By Eric Smith

Inclement weather around the globe in 2018 took a toll on golf rounds played, which declined in the mid-single digits.

But Acushnet Holdings Corp., the parent of Titleist, was among the companies benefiting from an important industry theme that has trumped poor playing conditions: The sport’s health continues on the upswing.

“It was a challenging weather year globally,” Acushnet President and CEO David Maher said on Thursday’s earnings call with analysts. “It really is challenging as we’ve seen in quite some time, which led to rounds being off somewhere between 3 percent and 5 percent around the world. And in spite of this, the market held up—held up well—which is I think commentary on the overall health and resilience of the dedicated golfer.”

The numbers back that up. Golfers continue to buy equipment, apparel and balls, and they continue to take those purchases to both golf courses and off-course facilities like TopGolf.

An estimated 23.8 million people played golf on a course in 2017 (the last year participation results are available), in line with 2016 and the second straight year of leveling off after a four-year decline from the 2012 total of 25.3 million players, according to the National Golf Foundation.

And of the almost 24 million who played on a course in 2017, about 20 million are considered the game’s most committed golfers, those who account for about 95 percent of all rounds played and spending, according to NGF.

Add in the 8.3 million people who played only off-course and the golf market is 32 million and “continues to climb incrementally,” NGF wrote in the foundation’s 2018 Golf Industry Report.

Whether or not this momentum the industry has built over the past two years carries into 2018 and beyond remains to be seen, but most of the game’s stakeholders—brands, retailers, associations, course operators, instructors, etc.—are bullish on the sport’s fortunes.

“As long as we keep that committed number of stable golfers at around 20 million, the spending will follow,” Steve Mona, CEO, World Golf Foundation, told SGB for a feature article on golf last year. “They’re going to buy golf balls; they’re going to buy golf clubs and that’s really what drives it.”

Additionally, golf retail channels are healthy and inventory levels are solid, while the general economic climate remains strong (though fears of a recession do loom, Maher admitted).

Those factors helped bolster the industry in 2018, but it doesn’t mean Acushnet and other brands weren’t immune to the industry’s fiercest headwind at the moment—poor weather, which tends to hit consumables (golf balls) harder than other categories.

Acushnet certainly felt the effects of weather in the fourth quarter, when the company’s net income dipped 37.4 percent year over year to $11.4 million.

Q4 sales of $343.4 million were down 2.3 percent year over year and dipped 1.4 percent in constant currency, driven by decreased sales of Titleist golf clubs, Titleist golf balls and FootJoy golf wear segments, partially offset by increased sales of Titleist golf gear. Adjusted EBITDA of $36.1 million was down 11.7 percent year over year.

Read more: Acushnet’s Q4 Profits Slide On Sales Dip

However, for the year ended December 31, net income was $99.9 million, up 1.2 percent year over year, primarily as a result of an increase in income from operations.

Consolidated net sales for the full year increased 4.7 percent, or 3.1 percent on a constant currency basis, driven by an increase of Titleist golf clubs due to higher sales volumes of the company’s newly introduced TS drivers and TS fairways. Adjusted EBITDA of $230.8 million was up 3.3 percent year over year.

“While Mother Nature was especially unkind to the golf business in 2018, the industry held up well despite a weather-induced loss of rounds in many global markets,” Maher said. “Against this backdrop, Acushnet was able to capitalize, posting a 5 percent sales increase for the year, fueled by new product innovation and some great work by our associates.”

The company’s business segments for 2018 break down like this:

  • Titleist golf balls: 2.3 percent increase in net sales (1.2 percent increase on a constant currency basis), primarily driven by a sales volume increase attributed to the new AVX premium performance golf balls and performance golf balls launched in the second quarter and first quarter, respectively.
  • Titleist golf clubs: 11.9 percent increase in net sales (10.5 percent increase on a constant currency basis), primarily driven by higher sales volumes of the new TS drivers and TS fairways launched in the third quarter of 2018 and by our wedges launched in the first quarter of 2018.
  • Titleist golf gear: 2.2 percent increase in net sales (0.3 percent increase on a constant currency basis), primarily driven by higher average selling prices across all categories of the gear business, largely offset by a sales volume decline in travel gear.
  • FootJoy golf wear: 0.5 percent increase in net sales (1.4 percent decrease on a constant currency basis).

For 2019, the company expects consolidated net sales to be approximately $1,655 million to 1,685 million and consolidated net sales on a constant currency basis to be in the range of up 2.8 percent to 4.7 percent. The company projects adjusted EBITDA to be approximately $235 to 245 million.

“As we head into 2019, we are optimistic about the opportunities in front of us,” Maher said. “The global golf business is structurally healthier than in recent years, and the dedicated golfer remains, we believe, the most attractive market opportunity and one we are particularly suited to serve, as they place a premium on product performance and quality.

“Against this backdrop, Acushnet sees itself in a strong position. The new Pro V1 and Pro V1x are off to great starts, our TS metals bring great momentum into the new year and we have broad strength across our entire golf club line. New FootJoy and gear product lines have been well received and are off to promising starts early in the season. With leading products across a broad platform, we are confident in our ability to successfully execute our strategy in 2019 and beyond and deliver as a long term, total return investment for our supportive shareholders.”

Photo courtesy Acushnet

 

[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]