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It’s difficult to fully grasp the retail market dynamics for equipment sales, which in turn influences manufacturer sales. In the early going of 2010, the signs at the off course level haven’t offered a lot to be inspired about. According to Marty Hanaka, CEO at Golfsmith, his business, like a lot of others, is fighting a tough trend. “If you went year-to-date (the latest research accounts up to May) Golf Datatech, which is a third-party, we believe that if you look at every category, added them up, they are down over 3% in dollars and down in units as well,” he said, referring to the overall state of equipment sales. “The big losers through May was woods. They were down 8% year-to-date through May and we know in June they dropped 9%. That is the big loser,” he continued. “And that is, as we say in the business, as go woods so does your business, because it is so big and it’s a purchase that people make every couple of years. The recovery hasn't happened in the industry the way we had all hoped.” Hanaka also stated that wood sales were off in April by 11% in dollars, according to Datatech research.
The reason for the weaker sales to date in 2010, can be traced back to activity from last year. “Last year if you bought a driver from any one of the big brands, TaylorMade, Callaway, Nike, you would get a free hybrid, free fairway. That was a big value and that held us together and the vendors fully supported it in the backend, so we all made full margins on it,” explained the CEO. “From their viewpoint it wasn't affordable.” Therefore last year’s promotions, especially in the woods category are still being felt indirectly in 2010.
Meanwhile, the world hasn’t improved from a year ago when the deals being made were trying to overcome the headwinds provided by a lackluster economy. California, an area where 15 of Golfsmith’s 77 stores are located has a little more on its plate to overcome in 2010. “You’ve got an unemployment rate there that is over 12%, 12.2% I think in Orange County. You’ve got markets where there it is 14% unemployment,” said Hanaka in explaining the challenges the Golden State is experiencing that is also being felt at retail. “You’ve got this whole foreclosure and bankruptcy thing going on. So consumer confidence is probably one of the weakest areas,” he continued. “The third thing, I think is that California has rounds played that are down substantially. This is a big market. It’s a year round market.”