Golfweek

By ADAM SCHUPAK
Senior Writer

Callaway reported record net sales for the first quarter, but tempered hopes for another banner year saying it expects to deliver at the lower end of its guidance due to uncertainty about the economy.

Callaway president George Fellows said the company’s performance may benefit from international markets, which account for almost 50 percent of its revenues, and its gross margin initiatives are “somewhat independent of macroeconomic issues.”

Callaway’s first-quarter net income rose to $39.7 million from $32.8 million a year ago. The company posted net sales for the first quarter of $366.5 million, a 10 percent increase compared with $334.6 million for the same period in 2007.

Net sales increased in four of the five major categories:

• Woods: $116.6 million, up 13 percent
• Irons: $96.5 million, down 4 percent
• Putters: $34.6 million, up 19 percent
• Golf balls: $58.4 million, up 9 percent
• Accessories and other: $60.4 million, up 24 percent

The company received a boost from strong demand for new fairway woods and hybrids. This increase was offset slightly by what it termed expected lower, second-year sales of its Fusion drivers, the FT-5 and FTi.

Double-digit growth in sales of Odyssey putters was driven by the Black Series, Divine Line, and sell-in of new products. Its biggest percentage gain year-over-year continues to be in accessories, which was attributed primarily to Top-Flite packaged club sets, Callaway Junior sets and headwear. Golf ball sales increased thanks to the launch of the HX Hot Bite, HX Tour ix products and new Top-Flite lines. Sales of irons dipped slightly due to lower, second-year sales of its X-20 and X-Forged irons; this was somewhat offset by gains recorded by its new FT and Big Bertha line of irons as well as its X-Forged series of wedges.

Net sales increased in all five major regions:

• United States: $184.4 million, up less than 1 percent
• Europe: $66.1 million, up 18 percent
• Japan: $53.3 million, up 41 percent.
• Rest of Asia: $26.5 million, up 16 percent
• Other foreign countries: $36.2 million, up 6 percent

Fellows singled out sales of the Legacy driver, designed specifically for the Asian market, which sold particularly well in Japan.

“The international (category), particularly throughout Europe and Japan, is quite solid at this stage,” Fellows said, “and appears to be insulated from the negative prognostications about the U.S. and Canadian retail environment.”

However, the company expects net sales in 2008 likely will fall toward the lower end of its forecast of $1.15 billion to $1.17 billion; earnings are expected to be between $1.08 and $1.18 a share.

• • •

Adam Schupak is a Golfweek senior writer. To reach him e-mail aschupak@golfweek.com.


Posted: 5/3/2008

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