Acushnet Holdings Corp., the parent of Titleist and Footjoy, reported earnings slid 3.5 percent in the second quarter ended June 30 as sales slumped 3.3 percent due to a decline in golf club sales.
“Through the first six months of the year, our business has been led by nice gains in Titleist golf balls, Titleist gear and FootJoy golf wear,” said David Maher, Acushnet’s president and chief executive officer. “Our new Pro V1 and Pro V1x models are off to great starts in all global markets, and the Titleist ball count across worldwide professional tours is 73 percent, more than eight times our nearest competitor.
“Titleist TS drivers have been the most played driver at 28 of 35 events on the PGA Tour this season, validating our TS metals speed platform which delivers terrific ball speed and total game performance”, continued Maher. “Gains in Titleist gear were led by strong acceptance of our new stand bags, the largest component of that business, and the new FJ Flex and Fury golf shoes have been well received along with the 2019 FootJoy performance outerwear and apparel lines. We continue to be excited about the second half of the year, as we are set to launch several innovative new products led by our new Titleist T- Series irons, which will arrive in golf shops later this month. Across all markets, Acushnet associates and our valued trade partners continue to do great work presenting and fitting Titleist and FootJoy products to dedicated golfers.”
Summary of Second Quarter 2019 Financial Results
Consolidated net sales for the quarter decreased by 3.3 percent. On a constant currency basis, consolidated net sales were down 0.8 percent resulting from a decrease of $8.4 million in net sales of Titleist golf clubs primarily related to lower sales volumes of irons and wedges, partially offset by higher sales volumes of TS drivers and fairways, as well as an increase of $4.8 million in net sales of Titleist golf balls partly driven by sales of our latest generation Pro V1 and Pro V1x golf balls.
On a geographic basis, consolidated net sales in the United States increased by 1.4 percent in the quarter, driven by an increase of $3.0 million in net sales of Titleist golf balls and an increase of $1.7 million in net sales of Titleist golf gear, partially offset by a decrease of $1.8 million in Titleist golf clubs. Net sales in regions outside the United States were down 8.7 percent and down 3.3 percent on a constant currency basis. On a constant currency basis, Japan was down 13.2 percent, EMEA was down 5.0 percent, and Korea was up 5.5 percent. In Japan and EMEA, the decrease in net sales was primarily due to decreases in sales of Titleist golf clubs and FootJoy golf wear, mainly in the footwear category. In Korea, the increase in net sales was primarily due to an increase in Titleist gear sales across all categories.
Segment specifics:
- 0.6 percent increase in net sales (2.8 percent increase on a constant currency basis) of Titleist golf balls partly driven by higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls which were launched in the first quarter of 2019, partially offset by sales volume declines in our AVX models which were introduced in the second quarter of 2018 and our performance golf balls which were in their second model year.
- 9.2 percent decrease in net sales (7.1 percent decrease on a constant currency basis) of Titleist golf clubs. This decrease primarily resulted from lower sales volumes of our irons and wedges which were in their second model year. The decrease was partially offset by higher sales volumes of TS drivers and fairways, which were launched in the third quarter of 2018.
- 2.2 percent increase in net sales (5.2 percent increase on a constant currency basis) of Titleist golf gear. This increase was primarily driven by sales volume increases in our golf bag, Titleist glove and travel gear categories.
- 4.5 percent decrease in net sales (2.0 percent decrease on a constant currency basis) in FootJoy golf wear primarily as a result of lower sales volumes and average selling prices in the footwear category, partially offset by higher sales volumes and average selling prices in apparel.
Net income attributable to Acushnet decreased by $1.4 million to $38.5 million, down 3.5 percent year over year, primarily as a result of a decrease in income from operations, partially offset by a decrease in income tax expense.
Adjusted EBITDA was $75.7 million, down 4.7 percent year over year. Adjusted EBITDA margin was 16.4 percent for the second quarter versus 16.6 percent for the prior year period.
Summary of First Six Months 2019 Financial Results
Consolidated net sales for the first six months decreased by 2.6 percent. On a constant currency basis, consolidated net sales were down 0.1 percent due to a decrease of $31.9 million in net sales of Titleist golf clubs primarily related to lower sales volumes of irons and wedges, partially offset by higher sales volumes of TS drivers and fairways as well as an increase of $24.7 million in Titleist golf balls partly driven by our latest generation Pro V1 and Pro V1x golf balls.
On a geographic basis, consolidated net sales in the United States increased by 3.1 percent in the six month period. The increase in net sales in the United States resulted from an increase of $13.3 million in net sales of Titleist golf balls and an increase of $6.9 million in net sales of FootJoy golf wear, partially offset by a decrease of $7.8 million in Titleist golf clubs. Net sales in regions outside the United States were down 8.6 percent and down 3.4 percent on a constant currency basis. On a constant currency basis, Japan was down 16.8 percent, Korea was up 1.8 percent and EMEA was up 0.4 percent. In Japan, the decrease in net sales was primarily due to a decrease in sales of Titleist golf clubs. In Korea, the increase in net sales was primarily driven by increased sales in Titleist gear and Titleist golf balls. In EMEA, increased net sales in Titleist golf balls were largely offset by lower net sales of Titleist golf clubs.
Segment specifics:
- 6.0 percent increase in net sales (8.3 percent increase on a constant currency basis) of Titleist golf balls partly driven by higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls launched in the first quarter of 2019 and our AVX premium performance golf balls introduced in the second quarter of 2018, partially offset by a sales volume decline in our performance golf balls which were in their second model year.
- 15.5 percent decrease in net sales (13.6 percent decrease on a constant currency basis) of Titleist golf clubs. This decrease primarily resulted from lower sales volumes of our iron series and wedges which were in their second model year. The decrease was offset by higher sales volumes of TS drivers and fairways which were launched in the third quarter of 2018.
- 2.0 percent increase in net sales (5.0 percent increase on a constant currency basis) of Titleist golf gear. This increase was primarily due to a sales volume increase in our travel gear, golf bag and Titleist glove categories.
- 2.0 percent decrease in net sales (0.8 percent increase on a constant currency basis) in FootJoy golf wear. This increase was primarily driven by a sales volume increase and higher average selling prices in apparel, partially offset by lower sales in the footwear category due to lower average selling prices.
Net income attributable to Acushnet decreased by $8.0 million to $73.4 million, down 9.8 percent year over year, primarily as a result of a decrease in income from operations, partially offset by a decrease in income tax expense.
Adjusted EBITDA was $139.9 million, down 10.5 percent year over year. Adjusted EBITDA margin was 15.6 percent for the first six months versus 17.0 percent for the prior year period.
Cash Dividend and Share Repurchase
Acushnet’s board of directors today declared a quarterly cash dividend in an amount of $0.14 per share of common stock. The dividend will be payable on September 13, 2019, to stockholders of record on August 30, 2019. The number of shares outstanding as of August 2, 2019 was 75,365,727.
During the quarter, the company repurchased 253,385 shares of common stock on the open market at an average price of $24.38 for an aggregate of $6.2 million.
2019 Outlook
- Consolidated net sales are expected to be approximately $1,655 to 1,685 million.
- Consolidated net sales on a constant currency basis are expected to be in the range of up
2.8 percent to 4.7 percent. - Adjusted EBITDA is expected to be approximately $235 to 245 million.