Callaway, Dick’s Sporting Goods marks with growth in golf

Golf gained popularity in 2020 by almost every measure, as people sought out socially remote outdoor activity amid the pandemic.

More than 24.8 million people played golf in the United States in 2020, up more than 2% year-over-year and the largest net increase in 17 years, according to the National Golf Foundation. The sport also saw the largest percentage increase in the number of novice and young golfers since 1997 – the year Tiger Woods, then 21, won his first major championship at the Masters.

Almost two years now that the pandemic first hit the United States, and although other activities have resumed, golf has continued to grow in 2021, giving long-term golf brands a boost. date like Callaway and Titleist. It has also elevated companies looking to capitalize on changing demographics and trends in sports.

For many in the golf industry, it was unclear whether the growth seen in 2020 was a function of the pandemic or a new inflection point for the sport.

Until the end of July – the peak of the golf season in the United States – the number of games played in 2021 was up 16.1% from 2020, according to NGF data. While the specific numbers for July were down 3.1% from 2020, a month in which nearly all golf courses were reopened following pandemic closures in some states, the 2021 numbers are clearly higher than the averages for the previous year.

Although these increases are mainly due to older and already avid golfers – the average number of rounds played by golfers rose to 20.2 in 2020, a record since NGF started tracking this statistic in 1998 – young people golfers, and especially female players, has seen significant increases.

“The new entrants are getting younger and younger; they’re addicted to the game and they want to improve,” David Maher, CEO of golf conglomerate Acushnet Holdings, said on the second quarter earnings conference call. company with analysts in August. “A lot of the energy comes from passionate and dedicated players who just play more and consistently; more juniors, more women, younger [players], and more families. “

The number of female golfers increased by 8% in 2020, the biggest increase in five years, according to NGF data. Forty-four percent of people who played a round of golf on a course in 2020 were under 40, and almost as many people in their 30s played golf as those in their 60s, according to NGF data.

This increase in the number of new golfers has been a boon for Acushnet, which owns golf brands like Titleist and FootJoy.

Acushnet’s second quarter US net sales increased 117.1%, fueled by a 98.1% increase in Titleist golf ball sales and a 111% increase in Titleist golf club sales . In the first half of its 2021 fiscal year, sales in the United States increased by 75.2%.

Callaway, which owns several brands of golf equipment and apparel, including its eponymous line of balls, clubs and other equipment, has also seen growth.

Earlier this month, the company raised its financial outlook for its third quarter as well as 2021 as a whole, citing the outperformance of its brands as well as the mitigation of some supply chain disruptions.

“More and more people are signing up for golf courses, [there are] more entrants into the game, more consumers and we think the long-term trends are going to be pretty attractive, ”Callaway CEO Chip Brewer told CNBC in June. “The market will be larger at the end of the pandemic than when it arrives. “

Dick’s Sporting Goods, which sells golf products through its stores as well as golf specialty retailer Golf Galaxy, has identified sport as one of its growth engines in recent quarters.

“We have continued to see consistent growth in the golf industry,” said Lee Belitsky, chief financial officer of Dick’s Sporting Goods, during the second quarter 2022 earnings conference call with analysts on August 25. “The golf industry has remained very strong for us.”

Although the company does not detail the performance of Golf Galaxy stores in its earnings report, CEO Lauren Hobart said “the golf business has been great at both Dick’s and Golf Galaxy.”

The company has “invested in talent and elevated the in-store service model to become trusted advisors for golf enthusiasts of all skill levels,” said Hobart, and recently opened its first next-generation Golf Galaxy prototype store. outside of Boston. At this location, the Golf Galaxy Performance Center, golfers can not only purchase golf products, but also take lessons, practice in the hitting bays and have personalized club accessories.

In May, South Korean private equity firm Centroid Investment Partners acquired TaylorMade Golf for $ 1.7 billion, the largest acquisition in the golf goods industry to date. TaylorMade, which produces clubs, balls and apparel, was sold to KPS Capital Partners by Adidas in 2017 for $ 425 million.

“The industry is currently experiencing strong demand, increased participation with strong long-term opportunities globally,” said Jinhyeok Jeong, Founder and CEO of Centroid Investment Partners, in a press release at the time of the transaction. South Korea is the world’s third largest golf market behind the United States and Japan.

Overall, sales of golf equipment have slowed in recent months, according to NPD data – sales in June, July and August 2021 are down 2% from 2020 after the first half of 2021 was doubled what was seen in 2020. However, the June, July and August 2021 sales figures are up 50% from those months of 2019.

NPD Group Senior Industry Advisor Matt Powell said more consumers are expected to adopt healthier lifestyles after the pandemic, and that will include an increase in outdoor and sports activities, which should benefit the golf.

However, it is still unclear how the supply chain issues plaguing other industries will impact golf equipment, which could limit growth.

Both Acushnet and Callaway executives cited Vietnam’s ongoing supply chain issues as potential hurdles ahead. Both Acushnet and Callaway declined to comment on this article.

“There are inventory issues, but when we look at most of the categories that we track, we found that business was starting to level off,” Powell said. “Corn, [golf sales] are reset to a new top level and while we are not having massive growth, this is a much bigger business than it was two years ago. “

The rise of interactive golf experiences that go beyond the typical 18-hole course has also helped golf develop, especially with new audiences.

The growing popularity of TopGolf, which now has 70 locations in six countries after launching in China earlier this month, has been a key driver. While the actual golf experience reflects what can be found in a round of driving, TopGolf aims for a more social and fun experience with food and drink.

Callaway, which previously owned 14% of TopGolf, merged with the company in March, paying $ 2.66 billion to acquire the remaining part.

TopGolf said it generated $ 1.1 billion in revenue in 2019 and had a 30% growth rate since 2017. Callaway said TopGolf generated $ 325 million in revenue in the second quarter, while sales on the same sites were in the 90th percentile of 2019 levels.

Virtual coaches, both used for entertainment and top-level golf training, have also grown.

Full Swing, which produces golf simulators for commercial, residential and entertainment venues, was acquired by investment firm Bruin Capital for $ 160 million in July. While the simulators can be used for other sports as well, the golf feature is used by PGA Tour pros like Woods and Jon Rahm, who is currently ranked No.2 in the world and plays for the European team during the Ryder Cup.

“At the start of the advent of off-course golf gamification, I think there was a misinterpretation of the impact on the actual game of golf and participation,” said David Abrutyn, partner at Bruin Capital. . “It has been proven to be an entry point for golf and the more people you get to swing with a golf club or experience the sport in a place of entertainment, the more ability it has to. promote participation in sport. “

In addition to the 24.8 million people who played a round of golf on a course in 2020, an additional 12.1 million participated in an “off-course golf activity”, which includes driving ranges, sites like TopGolf or indoor simulators like the Full Swing ones produced.

The growing mix of the traditional sport of golf with technology and other forms of entertainment is a good harbinger for the future of the sport, said Abrutyn.

The biggest golf events have attracted more viewers this year. In April, The Masters’ final round attracted an average of 9.45 million viewers on CBS, up 69% from 2020. In May, the final day of the PGA Championship attracted an average of 6.58 million viewers, a 29% year-over-year increase. And in June, the US Open final round averaged 5.7 million viewers on NBC, up 76% from 2020.

The sport is also seeing coverage expand in new ways. The PGA Tour is working with Netflix to create an episodic documentary series, which will likely be inspired by “Drive to Survive”, the popular Formula 1-focused series that has drawn new fans to motorsport. NBA star and avid golfer Stephen Curry recently signed a deal with Comcast NBCUniversal to work on a host of projects, one element of which will include creating Ryder Cup content for the NBC Sports’ Golf Channel.

“A lot of people have tried golf and are realizing that it might not be as hard as they thought it would be, and it is creating a whole new generation of golf fans, especially the younger ones, who will be. now fans and engaged in sport, ”he said. noted. “This is particularly exciting for anyone involved in the golf industry.”

Disclaimer: CNBC’s parent company, NBCUniversal, is the broadcast partner of The Ryder Cup.