When Callaway and Acushnet release their quarterly financial reports, we usually discuss sales, profits and which segments are under- or over-performing.
However, since news broke that Topgolf and Callaway will split into separate companies next year, the numbers and trends get a little more interesting. Both Acushnet and Topgolf Callaway released their Q3 financial reports over the past week and the contrast is fascinating. What we’re finding is one company riding a roller coaster of plusses and minuses and profits and losses while the other continues to chug along, getting neither too high nor too low.
With that, here are five things you need to know about the Acushnet and Topgolf Callaway Q3 financial reports.
#1: Acushnet is a very steady company
Acushnet is reporting $620.5 million in sales for Q3. That’s up nearly five percent compared to last year. Year-to-date (YTD) sales for the first nine months total just over $2 billion, up nearly three percent over last year.
What’s more, Titleist’s parent company almost always shows a quarterly net profit and this go-round is no different. Q3 profits are just over $56 million while YTD profits are $215 million. Both are down slightly from last year, but in a year projected to be mostly flat, any profit is good profit.
Acushnet’s quarterly EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is up nearly nine percent over Q3 of 2023 while YTD EBITDA is up nearly four percent. That’s important as EBITDA reflects actual sales and profit from operations before the finance department gets involved. Investors like it when EBITDA goes up.
#2: Acushnet might have a FootJoy problem
Yet another quarterly report shows FootJoy sales either decreasing or remaining static. The Q3 financials show FootJoy sales down 2.5 percent for the quarter and three percent YTD with higher sales prices partially offsetting lower sales volumes.
FootJoy is still a force with YTD sales pushing $483 million. Its relative stagnation is likely the result of increasing competition in the footwear and apparel spaces. It’s not just FootJoy, either. Topgolf Callaway’s Active Lifestyle business segment is also struggling, with an 11-percent drop in sales in Q3. Year-to-date sales stand at $787 million, down 10 percent from 2023. The Jack Wolfskin brand continues to struggle in Europe although the company says a brand-rebuilding program is underway.
Acushnet’s other markers are strong. Titleist club sales were up over 18 percent in Q3, driven by the new GT line of drivers and fairways. Golf Gear (bags, gloves, accessories) sales were up over eight percent for the quarter. The increase was driven by big increases in travel gear as the Club Glove acquisition is now fully integrated into the Acushnet family.
Surprisingly, golf ball sales were down slightly for the quarter but are still up four percent for the year at $646 million. The new Pro V1 lineup is scheduled for release in January.
#3: The Topgolf/Callaway split can’t get here soon enough
In September, Topgolf Callaway announced it would be splitting into two separate entities. After looking at the company’s Q3 and YTD financials, the split couldn’t come at a better time. Topgolf Callaway is reporting Q3 sales of just over $1 billion. I don’t care who you are, that’s a lot.
However, that’s a three-percent drop from last year’s performance. Additionally, the company is posting a net loss of $3.6 million for the quarter. In the big picture, that’s not a lot, but it is a huge reversal from last year’s nearly $30-million quarterly profit.
Year-to-date sales top $3.3 billion, down two percent from last year. YTD profits are down, too, at $65 million versus $172 million last year. That’s a decrease of 62 percent. Topgolf sales are up for the quarter and YTD but the company again credits new venue sales for the increase. Same-venue sales were down 11 percent for the quarter and Topgolf Callaway expects same-venue sales to end the year down either by high single digits or low double digits.
Golf club sales were up in Q3 by nearly two percent thanks to the recent Apex irons launch. YTD, however, club sales are down two percent at a still-strong $882 million. Golf ball sales were down for the quarter but up slightly for the year at $275 million. The company says it has reached an all-time marke- share high in golf balls at 22 percent.
#4: Wall Street isn’t happy with Topgolf Callaway’s full-year outlook
Each quarter, publicly traded companies provide investors with a status check on where they expect to end the year. How that outlook changes during the year can impact stock prices in a big way.
In its Q3 financials, Topgolf Callaway said it expects 2024 revenues to come in at $4.2 billion. While that’s a lot, it wavers slightly from its Q2 estimate of $4.2 billion to $4.26 billion. It’s also down from 2023’s final sales tally of $4.28 billion.
The company does expect Topgolf’s revenue to hold steady at $1.79 billion for the year, even with same-venue sales dropping as much as “low double digits.” That projection didn’t change. Expected EBITDA, however, was projected to be lower.
As you’d expect, Wall Street hasn’t been thrilled. Topgolf Callaway stock was trading at just over $10 per share on Tuesday. It dropped to below $9 in yesterday’s trading. CEO Chip Brewer told investors that its Q3 results exceeded expectations which makes one wonder what those expectations were.
Like Acushnet, Topgolf Callaway has an Active Lifestyle problem. TravisMathew is usually a top performer and, despite the 11-percent sales decrease, TravisMathew has opened 10 new retail venues this year. The real problem is Jack Wolfskin which has been underperforming for several quarters. The company has started a turnaround effort for the brand in Europe and it says the brand is performing better in China.
#5: It’s a split, not a dump
The plan is for Topgolf Callaway to split into two separate companies some time in the second half of next year. When the split was announced, the company said the capital investment and operational needs of the two entities were incompatible and an amicable divorce was simply in the best interest of investors.
It’s important to stress that Callaway isn’t “dumping” Topgolf nor is it selling off Topgolf. What’s happening is an actual split of the company into two entities with stockholders getting an equal share in each new company. That means if you own 200 shares of Topgolf Callaway stock when the split happens, you’ll end up with 200 shares of Callaway stock and 200 shares of Topgolf stock.
Although self-proclaimed “real golfers” tend to scoff at Topgolf, the fact remains the Topgolf business segment will end the year with nearly $1.8 billion in sales and a healthy net profit. Topgolf wasn’t, isn’t, and never will be a “practice facility.” It’s unabashedly a golf-centric bar/restaurant/entertainment center. According to the company, some 10 percent of new golfers say Topgolf first exposed them to the game. The new Topgolf Shop is the company’s effort to capitalize on those new golfers and make it easy for them to buy their first set of golf clubs.
However, it is obvious the current trend of growth being fueled solely by new venues is unsustainable. That’s the driving force behind the split but it’s also clear that individual venue profitability is on the upswing. How Topgolf ultimately fuels growth beyond just new venues will be interesting to watch.
Final thoughts
It’s no surprise that both companies’ Q3 financials show FootJoy and Callaway’s Active Lifestyle segments are struggling somewhat. Topgolf Callaway says Golf Datatech is reporting U.S. golf shirt sales are down nine percent. Regardless, the trends for both companies’ apparel divisions are a concern. Apparel tends to be a high-volume, low-capital investment (compared to clubs) business.
Now that Callaway is on its way to becoming equipment-centric again once the split happens, it’s interesting to compare it straight up with Acushnet. Removing Topgolf from the year-to-date numbers, we see Callaway’s sales for the first nine months of 2024 totaling $1.945 billion. That’s compared to Acushnet’s YTD sales of just more than $2 billion.
Callaway expects to end 2024 tops in golf club sales for the third straight year and nine out of the last 10 years. Acushnet makes up for it by dominating golf ball sales. The two companies are somewhat even in apparel and accessory sales.
It’s also important to note that while being the biggest is a prize to those of us who watch for a living, growth and profitability remain the goal for those who actually run those companies. In that respect, the Callaway-Topgolf split is critical for Callaway as it returns to being a golf-centric brand.
CCshop
2 years ago
3% down isn’t that bad especially if overseas market is a little down. If it was more than 10% then there’s a problem. Plus the market is so flooded with product. Once we see normalization, the most supported companies, like FJ, will stay toward the top while these newer brands fade.