Callaway Golf Company reported net sales in the second quarter increased 24 percent to $305 million. The increase was led by a 64 percent increase in sales of woods, primarily due to strong sales of the EPIC line of woods, and a 74 percent increase in gear, accessories and other, primarily due to the addition of the new business ventures, OGIO and the Japan apparel joint venture. The overall increase in net sales reflects the company’s continued brand momentum and increased hard goods market share, as well as increased sales in all operating segments and in all reporting geographic regions.
In addition to the sales increase, the company also recognized a significant increase in operating income. The company’s 2017 second quarter operating income increased 135 percent to $49 million as compared to the second quarter of 2016. The company’s diluted earnings per share was 33 cents for the second quarter of 2017 compared to 36 cents for the comparable period in 2016 (which included a $17.7 million gain on the sale of a small portion of the company’s Topgolf investment). In addition, as a result of the company’s prior deferred tax valuation allowance, the company did not recognize U.S. income tax expense in the second quarter of 2016. On a non-GAAP basis (which excludes from 2017 the $2.3 million of OGIO non-recurring transaction and transition expenses and from 2016 the Topgolf gain, and which applies an estimated non-GAAP tax rate of 38.5 percent for the second quarter of 2016), the company’s earnings per share for the second quarter of 2017 increased to 34 cents as compared to 12 cents for the comparable period in 2016.
As a result of this better-than-expected second-quarter performance and expectations for continued brand momentum for the second half of the year, the company increased its full-year sales guidance to $980 million to $995 million as compared to its prior guidance of $960 million to $980 million. The company also increased its full year non-GAAP earnings per share guidance to 40 cents to 45 cents compared to prior guidance of 31 cents to 37 cents. The full year non-GAAP guidance excludes an estimated $7 million (5 cents per share) of non-recurring OGIO transaction and transition expenses but does not include any effect from the pending acquisition announced earlier today.
“We are very pleased with our 2017 first half performance,” commented Chip Brewer, president and CEO of Callaway Golf company. “This year’s product line-up, including the EPIC driver and Chrome Soft golf ball franchise, has resonated strongly with golfers. As a result, our brand momentum has increased and our hard goods market share has increased in every major region, resulting in double-digit net sales growth and double-digit EBITDA growth. Furthermore, our new ventures, namely the apparel joint venture in Japan and the OGIO business, continue to perform well. We are also very pleased to announce our agreement to acquire TravisMathew. It is an exceptional high-growth golf and lifestyle apparel company that fits extremely well with our business, growth strategy, brands and culture. Moving into the second half of the year, we are cautiously optimistic about the golf industry overall and very excited about TravisMathew becoming a part of Callaway.”
Photo courtesy Callaway Golf
