Golf is a funny game. If you're like me, you end up in the rough, woods, sand, and water much more often than in the fairway. But, despite a plethora of shots that land in a rough spot, it takes just one drive in the middle of the fairway to keep you coming back for more. Well, Callaway's (NYSE:ELY) fourth-quarter and full-year results seemingly place the company in a British Open crater-size sand trap, but the company's outlook puts it in the middle of the fairway.
Callaway reported a net loss of $28.5 million, or $0.42 per share for the quarter. Excluding charges incurred for its Top-Flite acquisition, the net loss for the quarter totaled $25.3 million, or $0.37 per share. While the numbers obviously improved somewhat when the charges were excluded, they still don't come close to matching the expectations of a per-share loss of $0.31.
The full-year results aren't any better. Callaway reported an annual loss of $10.1 million, or $0.15 per share on sales of $934.6 million. Excluding the Top-Flite charges, the company generated net income of $7.4 million, or $0.11 per share, well under the estimates of $0.19 per share.
As far as its merchandise, Callaway's woods continue to suffer in the face of stiffer competition as its sales plummeted 35%. However, the brand seems to be making a fashion statement, with clothing sales nearly doubling to $17.8 million. And golf balls, which now make up the company's biggest segment, generated a 25% increase in sales for the year.
Callaway is obviously encouraged by this section of the report and maintains that the disappointing results were caused by the company's initiative to reduce its inventory levels. It also contends that its efforts have been successful and it is beginning 2005 in a much better position that it was in six months ago.
While the company's restructuring efforts seem likely to improve Callaway's 2005 results, I'm not sure it's out of the woods just yet. I'd like to see how its new launch of Top-Flite and its new Ben Hogan clubs perform and whether its popular brands can continue to hold off the competition. In the meantime, I'll remain in the gallery and hold off teeing up just yet.
Fool contributor Mike Cianciolo has swung a Big Bertha but doesn't own shares of Callaway.
