Callaway Calls Out Fore on Its Revenue, Profit
Callaway Golf Co. suspended its earnings forecast Tuesday, warning that it expects to miss its sales and profit estimates for the third quarter and full year.
The Carlsbad, Calif.-based company, maker of the popular Big Bertha line of clubs, said it was reevaluating the timing of new product launches as part of a business review initiated after last month’s appointment of William Baker as chief executive.
Baker warned in a statement that the company might delay the launch of certain products until 2005 “to permit a more powerful launch, with better developed marketing plans and stronger inventories.”
He also said it was uncertain how reorders from retailers would fare for the rest of the year, suggesting that bad weather could slow sales of existing inventory.
Consequently, the company said it no longer expected to hit fiscal year target earnings of 15 cents to 25 cents a share on sales of $975 million to $990 million, or its projected third-quarter loss of 37 cents to 42 cents a share on sales of about $150 million to $160 million.
Analysts had forecast a per-share loss of 37 cents for the third quarter, according to Thomson First Call.
“Given the fact that our evaluation period will likely last through the remainder of 2004, we believe that it is inappropriate to set short-term expectations without all the facts,” Baker said.
Baker replaced Ron Drapeau, who stepped down from Callaway’s top post after coming under pressure due to shriveling profit.
The company has been using discounts to move inventory with some success, but faces hurdles including bad weather and a golf slump that has produced lackluster demand for new equipment in recent years.
“If you look at rounds played for the nation as a whole they’re down a little over 1%,” said Tim Conder, a leisure analyst with A.G. Edwards. “Then you have these little things called Charley, Frances and Ivan and another storm cloud brewing out there.”
Wet weather has reduced the rounds of golf played since mid-August from the southeast to the mid-Atlantic states, according to Conder. “You’re probably going to see more discounting needed to move product not only for Callaway but some others in the industry,” he said.
Conder said his company has a “sell” rating on Callaway’s stock, warning it could dip as low as $8 to $10. Callaway’s fortunes, he said, will ride in part on how its new products are received next year by the public and how competitors respond when it comes to pricing.
Shares of Callaway, which issued its statement shortly before the market closed Tuesday, finished up 6 cents at $12.30 on the New York Stock Exchange.
