Some times in life, you have to take a step or two back in order to move forward. Callaway Golf is hoping that will be its case as the company’s business continues to show signs of going in reverse. Callaway reported third quarter sales of $148 million, a drop of $25 million from a year ago when it delivered $173 million. The company also reported an operating loss of $83 million for the quarter.
The decrease in sales is not unexpected due to previous decisions by the company to pare its business down to clubs and balls. "Our decline in sales and gross margins during the third quarter are the result of the sale of the Top-Flite and Ben Hogan brands earlier this year as well as the sales promotions and other actions we took to stimulate sell-through on our 2012 products and prepare our business for a successful 2013,” stated Chip Brewer, President and Chief Executive Officer. “On the other hand, our results also include a decrease in operating expenses as a result of our cost reduction initiatives. Overall, our results, while not acceptable on an absolute basis, reflect many actions that should be beneficial in the long-term
"We are continuing to make solid progress on our turnaround plan," Brewer maintained. "In addition to the actions taken earlier this year, including the sale of the Top-Flite and Ben Hogan brands, the licensing of the apparel and footwear businesses, the cost-reduction initiatives, changes in senior management, and changes in our approach to product design and the sales and marketing functions, during the third quarter we also replaced a majority of our outstanding preferred stock with much less expensive 3.75% convertible debt, reached an agreement in principle on a sale/leaseback of our Chicopee, Massachusetts ball factory for a much smaller footprint and lower costs, and began transitioning to a third party based model for our GPS business. These key initiatives are all consistent with our efforts to simplify our business, focus the team on our core business of golf clubs and golf balls, and reduce our cost structure."
"I am encouraged by the progress we have made in the eight months I have been at Callaway," Brewer continued. "We are beginning to see some of the benefits of the actions we have taken in the form of reduced operating expenses and an increase in market share for the last five consecutive months in the U.S., albeit at modest levels. I am also very pleased with the changes we have made in our 2013 product line and marketing strategy, both of which will be more consumer-oriented and relevant. Although we have revised downward our full year 2012 guidance in light of continued softness in the European market and actions we plan to take in the U.S. for the balance of the year to increase sell-through and prepare for 2013, I am confident in our turnaround plans and optimistic that our results will improve significantly in 2013." The Company provided revised financial guidance, estimating that full year 2012 net sales will range from $830 to $845 million compared to $887 million in 2011.