If you play golf the way I do, your clubs probably have the longevity of a middle-school romance. Most golfers rarely have time to practice, and the brunt of so many duffs, hooks, and slices are borne by the equipment.
This trend of frequent club replacement should be a good thing for cutting-edge manufacturers such as Callaway Golf
Callaway reported a 16% drop in revenues for the third quarter, which was also 11% below analysts' expectations; the company dropped prices to clear 2004 club inventory and also delayed the launch of products while it completes this transition. The company's net loss of $0.46 per share was a cent wider than estimates and was a turnaround from the $0.04 per share earned last year.
Competition from companies such as Nike
Third-quarter results aside, the obvious transition in product mix has begun. Woods (not Tiger) made up 31% of total sales at the end of 2003 and accounted for only 11% of sales in the third quarter; irons shifted from 33% of sales to 28%; putters were 18% of sales in 2003 and only 12% in the latest quarter; balls made a dramatic increase from only 12% of sales to 32%; and accessories and other items (including apparel) were 8% and are now about 17% of sales.
The Callaway Golf brand accounted for 21% of Ashworth's
The company's strong brand name will go a long way toward supporting a decent revamped operating strategy. Callaway is planning to launch three new products by the end of 2004, with these products targeting categories less dependent on retail inventory levels and more reliant on consumer demand. The shares should be seen as fairly risky, given the fragile nature of current earnings expectations. However, given the company's decent 2.92% dividend yield and strong share of the popular golf market, the shares should be monitored closely.
Take a couple of practice swings before you line up these other views:
Fool contributor Phil Wohl spent more than 12 years on Wall Street and has a low 18-hole score of 82. He does not own shares of any of the companies mentioned.