Callaway Golf’s Earnings Tumble 55% in Quarter

Callaway Golf Co., the largest U.S. maker of golf clubs, reported a 55% drop in second-quarter net income Wednesday and said it expects a loss of as much as 22 cents a share in the second half of the year as the continuing economic turmoil in Asia slows sales.

The maker of Big Bertha titanium clubs said net income fell to $21.1 million from $46.8 million a year earlier.

The Carlsbad-based company said weak sales in Asia, coupled with soft demand at home, helped send second-quarter earnings down to 30 cents per diluted share versus 66 cents a year ago. Financial analysts had forecast 31 cents per share, according to tracking firm First Call.

“We see no significant improvement in sales in the near term,” Chief Executive Donald Dye said, adding that direct sales to Asian markets are off more than 25% from last year.

Revenue fell 8% in the quarter, to $233.3 million from $253 million.

Callaway warned that the second-half loss will result in full-year earnings of as little as 25 cents a share. The company had been expected to earn $1.22 a share, according to analysts.

Callaway said it will review all operations, including its principal club-making business and its plan to begin making golf balls, and will delay or eliminate nonessential units.

“It is too early to predict results for 1999, but we do not expect at this time to see a significant improvement in revenues from golf club sales during that period,” Dye said.

However, the company said it expects cost-reduction programs to improve its margins in the year ahead.

Callaway shares fell 31 cents to close at $19 in New York Stock Exchange trading. The results and warning were issued after U.S. markets had closed.