Acushnet Holdings Corp.’s second-quarter sales results topped analyst estimates as weakness at FootJoy was offset by momentum in Titleist golf balls and golf clubs. 

David Maher, president and CEO, told analysts, “Supporting the company’s first half results, we are enthused by the golf industry’s overall health and stability with participation remaining vibrant even as golfers return to many pre-COVID activities.”

Maher said some 250 million rounds of golf were played in the U.S. during the first half of 2023, a 5.5 percent gain versus last year and roughly a 16 percent increase compared to 2019. Total worldwide rounds for the first half are forecasted to be up low-single-digits as domestic gains more than covered modest weather-related declines outside the U.S.

Maher said, “The sport continues to generate strong interest and is benefiting from new golfers who have entered the game during the past few years.”

Overall sales in the second quarter ended June 30 advanced 4.7 percent, or 6.4 percent on a constant-currency basis, to $689.4 million, exceeding Wall Street’s consensus estimate of $675 million. Net income rose 12.3 percent to $74.7 million, or $1.09 a share, surpassing Wall Street’s consensus estimate of 93 cents.

Acushnet raised its annual EPS guidance due to lower freight and reduced currency headwinds.

Titleist Golf Balls Sales Increased 20 Percent
Titleist golf balls’ sales grew 19.8 percent currency-neutral (18.0 percent reported) to $237.6 million. Maher said Titleist golf balls were also up 20 percent in the half, benefiting from the successful launch of the Pro V1. In addition to major wins by Titleist and FootJoy brand ambassadors Wyndham Clark and Brian Harman at the U.S. Open and Open Championship, respectively, the Titleist ball was used by the winners of the U.S. Women’s Open Evian Championship, Senior Open U.S. Junior Amateur and U.S. Girls Junior Amateur.

“Operationally, our team continues to optimize and expand output to meet strong global demand for Titleist golf balls, contributing to double-digit growth in all global regions for the half as golfer response to the new Pro V1 and Pro V1x models has been positive across all markets,” said Maher. “Titleist golf ball retail inventories are approaching normalized levels except for Pro V1 models, which we expect to remain in tight supply into the fourth quarter.”

Titleist Golf Club Sales Expand 16 Percent
Titleist golf club sales grew 16.3 percent on a currency-neutral basis (14.5 percent reported) to $188.0 million in the quarter. “We are seeing a positive response to our entire golf club product line, which, combined with our deep commitment to custom fitting, are the primary catalysts to our growth and momentum,” said Maher.

TSR drivers, the most played models on the PGA Tour, lead Titleist’s golf club gains. Scotty Cameron putters “are having another strong year, fueled by the great response to our new super-select models introduced earlier this year,” said Maher.

Maher said that with clubs launched on a two-year cycle, T-Series irons will begin shipping later this month. “Initial response across worldwide tours and with trade partners is meeting our high expectations, and we are confident in our team’s ability to execute a successful launch campaign throughout the second half,” said Maher.

Titleist Golf Gear Sales Growth Slows
Titleist golf gear’s sales improved 2.9 percent on a currency-neutral basis (1.2 percent reported) to $69.9 million, slowing from 24 percent currency-neutral growth in the first half. Maher said the first-half growth came notably in golf bags and travel gear, while the gear segment also benefited from the recalibration of shipments in 2023 after facing supply constraints in 2022.

FootJoy Sales Decline 10 Percent
FootJoy sales were down 9.5 percent (11.1 percent reported) to $158.2 million in the quarter. FootJoy sales were flat in the half. FootJoy results reflect elevated footwear inventory levels in the marketplace and increased promotional activity in many regions.

Maher said, “We are confident in our ability to protect FootJoy’s premium shares and leadership position; however, we expect that it will be a few quarters until retail inventories return to healthier levels.”

Maher noted that while FootJoy’s footwear sales were down compared to the first half of 2022, they were almost 30 percent above 2019. FootJoy’s apparel continues its positive trend, with revenues up double-digits.

KJUS, the ski and golf sportswear acquired by Acushnet in 2019, posted double-digit gains in the half, led by nearly 25 percent growth in the U.S. market.

U.S. Leads Regional Gains
On a geographic basis, sales in the U.S. increased 14.2 percent to $401.4 million, driven primarily by increases of 23.0 percent in Titleist golf balls and 25.9 percent in Titleist golf clubs from higher sales volumes of Pro V1 and Pro V1x golf balls and TSR drivers, fairways and hybrids and Scotty Cameron Super Select putters. This increase was partially offset by a decrease of 5.1 percent at FootJoy due to lower footwear volumes.

Outside the U.S., international sales decreased 2.5 percent on a constant-currency basis (6.3 percent reported). In Korea, sales declined 7.8 percent on a currency-neutral basis (12.1 percent reported) to $86.6 million. The declines came despite sales volume increases in Titleist golf balls and Titleist golf clubs.

EMEA sales were down 5.1 percent currency-neutral (6.3 percent reported) to $86.1 million. Higher sales volumes in Titleist golf balls partially offset lower sales volumes in FootJoy golf wear.

Japan’s sales were down 9.4 percent currency-neutral (14.6 percent reported) to $32.8 million due to lower sales in Titleist golf clubs and FootJoy golf wear. Rest of the World’s sales gained 10.5 percent (5.2 percent reported) to $82.5 million, with increases across all reportable segments.

Gross Margins Gain 130 Basis Points
Gross margin improved 130 basis points to 53.5 percent, mainly due to lower inbound freight costs across all reportable segments.

SG&A expense increased 1.2 percent, mainly due to higher advertising and promotion expenses to support new product launches and costs related to optimizing its distribution and custom fulfillment capabilities. These increases were offset by lower IT-related expenses in Q2, which has shifted to the back half of 2023. As a percent of sales, SG&A expense declined to 35.1 of sales from 36.3 percent.

R&D expenses gained 18.4 percent to $16.5 million, mainly due to higher employee-related expenses. Adjusted EBITDA jumped 24.0 percent to $132.1 million.

Inventories closed the quarter at $562.3 million, up 20.3 percent year-over-year but down 16.7 percent since the start of 2023. Sean Sullivan, CFO, said, “We are comfortable with our inventory quality and position given the current state of demand in the supply chain. We expect inventories to decrease in Q3 before increasing in Q4 as we prepare for 2024 product launches.”

2023 Guidance
Acushnet expects full-year 2023 consolidated net sales to be approximately $2,350 to $2,400 million, up from previous guidance in the range of $2,325 to $2,375 million due to easing currency headwinds. Consolidated net sales are still expected to increase from 5.0 percent to 7.2 percent on a constant-currency basis.

Maher said, “Golf ball sales momentum is expected to continue in the back half, although we still have constraints on the available supply of Pro V1 and Pro V1x balls. Concerning golf clubs, we are enthused about our upcoming iron launch, and it is worth noting that the second half sales will be comping against a Metals launch from last year, and Metals have a larger initial inventory pipeline than irons, which are more custom fit and built to order. Titleist golf gear sales are expected to be lower in the second half, mainly due to outsized growth in 2022 in this segment as our supply chain and fulfillment capabilities catch up. Finally, we have tempered our outlook in the FootJoy golf wear segment given the elevated marketplace inventories in the footwear category.”

Adjusted EBITDA is projected to be approximately $355 to $375 million, compared to previous guidance in the range of $345 million to $365 million. The second half is expected to see promotional activity, notably in footwear and unfavorable footwear manufacturing overhead absorption, with the guidance adjustment due to lower freight and reduced headwinds in currency.

Photo courtesy Titleist