It’s not easy turning a battleship into the wind, just as it’s not easy turning around large golf equipment company. But Callaway Golf President and Chief Executive Officer says management is “making good progress” in its turnaround plan.
“I believe we are moving quickly, decisively and on the right path,” Brewer told Wall Street analysts yesterday in a conference call to detail Callaway third quarter earnings.
Callaway reported Q3 sales of $148 million compare to $173 million the same period a year ago and recorded a loss of $83 compared to $44 million the third quarter of 2011. The increase in losses wasn’t unexpected as Brewer and his management team continue to try to get Callaway back to its core golf equipment business and away from the Callaway-branded accessories it had virtually become under the George Fellows regime.
“Our primary areas of weakness in Q3 and for the balance of the year were in the Americas, Canada and the U.S. and in Europe,” said Brewer, who replaced Fellows as Callaway president and CEO eight months ago. “With the exception of our Asia-specific models, our 2012 products have not sold through well enough, and thus, during the quarter, we took aggressive pricing action to drive sell-through at lower inventory levels, both our inventory levels and those in the field. These actions had predictable results on our gross margins, but we’re successful in delivering the desired results in the field where we have enjoyed five consecutive months of hard good dollar market share growth in the U.S.”
Although painful financially, Brewer said those actions “are helpful for the long-term outlook in that they clearly channel and start to improve momentum for our 2013 story when we will have new product and new marketing to drive improved results.
“This is also significant in that to turn this business around, it needs to first stop shrinking, which means we need to stabilize and grow our dollar market share. To this end, in August, we had the first year-over-year gain in market share since November of 2010.”
Brewer said Callaway has received positive feedback from key retail partners that that have seen the company’s 2013 product line.
“Our larger customers are nearly uniformly behind us, they noticed the changes and improvements, and believe we will do better than recent offerings. That sentiment, I whole-heartedly agree with,” Brewer said.