Citing “recessionary conditions,” and soft international and domestic sales, Callaway Golf Company has cut its 2008 profit projection.
ELY currently estimates that for the full year 2008, net sales will be in the range of $1.125 billion to $1.145 billion and that its pro forma fully diluted earnings will exceed 2007 and will be in the range of 92 cents to $1.02 per share. Callaway had previously estimated that net sales would be at the higher end of the range of $1.145 billion to $1.165 billion and that pro forma earnings per diluted share would be at the lower end of the range of $1.08 to $1.18. Pro forma earnings exclude after-tax charges related to the gross margin improvement initiatives in the amount of approximately 11 cents per share.
Based on current information, Callaway estimated its net sales for the third quarter of 2008 will be $213 million down from $236 million for the year-ago quarter. Management also estimated that the Q3 loss per share would range from 12 cents to 14 cents. For the third quarter of 2007, the company reported fully diluted earnings of 2 cents per share.
“The significant deterioration in global economies over the last several weeks of the third quarter have finally impacted what had been a record year for Callaway Golf,” commented George Fellows, president and CEO of Callaway Golf. “Although we are disappointed with the effect these conditions have had on our third quarter sales, the operating expense contingency plans and share repurchases we implemented earlier this year have allowed us to increase pro forma earnings by approximately 5% for the first nine months of 2008 compared to the first nine months of 2007. Despite the impact of these macro-economic issues on our top-line, the fundamentals of our business remain strong.”
Fellows remained positive, maintaining that the company has a strong balance sheet with no long-term debt. He added that Callaways inventory is in line to reach the companys 20% year-end target, and operating expenses are expected to be less than projected previous guidance statements.
“Looking forward,” concluded Fellows, “we believe our 2009 new product line-up is stronger than our record setting 2007 offering, and along with the strong business fundamentals just mentioned, we feel we are well positioned for growth when the global economy and normal demand for new products finally begin to recover. In the meantime, we will continue to manage our business in a conservative and prudent manner.”
This news comes on the heels of a record-breaking first half of 2008 for ELY, which reported net sales of $732.5 million versus 2007s record of $714.6 million. Second quarter earnings were up 1.4% to $37.1 million from $36.6 million in the second quarter of 2007.
