Callaway Golf’s Stock Dives on Profit Warning

Shares of Callaway Golf Co. fell about 10% on Wednesday after the golf club maker said currency turmoil in Asia and increased price competition could cut its second-quarter earnings to about 50% below analysts’ estimates.

President and Chief Executive Donald H. Dye said Callaway’s earnings could be as much as 30 cents a diluted share less than analyst expectations. The company blamed weak currencies and an economic slowdown in Asia for slowing sales in Japan, which accounted for 10% of 1997 sales.

The Carlsbad-based company was expected to earn 66 cents a share for the quarter, according to a survey of analysts by IBES International Inc.

“This could be pretty severe--most of the hope that was out there for a positive year in 1998 or a comeback from El Nino is greatly diminished,” said analyst Robert Marvin at Seidler Cos. “The market is growing, but it’s primarily beginner golfers who don’t pay Callaway prices for clubs.”

The firm faces increased competition from newcomers such as Adams Golf Inc. and Orlimar Golf Co., which often offer their products below Callaway’s prices. And other competitors have announced higher club sales, Marvin said.

Callaway disclosed its second-quarter outlook late Tuesday. Its shares fell $2.25 to close at $20.63 on Wednesday on the New York Stock Exchange, after trading as low as $19.75--its lowest price since early 1996.

Callaway is the largest maker of premium golf clubs in the world. Its Big Bertha metal woods, some of which are made with stainless steel, are popular among professional golfers. In recent years, it also started selling irons made with titanium and other exotic metals.

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Callaway had earnings of $11.16 million, or 16 cents a diluted share, in the first quarter, less than half the $24.47 million, or 34 cents, recorded in the year-earlier period.