Callaway Golf Company continues to make strides away from its past troubles, largely thanks to the strength of new products. The company expects net sales for the second quarter to amount to approximately $380 million, representing an increase of approximately 11% over last year’s $342 million. The company said that strong sales of the FT-5 and FT-i drivers, as well as the X-20 irons, drove the top line gains with increases in accessories and balls also contributing.


The delays in re-orders that had several retailers complaining during Q1 conference calls seem to be nearly in the past with President and CEO George Fellows commenting, “While demand for our fusion drivers had been outstripping capacity, by the end of the quarter we were able to make significant headway, and expect to have the supply issue completely behind us by the end of July.”


Sales were not the only improvement the company expects to realize as ELY now anticipates second quarter gross margins of 46% of sales, up approximately 500 basis points from 41% of sales last year.  On a pro forma basis, excluding charges that are helping to increase margins, GM would have been 47% of sales.  The company noted that an increased mix of sales of higher margin products such as fusion drivers and X-series irons were the main force behind the improvement, with the initiatives designed to improve margins also working in the company’s favor.


The company estimates that its operating expenses for the quarter will be approximately $113 million, or 29.7% of net sales, increasing slightly from 29.6% of sales in the second quarter of last year.  However, the slight expense increase was not enough to slow the large margin improvements which combined with the sales gains to drive the bottom line.  Management estimates that earnings per diluted share will increase over 50% to between 50 cents and 53 cents, including long-term incentive compensation expense and after-tax charges of approximately 2 cents per share related to the gross margin improvement initiatives.  Diluted earnings per share totaled 33 cents during the year-ago quarter including a 2 cents per share charge for restructuring initiatives and costs incurred through the integration of the Top-Flite business.