Citing a sluggish golf market and ensuing slimmed-down inventory orders from retailers, Callaway Golf Company now expects first quarter revenues and earnings to be significantly lower than previous estimations. The company is indicating that net sales for the first quarter are estimated to be $272 million, a decrease of 26% as compared to net sales of $366 million for the first quarter of 2008. Originally, analysts polled by Reuters Estimates forecast sales of $317.3 million for the first quarter of fiscal 2009. ELY said changes in foreign currency exchange rates adversely affected net sales by approximately $22 million.
U.S. net sales are estimated to be $141 million, a decrease of 23% compared to $184 million for the same period last year.
International net sales are estimated to be $131 million, a decrease of 28% compared to $182 million last year. On a currency-neutral basis, 2009 International net sales are estimated to be $153 million, a decrease of 16% compared to the year-ago period.
Gross margins are estimated at 43% of net sales, down about 500 basis points from Q1 last year. On a currency-neutral basis, margins were estimated to be at about 46% of net sales.
Operating expenses for the quarter are estimated to be $103 million compared to $111 million for the first quarter of 2008. On a currency-neutral basis, operating expenses are estimated to be $107 million for the first quarter of 2009.
Earnings per diluted share are estimated to range between 10 cents and 12 cents per share. For the first quarter of 2008, the company reported fully diluted earnings per share of 61 cents. Analysts were expecting the company to post a profit of 42 cents per share.
Furthermore, the company said it no longer expects that its full year 2009 currency neutral earnings to be in line with 2008 earnings.
Management said they expected sales to decrease at a lower rate that projected industry-wide sales, which are expected to fall in the 15% to 20% rabge. The company estimated that annual gross profit as a percentage of net sales will be in the range of 40% to 42%, and operating expenses will range from $375 million to $390 million.
This development comes on the heels of a 2008 fourth quarter that saw sales for Callaway decline 1.8% to $171.3 million from $174.4 million in the fourth quarter of fiscal 2007. Full year revenues for 2008 declined 0.7% after a back-end that proved to be crippling for golf manufacturers and retailers across the board.
This development comes on the heels of a 2008 fourth quarter that saw sales for Callaway decline 1.8% to $171.3 million from $174.4 million in the fourth quarter of fiscal 2007. Full year revenues for 2008 declined 0.7% after a back-end that proved to be crippling for golf manufacturers and retailers across the board.
In December, Callaway also emerged victorious from a drawn out patent infringement court battle with rival Achushnet, which resulted in the permanent injunction of the popular Titleist Pro V1 and Pro V1x golf balls. The court ruled Acushnets manufacturing process of the Pro V1 and Pro V1x infringed on several patents under Callaways name, and the company was forced to alter production processes. Also of note, in March the company moved production and distribution of Callaway golf and sportswear apparel to Perry Ellis International. Callaway apparel had previously been produced by Ashworth, Inc., which was acquired by TaylorMade-adidas Golf last year.
Company President and CEO George Fellows said in a press release that retailers have been “very conservative” with inventory orders while an increasingly cautious consumer has resulted in an aggressive pricing environment that has further damaged margins.
The company recently reduced its global workforce by 10%.
