Less than five years ago, Callaway Golf was almost exclusively a maker of golf clubs and balls. Today, it’s diversified through acquisitions into apparel and golf-related entertainment led by Topgolf.
Those bets are paying off. The Carlsbad company reported better than expected revenue for the third quarter driven by Topgolf’s bounce back from the pandemic, momentum in its TravisMathew and Jack Wolfskin clothing brands, and continued demand for its core golf gear.
Revenue for the quarter came in at $856 million, up 80 percent from the prior year mostly because of the addition of Topgolf in March.
“When you invest in Callaway, you are now investing in what I like to call ‘modern golf,’ a combination of traditional golf with lifestyle apparel and the world’s leading, tech-enabled golf entertainment company,” said Chief Executive Chip Brewer in a conference call with Wall Street analysts.
A mashup of a driving range, high-tech arcade and sports bar, Topgolf was acquired by Callaway for $2 billion. In the third quarter, it delivered $334 million in sales, exceeding expectations thanks to increased walk-in traffic and small group gatherings. Same-store sales rebounded to pre-pandemic levels, according to the company.
Callaway made another bet on golf-related entertainment this month when it took a $30 million minority stake in Five Iron Golf — an urban indoor golf experience offering simulator rentals, golf lessons, custom club fittings, and swanky food and beverages. It operates in New York City, Chicago, Baltimore, Philadelphia and other large cities.
In Callaway’s core golf gear business, demand remained strong despite supply chain hiccups, said Brewer. Sales increased to $290 million in the quarter, up $23 million from a year ago.
After years of stagnation, golf experienced a renaissance during the pandemic, where it was seen as a relatively safe outdoor activity. That momentum has continued this year. Rounds played in the U.S. through September were up 8.4 percent year over year, according to industry research firm Golf Datatech.
Finally, Callaway’s TravisMathew, Jack Wolfskin and other apparel brands rang up sales of $233 million in the quarter, a gain of $25 million year over year.
“Golf equipment is a great business with wind at its back, but now it’s just a portion of our business, just under 40 percent of estimated full-year revenues,” said Brewer. “Looking ahead, we are expecting all of our business units to deliver growth and each other.”
For its third quarter, Callaway posted adjusted earnings of $26 million, or 14 cents per share. That’s down from earnings of $59 million or 61 cents per share, for the same quarter last year. The decline stemmed from higher expenses related to the addition of Topgolf, among other things.
Looking ahead, Callaway is forecasting full-year revenue of $3.1 billion, compared with last year’s pre-Topgolf revenue of $1.6 billion. The company did not provide guidance for 2022 for now.
Callaway released results after markets closed. Its shares ended trading Tuesday flat but gained 2.6 percent to $29.75 in extended trading on the New York Stock Exchange.
