What happened
Shares of Topgolf Callaway Brands (MODG 0.06%) were sliding today after the golf and entertainment company beat estimates in its first-quarter earnings report but cut its full-year guidance.
As a result, the stock was down 17.7% as of 12:55 p.m. ET.
So what
Topgolf Callaway, which offers both Topgolf entertainment venues and Callaway golf equipment, posted solid results in the quarter with revenue up 12.% to $1.17 billion, topping estimates at $1.14 billion.
The company credited the strong growth to its new Topgolf venues and its new line of golf clubs, Paradym.
Topgolf revenue jumped 25% to $403.5 million, while golf equipment sales were down 5.2% to $443.7 million. Its active lifestyle category, which includes apparel and footwear under brands like Jack Wolfskin, also rose 28% to $320 million.
Operating income fell due to planned investments in marketing and labor, and overall adjusted operating income declined from $106 million to $91 million.
On the bottom line, adjusted earnings per share (EPS) fell from $0.36 to $0.17.
CEO Chip Brewer said, "The Modern Golf consumer remains engaged and our brands continue to
be well-positioned to benefit from the sustained momentum in off-course and on-course golf."
Now what
Looking ahead, the company guided to Q2 revenue of $1.175 billion to $1.195 billion, up 5.7% from the year before but below the consensus at $1.22 billion, as management cited concerns that the economy would impact corporate sales.
For the full year, it raised its full-year revenue guidance slightly to $4.42 billion to $4.47 billion, representing 11% growth. However, management cut its full-year adjusted EPS guidance from $0.70 to $0.78 to $0.63 to $0.69, a 20% decline at the midpoint.
While the investments seem to be justifed given the growth potential in Topgolf, investors weren't pleased with the pullback in profit guidance and seem to fear the impact of a recession.
