Acushnet Holdings Corp., the parent of Titleist and Footjoy, lifted revenue guidance for the year after reporting a return to double-digit growth in the second quarter.
Consolidated net sales for the quarter increased 11.7 percent, up 9.0 percent on a constant currency basis. Said David Maher, Acushnet’s president and CEO, on a conference call with analysts, “Growth this quarter was driven primarily by higher sales volumes in Titleist Clubs, notably 718 irons and Vokey SM7 wedges, and growth in Titleist Golf Balls headlined by the successful introduction of our new AVX model. Adjusted EBITDA for the quarter was up 10.6 percent versus last year.”
On a geographic basis, consolidated net sales in the United States increased by 12.7 percent in the quarter. Net sales in regions outside the U.S. were up 10.6 percent, up 5.0 percent on a constant currency basis. On a constant currency basis, EMEA was up 8.0 percent and Korea up 5.3 percent.
Both Japan and Korea also experienced late starts to their seasons as cold weather impacted rounds which were off 3 percent and 5 percent, respectively, for the first-half.
Said Maher, “Overall, the major markets continue to be fairly stable and appeared to have recovered from various weather impacts early in the first-half. While there are pockets of higher-than-normal trade inventories, we like our position and have made the necessary and customary mid-season forecast adjustments in preparation for the back half of 2018.”
Among segments, Titleist golf balls grew 11.1 percent increase in net sales (9.1 percent increase on a constant currency basis), primarily driven by a sales volume increase attributed to our new AVX premium performance golf balls launched in the second quarter.
“The AVX premium performance ball is off to a fast start as golfers appreciate its long distance and exceptionally soft feel,” said Maher. “Performance feedback from golfers has been exceptionally positive, resulting in steady sell-through throughout North America, where it was first launched in May. In July, we began AVX in ex-U.S. markets. Globally, we have also had great reception to the new Tour Soft and Velocity models.”
He added that the Pro V1 was the most-played ball at this year’s U.S. Open, marking the 70th consecutive year Titleist has captured the number one spot at the national championship.
Maher added, “Building on the unmatched share position of the Pro V1 franchise, the launches of new Tour Soft, Velocity and AVX offer golfers more choices with differentiated performance characteristics. Our golf ball fitting teams are connecting with trade partners and golfers every day, educating and demonstrating the unmatched performance and consistency of the number one ball in golf.”
Titleist golf clubs delivered a 26.3 percent increase in net sales (23.4 percent increase on a constant currency basis), primarily driven by continued growth of our iron series introduced in the third quarter of 2017, and the company’s wedges and putters launched in the first quarter of 2018, partially offset by lower sales volumes of drivers and fairways which were in their second model year.
“This growth was driven by continued momentum in 718 irons and 818 hybrids, and the strong early response to new Vokey SM7 wedges and Cameron Select putters,” said Maher. On the PGA Tour Titleist irons, hybrids, wedges and putters have been the most played so far this year. And Titleist drivers are prominently positioned as the number two driver on tour.
Maher added, “Touching again on the excitement surrounding our new product launches, we have begun the seeding process for the new Titleist TS driver and fairway metals, with the first drivers put into competition at the U.S. Open in June. Early adoption by professionals eclipsed our high expectations with 17 players putting the TS in play for the very first time at the U.S. Open, and with TS representing 60 percent of all Titleist drivers in play at the Open championship.
“We expect adoption to steadily increase as we are able to fit more players into these exciting new products. You will hear more about the Titleist Speed project over the next several weeks as we ramp up our communication plans for the TS driver and fairway launch in late September.”
Titleist golf gear saw a 3.1 percent decrease in sales (5.7 percent decrease on a constant currency basis). This decrease was primarily due to a sales volume decline in its golf bag, travel gear and headwear categories, partially offset by higher average selling prices across all categories of the gear business.
Footjoy saw a 6.2 percent increase in net sales (3.3 percent increase on a constant currency basis, primarily driven by higher average selling prices across all FootJoy categories).
“Momentum in FootJoy apparel continues to build, with strong sellthrough results and healthy advanced booking supporting its continued growth. While FJ apparel has been global success story, it is strongest within the on course channel in the U.S., with men’s and women’s collections excelling.”
“Within footwear, the lead story is once again Pro SL, which has had a very strong sophomore season. Twenty eighteen footwear sales had been impacted by our decision to exit some price points at the low end of the value segment which, while planned, have negatively affected our year-to-date footwear comps. We believe this will be good for the brand over the long term and better position FJ to capture higher margin sales in more premium categories.”
Net income reached $39.9 million, up 20.9 percent year over year, primarily as a result of higher income from operations. Adjusted EBITDA was $79.4 million, up 10.6 percent year-over-year. Adjusted EBITDA margin was 16.6 percent for the second quarter versus 16.8 percent for the prior year period.
Gross margin was 52.5 percent, up 40 basis points year-over-year. The increase in gross profit was primarily driven from a sales volume increase of Titleist premium performance AVX golf balls. Titleist Clubs, including 718 irons and Vokey SM7 wedges, saw higher ASPs in FootJoy golf wear. Similarly, higher FootJoy ASPs and AVX largely drove the 40 basis point increase in gross margin in a quarter.
SG&A of $171.7 million was up $20.1 million or 13.2 percent versus last year. The increase in SG&A was primarily due to higher selling expense across all categories and an increase in advertising and promotion to support new product launches in golf balls in clubs.
Looking ahead, Acushnet said the company now expects revenues to range between $1.62 billion and $1.64 billion and climb in the range of 1.7 percent and 3.0 percent on a currency-neutral basis. Adjusted EBITDA is expected to be approximately $225 to 235 million.
The outlook previously called for sales in the range of $1,590 to 1,620 million and sales on a constant currency basis to be up between 1.3 percent and 3.2 percent. The expectation for adjusted EBITDA remains the same.
Photo courtesy Titleist
