Callaway and Topgolf apparel brands propel record results

Less than five years ago, Callaway Golf was almost exclusively a manufacturer of golf clubs and golf balls. Today, it has diversified through acquisitions in golf-related apparel and entertainment led by Topgolf.

These bets pay off. The Carlsbad-based company posted better-than-expected third-quarter revenue, thanks to Topgolf’s post-pandemic rebound, momentum from its TravisMathew and Jack Wolfskin apparel brands and continued demand for its basic golf equipment.

Revenue for the quarter was $856 million, up 80% from the prior year, primarily due to the addition of Topgolf in March.

“When you invest in Callaway, you are now investing in what I like to call ‘modern golf,’ a combination of traditional golf with lifestyle apparel and the world’s leading technology-based golf entertainment,” said Chief Executive Chip Brewer said in a conference call with Wall Street analysts.

A mix of driving range, high-tech arcade and sports bar, Topgolf was acquired by Callaway for $2 billion. In the third quarter, it posted $334 million in revenue, beating expectations thanks to increased walk-in traffic and small group gatherings. Same-store sales rebounded to pre-pandemic levels, the company said.

Callaway made another gamble on golf-related entertainment this month by taking a $30 million minority stake in Five Iron Golf – an urban indoor golf experience offering simulator rentals, golf lessons, custom club layouts, plus chic food and drink. It operates in New York, Chicago, Baltimore, Philadelphia and other major cities.

In Callaway’s core golf equipment business, demand remained strong despite supply chain issues, Brewer said. Sales increased to $290 million in the quarter, up $23 million from a year ago.

After years of stagnation, golf has enjoyed a renaissance during the pandemic, where it was considered a relatively safe outdoor activity. This momentum continued this year. Rounds played in the United States through September were up 8.4% year-over-year, according to industry research firm Golf Datatech.

Finally, TravisMathew, Jack Wolfskin and other Callaway apparel brands had sales of $233 million in the quarter, a year-over-year gain of $25 million.

“Golf equipment is a great business with the wind at our backs, but now it’s only part of our business, just under 40% of estimated full-year revenue,” Brewer said. . “Going forward, we expect all of our business units to drive growth and support each other.”

For its third quarter, Callaway posted adjusted earnings of $26 million, or 14 cents per share. That’s down from earnings of $59 million, or 61 cents per share, for the same quarter last year. The decrease is explained, among other things, by higher expenses related to the addition of Topgolf.

Looking ahead, Callaway forecasts annual revenue of $3.1 billion, compared to revenue of $1.6 billion before Topgolf last year. The company has not provided guidance for 2022 at this time.

Callaway released its results after markets closed. Its shares ended trading flat Tuesday, but gained 2.6% to $29.75 in extended trading on the New York Stock Exchange.

Michael O. Stutler