By Eric Smith
No tournaments like the Masters or U.S. Open to watch. No entertainment venues like Topgolf to visit with friends or family. No brick & mortar stores to browse the latest apparel or equipment.
Like most other sports, golf has seen its world turned upside down in the last month due to the coronavirus, and the impact goes far beyond course closures.
While the sport is faring better than many others—including skiing and snowboarding, whose 2019/20 season was decimated just as the busy spring period began—pain points have emerged across the otherwise solid golf industry.
Severe impacts to manufacturing, retail, entertainment venues and more have indeed created a tough lie for the sport throughout 2020, according to Joe Beditz, president and CEO of the National Golf Foundation (NGF).
“The weakest golf businesses, if they’re not properly capitalized or there isn’t enough demand for what they’re offering, will probably not survive this economic event that’s upon us,” he told SGB Executive. “But I think that, overall, golf businesses will fare better than many, many other segments of the economy.”
Social Distancing? No Problem
The highest-profile indicator of golf’s struggle, as well as its relative success, amid coronavirus-driven measures can be found on the country’s courses.
Half of all U.S. golf courses—49 percent—were still open as of April 19, albeit with strict social distancing rules in place, according to the most recent National Golf Foundation COVID-19 survey. That is up one percentage point from the previous week’s survey but down from around 75 percent earlier in the month.
There are, not surprisingly, differences among each region, with increases in the Midwest and Pacific regions and decreases in the Mountain West and Mid-Atlantic.
“The majority of golf facilities in the South remain open for play, with more than 70 percent of courses open to players in golf-rich states such as Georgia, South Carolina and North Carolina,” the report reads. “The biggest increase came in the Midwest region. The most noteworthy drop could be found in the Mid Atlantic, where most New York golf courses that had been open suspended operations in response to an updated executive order that said golf is a non-essential business. While this remains true, private clubs have been told they’re permitted to allow members access to the property with strict social distancing guidelines in place.”
However, the number of open golf courses is expected to rise in the coming weeks as state governors lift stay-at-home orders, relax social distancing guidelines and reopen their economies.
The concept of social distancing has, undoubtedly, given the duffer a perennial excuse—”Of course I sliced my ball into the rough, got to keep my distance, heh heh”—but it’s also helped the sport cope during this crisis.
“Courses are adapting in many ways,” Beditz said. “Food-and-beverage operations are largely shut down. Single-occupancy cart riding is being advised virtually everywhere so that two people aren’t sitting next to each other. Flag sticks are remaining in the hole. Rakes are being removed from bunkers. The ‘19th hole’ doesn’t exist in many places right now, but I think that the golfers can sacrifice that so long as they’re able to get out and enjoy the outdoors for four or five hours, get some fresh air and get some exercise.”
Tee Times In Demand
Course openings vary by state and sometimes even by county. Over the past month, some counties had ordered courses closed while others viewed them as an activity that could be enjoyed without risk of spreading the coronavirus.
In Florida, for example, one of the sport’s hotbeds, “guerrilla golfers” are poaching closed courses, according to a Friday report in The New York Times. So demand remains high even with a limited supply, especially among core participants—some of whom will risk a fine or worse to hit some golf balls on an actual course.
Estero Country Club at The Vines, just outside Fort Myers, FL, remains open. Business there has been relatively good—all things considered—for a variety of reasons, according to Ben Pittman, the club’s head golf professional.
“So far, our only financial impact for the golf operation has been from the elimination of guest play,” he told SGB Executive. “Member play has increased, as they are playing more rounds per week because everything else is closed. They can’t go to the movies or concerts, hockey games, spring training baseball, etc. We are also seeing seasonal residents stay here longer because the weather is better and restrictions fewer. As the weather gets warmer up north and Florida implements more precautionary measures, I anticipate the spring migration to begin to take place in earnest.”
The golf industry was on a roll to begin 2020. Golf rounds played soared 19.1 percent in February, while rounds played year-to-date through the first two months were up 15.2 percent, according to Golf Datatech. March, of course, will see a dip since many of the closures occurred in the middle of the month, although some didn’t close until month’s end or early April.
“We know they’ll be down, but how much, we don’t know,” Tom Stine of Golf Datatech told SGB Executive.
Golf clubs are feeling the pain of the coronavirus, with revenue losses due to reduced play and ancillary services, including retail sales. But Stine is bullish on rounds played numbers to rally once the immediate impact of the coronavirus has passed, sometime in late spring or early summer. A Golf Datatech survey showed that most core golfers, about 91 percent, plan to “play about the same” amount of golf due to the coronavirus.
Once people are told they can leave their house and resume normal activities—something that’s happening in Florida, Georgia and other states—albeit at a safe distance from one another, golfers will be eager to get back to their favorite pastime.
“You can’t go in the clubhouse, but it’s one of those activities where, if you follow the social distancing rules, you can you can get some fresh air and you can get some exercise,” Stine said.
Manufacturing Hit Hard
Golf equipment manufacturers have dealt with unprecedented headwinds on the supply side, but now they face sell-in issues as retailers sit on a glut of inventory.
Achushnet Holdings Inc.—the parent of Titleist, FootJoy, Kjus and other assets—is projecting significant pressure on retail sales. The company estimates a $40 million impact on revenue and an $18 million effect on adjusted EBITDA in the second quarter, specifically “disruption to our apparel, gear and club businesses,” said David Maher, president and CEO.
Meanwhile, Callaway Golf Co. in February lowered its outlook for 2020 because the coronavirus is “estimated to have a negative impact of $25 million on sales [into China] and $13 million on EBITDA” for the year, according to CFO Brian Lynch.
The situation could’ve been worse for Callaway, which last year shifted some of its manufacturing due to the U.S.-China trade war, something many businesses did to avoid the added tariffs from imports.
There had been some potential green shoots for the industry. KeyBanc Capital Markets included Callaway in a March note to investors titled “Stock Ideas to Consider Now.” The analysts wrote that they “expect golf (as both a sport and as an industry) to continue to benefit as consumers are unable to participate in most indoor-based/large crowd activities (movie theaters, sporting events, etc.).”
But the outlook isn’t quite as rosy now. Callaway has enacted layoffs and furloughs, and its stock (NYSE: ELY) has lost about half its value since late January.
And Acushnet furloughed most employees and suspended golf ball manufacturing at its Massachusetts plant in late March; it doesn’t expect to resume operations until May 4. The company’s stock (NYSE: GOLF) is down about a third since late January.
More will be known about the supply-side, production and sell-in hits to Acushnet’s and Callaway’s financial performance when the manufacturers report first-quarter earnings in early May.
Online Sellers Stable While Brick & Mortar Struggles
Golf retailers, from big-box stores to small specialty shops, are feeling the brunt of the coronavirus crisis. Most of their brick & mortar locations have been closed for more than a month, and those without any kind of e-commerce presence are especially hurting.
“All of the major retail outlets, especially the national chains, are closed except for curbside or online business,” Beditz said. “Retail has shrunk dramatically, therefore the spring orders are not flowing into the OEMs. There’s no place to ship wholesale shipments when no one is ordering or reordering. Supply chain issues will probably be fixed, hopefully resolved, before their current inventories are shipped into the retail channels, but otherwise, I think that retail and OEM are two of the hardest-hit segments right now.”
Online-only sellers haven’t seen the same hit, according to Ed Byman, CEO of Global Value Commerce (GVC), whose websites include GlobalGolf.com, GlobalGolf.ca, 3balls.com and FairwayStyles.com.
Byman, a former pro player who was on the PGA Tour for a few years in the late 1970s, started GVC in 2001. He said the company has remained operational after implementing strict guidelines—spread-out employees, regular sanitizing, wearing of face masks, etc.—which have become commonplace in the warehouses and distribution centers of online businesses across the country.
“We’re open for business; we’re shipping every day,” Byman told SGB Executive. The actual offices with the merchandising team, the marketing team, the IT team, the accounting team, those people are all working remotely other than senior management. But we’re very fortunate in that we’re e-commerce only, so we don’t interface with the public.
While sales and website traffic are slightly down, and sales will probably continue to dip amid a soft demand environment and drastically altered consumer spending habits, Byman said the company’s conversion rate is up. And he added that GVC is well-positioned to tap into what he sees as an emerging golf apparel and equipment trend during and after the coronavirus crisis.
“People are value-oriented right now,” he said. “They still want to play, but instead of that $550 driver, they might buy a $299 driver. That’s who we speak to. That’s a real strength of ours. At the same time, we’re being very promotional just to make sure that people know that we’re here and we’re here to support them. It’s a great time to buy golf equipment right now because you can get a heck of a deal.”
With half of golf courses closed but perhaps reopening soon, the expectation is that core golfers will be back in the tee box in no time. But the economic toll of the pandemic makes the return of apparel and equipment sales a little harder to gauge, according to Estero Country Club’s Pittman.
“How we emerge from this is far from certain,” he said. “Will core golfers rush out to play and buy equipment, etc.? Depends on how long they had to go without a paycheck during all this madness. They may want nothing more than to have the ability to miss that three-footer again, but will they be able to afford to? The economic toll of this pandemic will determine much of the recovery from it.”
While acknowledging the toll the coronavirus has taken, and will continue to take, on the sport, Beditz said golf’s consumer base is strong, as are many golf businesses. The sport has grown its base since the Great Recession of 2008/09 and has attracted a new group of participants through the rise of off-course venues like Topgolf.
Now, he is banking on a couple of factors to provide surge in play, manufacturing and retail later this year. First, the reopening of courses and retail stores in the next couple of months. Second, the return of major golf tournaments this fall.
Each will provide the much-needed jumpstarts to the sport’s revenue and buzz, however late in the year, that golf needs to get out of the rough.
“Golf has been around for four centuries,” he said. “This interruption is not going to stop golf. We might have a reset, but golf is the most popular participation sport in the country. So while I’m concerned about the impact on individual businesses, I think golf, as a whole, can be assured that its customer base is going to be there when the economy and our society come out the other side of this pandemic.”
Photo courtesy Blue Ridge Shadows Golf Course, Virginia. A slice of foam at the bottom of the cup elevates the holed ball making them easier to remove to keep customers safe.