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The world is a much tougher place today than it was a year ago and even then no one was jumping up and down that times were great. The fall off has been dramatic and caught many (including those in Washington) off guard. The recession began last year and not everyone was on board from a recognition stand point of how the landscape was changing. As the wave of bad news came one after another, golf was hopeful that it might be insulated from the big picture. In part this was fostered by the fact its selling season for tee times to equipment was shut down for most of the country thanks to old man winter’s impending arrival. Golf’s seasonal occupation, it was hoped might allow for it to sidestep the carnage being experienced by others, for example in the auto or banking industries.
But when the calendar turned to 2009, there was some muted optimism that maybe it wasn’t going to be as bad as some where whispering. As is the case each and every year, hope springs eternal when Mother Nature begins to raise the mercury levels. But wishful thinking wasn’t going to supersede the deteriorating market conditions. Consider the following exhibit A of what is likely to be the first of many that show the golf industry isn’t recession proof or above the global economic crisis.
Callaway Golf Company (ELY: NYSE) announced its preliminary financial results for the first quarter of 2009. The company estimates its sales will be $272 million, a drop off of 26% versus a year ago when it enjoyed sales of $366 million. The stronger US dollar, Callaway said impeded sales by approximately $22 million in the 2009 first quarter. Domestic sales are expected to be down 23% from a year ago coming in around $141 million, while international sales sunk 28% and are estimated to be $131 million. “Global economic conditions have proven to be more severe than initially anticipated,” George Fellows, President and CEO of Callaway Golf stated in a company press release.
Earnings per diluted share are estimated to range from $0.10 to $0.12 (on 63.3 million shares). For the first quarter of 2008, the Company reported fully diluted earnings per share of $0.61 (on 64.8 million shares).
Based on Callaway Golf’s preliminary first quarter results and management’s current view regarding the remainder of the year, it no longer expects that in 2009 it can make the same amount of money as it did a year ago when backing out the effects of foreign exchanges rates. The company is estimating industry-wide sales for 2009 to decrease approximately 15% to 20% compared with 2008. But despite its first quarter results, Callaway believes its 2009 sales will outperform the forecast it provided for the golf industry. The basis for this reasoning is Callaway’s belief that it will grow its market shares.
“We believe these unprecedented macroeconomic conditions will continue to adversely affect consumers and our business in the short-term, but we remain optimistic about the golf industry for the long-term and believe it will recover as the global economy recovers,” Fellows said. “During this time, however, we will continue to proactively grow our market share, aggressively manage our costs, and position ourselves to take advantage of opportunities as the economy and golf industry begin to recover. We have just completed a reduction of our global workforce by approximately 10%. These actions, combined with the cost reductions taken at the beginning of the year, will allow the company to weather these short-term challenges and still be able to invest in initiatives that will drive sustained and meaningful long-term growth.” Callaway will release actual first quarter financial results on April 30, 2009, but expect the numbers to be close to what’s been revealed to this point, since the quarter closed.
No question these are difficult times and Callaway’s admission that its first quarter isn’t what it once was, is likely the first of many shoes to drop.

The fact Callaway is affected by the recession proves that no brand, big or small, is immune to what is happening. Consumers are not spending they way they once did and that includes equipment purchases. It doesn’t require much of an argument to suggest the trend is likely continue for at least, the foreseeable future. At the end of January, when Callaway’s management discussed its 2008’s results, it stated it felt the industry as a whole may be down by 5 to 10% for the year. According to Callaway, this was coming off a year (2007) where the industry was off 5%. Company officials acknowledged, back in January, there wasn’t any hard data to back up their opinion for 2009. But since the annual PGA Merchandise Show was held in Orlando, FL, the mood expressed by the company has shifted to an even larger drop off. While it may or may not come true, the name of the game has changed for any and all companies in the industry.
First and foremost, its a matter of being
lean on the expense side to weather the
current environment. Reckless behavior
will not enhance anyone’s long and short
term chances to be successful.
Promotional discounting is already in
play by more than one company and
while it may address a short term need,
its doubtful that a business can sustain
itself off this strategy regardless of how long the recession lasts.
Contingency plans are necessary in an effort to try and overcome these unusual and unprecedented times. While its clear no one was aware of what was coming, its now irrelevant since its here. How long its stays is a topic for debate. Nevertheless, golf tee times and equipment sales are seasonal and the 2009 game clock is ticking.