2 million; putters dropped by 19.9 percent to $27.7 million. Turnover in the category for “accessories and other” was down by 14.3 percent to $51.8 million.
Geographically, Japan was the least affected, with sales there decreasing by 11.1 percent in dollars to $47.4 million. Europe was off by 34.9 percent to $43.0 million, the U.S. dropped by 23.4 percent to $141.3 million, the rest of Asia declined by 37.4 percent to $16.6 million, and sales in other foreign countries fell by 34.7 percent to $23.6 million.
Going forward, the company thinks that the poor economy will hurt in the short term, but that conditions will improve as the year progresses. It has started cost-cutting initiatives including a 10 percent decrease in its worldwide workforce, and in the first quarter saved $7 million as a result of its gross margin initiatives. Callaway expects the golf industry to be down by 15-20 percent in 2009, but that its sales will decrease at a slower pace than that. It is looking to a gross margin for the year of 40-42 percent. It also expects to gain market share as the overall economic climate hurts its second-tier competitors.