New York, United States: Callaway Golf Company has announced its first half and second quarter 2014 financial results, demonstrating its turnaround is well underway and positioning it for a return to profitability for the full year.
Despite softer than expected market conditions, Callaway reported for the first half of 2014 a 9% increase in sales driven by growth in all product categories: woods (+8%), irons (+14%), putters (+9%), golf balls (+7%) and accessories and other (+5%).
Additionally, income from operations increased 40% to US$72 million and fully diluted earnings per share increased 12% to US$0.66.
These increases were driven by the increased sales and improvements in gross margins of 170 basis points, which more than offset a planned increase of US$9 million in operating expenses and a US$14 million decrease in other income due to adverse changes in foreign currency contract values. The 2014 results also benefitted from a US$9 million decrease in pre-tax charges related to the cost reduction initiatives that were completed in 2013.
For the second quarter, the Company had previously provided guidance that its sales and earnings would show a decrease versus the second quarter of 2013 as a result of a late start to the 2014 golf season, high retail inventory industry wide, and anticipated promotional activity during the second quarter.
The Company’s second quarter results reflect those market conditions with sales being down 7%, slightly more than the Company’s prior guidance of flat to down 5%, and with earnings declining to US$0.04 per diluted share compared to US$0.12 per diluted share in 2013, which was slightly better than the Company’s prior guidance of break-even to slightly profitable.
These second quarter results were consistent with the Company’s prior full year guidance and the Company has confirmed its full year guidance, estimating full year net sales of US$880 to US$900 million and diluted earnings per share of US$0.12 to US$0.16.
Chip Brewer, Callaway’s President and Chief Executive Officer, said: “We are pleased with our results for the second quarter in that we were generally able to achieve our financial guidance while continuing to build brand momentum and improving field inventory levels in key markets such as the US and Europe.
“We achieved these results despite more challenging market conditions worldwide than we had anticipated. We are also pleased with our results for the first half of the year.
“Our continued brand momentum and the strength of our 2014 product line enabled us to grow sales for the first half in each of our product categories despite a decline in industry sales due to a late start to the 2014 golf season, high industry wide retail inventory levels, and an increase in promotional activity. As a result, we gained market share in each of our key markets around the world, positioning us well for the balance of the year.
“Looking forward, we expect market conditions will remain challenging for the second half of the year. However, we believe our brand momentum and product strength will enable us to overcome these market headwinds and achieve the full year financial goals we set at the beginning of the year.
“We remain pleased with the state of our turnaround and the direction of our business.”
Callaway Golf is a Full Business Member of the Asian Golf Industry Federation.