Given the earthquake and tsunami that hit Japan this past March, it’s not surprising that Callaway Golf Company’s first quarter sales dropped to $285.6 million from $302.9 million the first quarter of 2010. The company’s Q1 sales in the important Japanese market fell 30 percent in the quarter. The prospects of a fast recovery don’t look good, meaning Callaway will have to figure out a way to make up for the loss in the second quarter, which is traditionally its strongest quarter. Callaway’s Q1 earnings were $12.9 million compared to $20.3 million the same quarter a year ago.
While the natural disasters in Japan certainly impacted Callaway’s business, it doesn’t let the company off the hook for its slow first quarter. Consider that Callaway’s U.S. sales in the quarter were down four percent compare to Q1 of 2010, re-emphasizing that the Callaway needs a strong second quarter.
The company held back some of its marketing spend in Q1, so we’ll see if it ramps up its marketing and advertising spend in Q2 in order to try and make up the difference.
Sidenote: Reuters recently reported that the Blackstone Group LP is teaming up with Callaway Golf for a possible run at the Acushnet Co. (Titleist and FootJoy). Acushnet parent Fortune Brands is looking to sell or spin off its highly success golf division, which had sales of $1.24 billion last year.
Callaway doesn’t have the financial wherewithal to acquire the Acushnet Company on its own – and you have to question whether or not it has the management strength. We should know more later this month as more companies are expected to make their intentions known about their interests in Acushnet.