By Thomas J. Ryan
<span style="color: #9e9e9e;">Acushnet Holdings Corp. reported third-quarter results that easily exceeded Wall Street’s targets. On a conference call with analysts, David Maher, president and CEO, said Titleist’s Ball Plant III and Ball Plant IV are “operating 24/7” to catch up to demand and will continue to do so in the foreseeable future.
Maher said the sales momentum noted in June and July on its August second-quarter call continued in the third quarter. He told analysts he’s hopeful the pandemic will lead to the retention of a number of new players in the coming years. Said Maher, “Golf has been a bright spot for a lot of folks. And we don’t think that just stops heading into the New Year.”
Third-quarter sales reached $482.9 million, up 15 percent versus last year and compared to Wall Street’s consensus estimate of $417.2 million.
Golf balls led the growth, posting a 40 percent increase for the period.
“Demand for our Pro V1 franchise has been especially strong, while we continue to allocate supply in order to minimize out-of-stock situations,” said Maher. He noted Titleist distributes most of its products in North America and the U.S. from California and Massachusetts distribution centers and is now looking at alternative options in the Midwest.
In August, the new Titleist Tour Speed, the brand’s first TPU or thermoplastic urethane golf ball, was successfully launched. Said Maher, “Initial sell-through of Tour Speed has been resoundingly positive and we’re excited about where we may take this TPU process technology in the future.”
Titleist club sales were off 5 percent for the quarter but Acushnet was pleased with the results given a challenging comp against last year’s iron launch and the decision to push its new TSi metals launch from August to November. A new three-model family of Titleist concept irons was introduced in September.
Titleist gear increased 27 percent for the quarter, with gains coming from all gear categories. Despite declines for most of the second quarter, both the Titleist bag and glove businesses are now comping positive for the year. FootJoy posted a 12 percent gain for the quarter, with increases across all categories, including apparel, a category particularly struggling earlier in the pandemic.
Maher said the third-quarter sales broadly reflect strong gains from Acushnet’s e-commerce platforms as trade partners and direct company-owned sites continue to generate increased traffic and sales.
Net income increased 112.1 percent to $63.2 million, or 84 cents a share, primarily as a result of an increase in income from operations, partially offset by an increase in income tax expense. Wall Street’s consensus estimate had been 39 cents.
Adjusted EBITDA was $99.2 million, up 77.8 percent year-over-year. Adjusted EBITDA margin was 20.5 percent for the third quarter versus 13.4 percent for the prior-year period.
<span style="color: #9e9e9e;">By region, the U.S. market set the pace, posting a 26 percent increase, as all segments and channels delivered gains for the quarter. EMEA also had a strong quarter with sales up 14 percent. Korea has been steady all year long with sales up 10 percent in the third quarter. Said Maher, “Rounds of play in the U.S. and EMEA have been especially strong since play resumed in the second quarter and play in Korea has trended up low single digits for most of the year.”
Japan has been most impacted by COVID. Said Maher, “Japan has an older golfing population and many golfers have elected to stay sheltered at home and not travel to the golf course. Japan’s third-quarter results also reflect an outsized impact from our decision to move the driver launch into November.”
Regarding product innovations, new Titleist TSi drivers and fairways launch next week and have already made a positive impact across worldwide tours and with club professionals.
“TSi has been the number one driver on the PGA Tour since debuting in early September,” said Maher. “This will be one of our most comprehensive club launches our team has made the most of our decision to move our global launch dates from August to November.”
New Pro V1 and Pro V1x golf balls have been out on tour for the past month and notched their first PGA Tour win last week in Bermuda as Brian Gay won with the new Pro V1 model.
Footjoy, which is celebrating 75 years in 2020, next week launches the new Stratos line of spikeless golf shoes and will launch the heritage Premier Series in the first quarter. Maher said the KJUS golf outerwear and apparel business continues to build momentum across the U.S. and Europe while the brand’s ski side has been “more meaningfully” impacted by COVID and is not expected to recover until late next year. KJUS was acquired in July 2019.
<span style="color: #9e9e9e;">Looking ahead, Acushnet said while the company is encouraged by the increase in rounds of play and demand for products around the world in Q3 and into early Q4, it also remains cautious given the recently implemented restrictions seen in Europe, and the rising number of cases of COVID-19 in U.S.
Acushnet provided guidance for the fourth quarter against the fourth quarter of 2018 given the firm’s reliance on two-year product life cycles.
Overall sales for the fourth quarter versus Q418 are expected to be up slightly. Despite strong demand, golf ball sales are currently expected to be flat, compared to Q418, as a result of the limited availability of Titleist’s premium performance models as it begins to ramp-up production of the new Pro V1.
Golf club sales are expected to be up slightly versus Q418 with increased sales in the U.S. led by the upcoming launch of TSi metals partially offset by lower sales volumes in Japan. Footjoy is expected to decline, also from lower sales volumes in Japan. Titleist Gear sales are projected to be down due to strong comparisons versus Q418.
“Looking forward, we will continue to balance strong interest in the game and healthy consumer demand with a good amount of caution as required by these uncertain times,” said Maher. “Our new product pipeline is in great shape. And as noted our supply chain is holding up well. Additionally, retail inventories are projected to be down 5 percent to 10 percent globally, which we think bodes well for upcoming product launches. Just as important Acushnet’s strong balance sheet positions the company to make key investments in our future growth, return capital to shareholders and offer a compelling long-term investment opportunity.”
Photo courtesy Acushnet/Titleist
