Interface News Reporter | Qin Siyue
In early September, Topgolf Callaway, the world's largest golf club manufacturer, announced that its board of directors plans to split the group into two independent companies, Callaway and Topgolf. This spin off is expected to take place in the second half of 2025.
Due to Topgolf's different operating model, capital structure, and investment philosophy from Callaway, the board has determined that the decision to spin off Topgolf will enable Topgolf and Callaway to maximize shareholder value, "said Chip Brewer, President and CEO of the company
Although both companies are in the golf industry, Topgolf and Callaway have slightly different expertise in segmentation. Callaway mainly sells sports equipment such as golf clubs, while Topgolf focuses on the operation of golf courses.
Callaway was founded in the United States in 1982, with founder Ely Callaway having many years of experience in the wine and textile industries. Golf equipment is mainly divided into two parts: golf equipment and footwear. At the beginning of its establishment, Callaway chose to focus on golf equipment. Due to its excellent quality, Callaway's golf clubs quickly became popular in the market. In 1992, when the brand had been established for ten years, Callaway successfully went public on the New York Stock Exchange.
However, due to the declining demand for golf equipment in the main European and American markets, Callaway's business has been struggling in recent years. As early as 2018, Callaway was downgraded in investment ratings by multiple investment companies, including DA Davidson, due to a consecutive drop in its stock price. During the epidemic, the number of golf customers mainly located outdoors continued to decrease, which further worsened Callaway's business situation. Of course, golf equipment is not just difficult to sell at Callaway, for example, another golf veteran TaylorMade was sold by German sports brand Adidas in 2021.
Interface News found that in the second, third, and fourth quarters of the 2023 fiscal year, Callaway's parent company Topgolf Callaway achieved revenues of $1.18 billion, $1.041 billion, and $897 million, respectively, showing a continuous decline in revenue and repeatedly falling below market expectations.
For the entire 2023 fiscal year, Topgolf Callaway's annual sales revenue was 4.285 billion US dollars (approximately 30.846 billion yuan), a year-on-year increase of 7.2%; But the net profit was only $95 million, a year-on-year decrease of 39.8%, indicating a significant decline in the company's profitability. From a departmental perspective, only Callaway's Golf Equipment division has seen a decline in performance: revenue of $1.386 billion in 2023, a year-on-year decrease of 1.4%.
A brand under Topgolf Callaway company. (Topgolf Callaway official website)
Topgolf was founded in 2000 and initially focused on sports venue operations as its main business. Topgolf and Callaway merged into one company through a stock swap in 2020. Against the backdrop of pressure on Callaway's operations, Topgolf Callaway hopes to achieve the goal of independently listing Topgolf through the spin off of Topgolf and Callaway. However, it should be noted that even as a leading company in golf course operations, Topgolf is facing significant operational pressure.
According to its publicly announced development plan, Topgolf will slow down its expansion speed in the coming period to improve operational efficiency: by 2025, Topgolf's new site development plan will be reduced to medium single digits. In the plan, promoting the growth of sales profits and improving operating profit margins in the same venue has become Topgolf's focus of work.
After the spin off, Topgolf will continue to focus on golf course operations, but its original Toptracer business will be merged into Callaway. For Callaway, if the cooling off of the US market is evident, the growing Chinese golf market may become a breakthrough.
According to the "2021-2027 Analysis Report on Market Trends and Investment Prospects of China's Golf Industry" released by Zhiyan Consulting, the size of the golf sports market in China was approximately 10.26 billion yuan in 2020, a year-on-year increase of 4.4%. According to the China Golf Association, the number of domestic golf participants reached 30 million from 2016 to 2020 and is still increasing.
At this year's Paris Olympics, Lin Xiyu won the bronze medal in women's golf, becoming another Chinese golfer to stand on the Olympic podium after Feng Shanshan. With the increasing number of local star players, the proportion of young golf enthusiasts in China is expected to further increase. According to data from the China Golf Association, in 2013, there were only over 400 registered young players in China. By 2022, this number has exceeded 100000. The number of supporting youth events has also skyrocketed from over 30 to over 800.