Callaway Golf beats Street in second quarter

Callaway Golf rung up better-than-expected second quarter earnings, as market share gains and the sale of a portion of an investment propelled the Carlsbad company’s financial results.

Callaway posted sales of $246 million for the quarter, up from $231 million a year earlier. Net income was $34 million, or 36 cents a share, compared with $12.8 million, or 16 cents a share, for the same quarter last year.

Wall Street analysts on average predicted earnings of 30 cents on sales of $242 million.

“Despite softer-than-expected market conditions, we grew our net sales 6.5 percent in the second quarter, which was led by increased sales in all product categories and in all regions,” said Callaway Golf Chief Executive Chip Brewer.

Brewer noted that U.S. sales were weaker for the golf industry overall based on figures from Golf Datatech, a research firm.

Still, Callaway reported year-over-year improvement in sales in the U.S. as it continues to wrestle market share from rivals.

“Nothing dramatic one way or another from a market conditions perspective, but there was some softness in the U.S., improved operating conditions in Asia, particularly Japan, and the European business was about on par,” said Brewer in a conference call with analysts.

Brewer said the company is at “a bit of a loss” to explain the choppy golf market in the U.S., where rounds year to date played were up 1.8 percent nationwide through May, according to Golf Datatech.

It wasn’t a great quarter for sporting goods retailers, however, with Sports Authority, Sports Chalet and Lumpy’s Golf all going out of business.

Callaway’s second quarter got a boost from the sale of a portion of its ownership stake in Topgolf, a driving range/golf arcade where micro-chipped golf balls provide players feedback and competition against peers.

Callaway was one of four early investors in Topgolf, which now has 29 locations worldwide. The company netted $18 million from the sale last quarter. Callaway still owns about 15 percent of Topgolf.

Looking ahead, Callaway expects sales of $170 million to $180 million in the current third quarter – compared with $176 million the prior year. It’s forecasting a loss of 10 cents to 15 cents a share, compared with a 4 cents per share loss a year earlier.

Brewer said third quarter results will be impacted by fewer new product launches than a year earlier.

The company stood firm on its previous full year forecast, however. It expects $855 million to $880 million in sales and earnings per share of 40 cents to 50 cents – both up from 2015.

Callaway released results Wednesday after markets closed. It shares ended the day at $10.43 but fell 45 cents to $9.98 in early after hours trading.