This week, a pair of the golf industry’s biggest hitters -- Callaway Golf and Acushnet -- announced better-than-expected results for 2nd Quarter 2021. New and lapsed golfers are picking up the sticks for the second year in a row along with avid golfers -- Callaway and Titleist’s heart and soul consumer -- who are playing more rounds and buying more gear than ever before. Flexible work schedules from home, no or low commutes has kept rounds played and spending high.
Supply chain woes and low inventories have provided cover for no or low discounting even during the traditional peak season golf holidays of Memorial Day and Father’s Day. Manufacturers and their retail partners have been taking advantage of these unique market dynamics to raise prices and limit promotional activity while scrambling to keep product on retailer shelves.
Following is a recap of their respective earnings reports.
Sales Bolster Callaway Golf’s Q2 Report
Callaway Golf (NYSE: ELY | Earnings Release), boosted by its new and legacy businesses, reported sales being up a whopping 208% for the 2nd quarter ending June 30. Topgolf, not quite a year since Callaway purchased all of its outstanding shares, outperformed with $325 million in revenue, which represented 36% of the company’s revenues. The brand’s traditional businesses broke records, soaring to $588 million, up 98% over 2020 and up 37% versus 2019 pre-pandemic levels. Equipment is leading the brand’s way with club sales up 105% and balls up 51%.
Callaway’s newer and smaller businesses in soft goods, gear and outside of golf, including the Jack Wolfskin brand, saw revenue increase 21% versus 2nd quarter of 2019. Year-to-date versus last year, these emerging businesses were up 115% and driven by apparel sales up 152% and gear sales up 88%.
The tailwinds of high golf demand are colliding with the headwinds of the world’s supply chain issues.
Looking ahead, Callaway Golf president and CEO Chip Brewer said the company still faces numerous macroeconomic hurdles, including supply-chain constraints, freight costs, staffing challenges and inflationary pressure. However, he added, “At the demand level we are experiencing and expect to experience in the foreseeable future, we see these as manageable and expect to still deliver excellent financial results. On the supply chain side, our guidance assumes an estimated $55 million negative impact to our top-line growth, primarily in Q3, to account for current disruptions. On the inflationary side, we have already started taking some price and believe we’ll largely have the ability to take price as needed.”
The market this week has responded negatively to the supply chain outlook this week with the stock price dropping 7% since Monday.
Acushnet Enjoys Triple Digit Gains
Acushnet Golf (NYSE: GOLF | Earnings Release), released its earnings report late last week and, like Callaway, it had many triple-digit gains to report. Second quarter net sales were up 108% over last year, and up 35.2% versus 2019. Year-to-date sales were up 70% over last year, and also up 34.6% compared to 2019’s pre-COVID-19 levels.
Full retail prices are holding steady with no slowdown in golf spending, even with late summer now upon the marketplace. Titleist’s U.S. business is up 75% year-over-year, driven mostly by golf balls, then clubs, FootJoy golf wear and Titleist gear. Net sales in other regions outside of the U.S. were up 65% -- 52.8% on a constant currency basis.
However, Acushnet president and CEO David Maher noted that “supply chain complexities” have expanded in recent weeks. Storms in Texas have impacted the supply of Surlyn, a key raw material for golf balls, at the petrochemical plants. Additionally, Vietnam and Thailand, where a number of golf manufacturing plants are based for all key players in the sport, are experiencing slowdowns due to COVID-19 impacts on labor shutdowns and raw material shortages.
The market has been slightly kinder to Acushnet versus the stock price drop Callaway has experienced this week. In the last five days, it is up 1.7% and has surpassed consensus earnings per share (EPS) estimates four times during the last four quarters.
Drive Shack Reports First Operating Income in Three Years
Drive Shack Inc. (NYSE: DS | Earnings Release), owner and operator of golf-related leisure and entertainment businesses, reported its financial results for the second quarter and six months ending June 30, 2021.
Total revenue for the second quarter this year was $73.9 million compared to $32.1 million in the same period last year, up 130%.
The company’s traditional golf business, American Golf, generated total revenue of $62.3 million in the second quarter 2021, compared to $30.3 million in the second quarter 2020, a gain of 105.6%. The increase to last year’s second quarter was primarily due to COVID-19 related course and Drive Shack closures for a portion of the second quarter 2020.
"We have had incredible results this quarter including reporting operating income for the first time in three years and our fourth consecutive quarter of positive Adjusted EBITDA," said Hana Khouri, Drive Shack’s CEO and president. "Both our American Golf and Drive Shack businesses delivered strong financial performances as the momentum in the golf and entertainment sectors continued throughout the second quarter. Walk-in revenue at our Drive Shack venues was at an all-time high and each surpassed their pre-pandemic venue contribution levels, including Orlando delivering above break-even for the first time."
