The recession hits all sectors. The golf equipment companies is certainly not immune to this. One of the most noted golf club manufacturers, Callaway Golf Co., saw its earnings drop significantly in the first quarter of 2009. However, their stock was up significantly as the company indicated the steps that it is taking to improve its bottom line.
On Friday, May 1, 2009, Callaway Golf, one of the top gold equipment companies reported its first-quarter of 2009 results. Their profits were 83% lower than they were the same time last year. The results were worse than the Wall Street analysts had anticipated.
At the end of the first quarter of 2009, Callaway’s net income fell to $6.8 million. In Q1, 2008, Callaway had reported net income of $39.7 million. Revenue was off significantly as well, dropping from $366.5MM to $271.9MMRevenue in the quarter was $271.9 million as compared with $366.5 million a year ago.
These results should not surprise too many people however. In times of recession, such as these, fewer people are willing to spend money on unnecessary items. For most people, short of the professional golfers on the tour circuit, golf is a luxury, not a necessity.
When times were better in the economy, many of the golf equipment manufacturers, such as Callaway, Titleist, and Ping g10 golf, would give their golf equipment to retail shops on consignment. Those times no longer exist. Today, if a golf retail shops wants to purchase Nike clubs, used Ping irons, Callaway clubs, or most any other manufacturers clubs, they need to purchase all of their clubs from the manufacturer in advance.
Since sales in these difficult economic times are slower, the retail shops have less cash. So the last thing that the store owners would want to do would be to part with their cash up front. The result is that there is less and less inventory in the shops. The sales slowdown becomes a downward spiral.
Callaway is moving to correct this shortfall in earnings and revenue. Many companies fix this problem by getting rid of employees. Callaway is following that path. The company indicated that it has eliminated 10% of it staff worldwide.
Callaway stated that they believe that the situation will not get better this year. They feel that sales of their equipment will continue to struggle while the economy struggles. As the world’s financial difficulties subside, their products, and the golf industry in general will recover as well.
Shares ofCallaway Golf Co. moved up a lot on this news. Shares of Callaway were up more than 11% based upon the hopes of a recovery along with the steps that the company has taken to improve its bottom line.
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