Thursday, Callaway Golf Company (ELY) said it expects a wider loss and lower revenue for the third quarter, hurt by a strong dollar as well as a shift to lower price points by consumers. The company said its business scenario is improving lately, with currency rates becoming more favorable.
The Carlsbad, California-based maker of golf clubs and balls said it expects a wider loss of $0.25 per share for the third quarter, compared to a loss of $0.12 per share a year ago. On average, 13 analysts polled by Thomson Reuters are expecting a loss of $0.18 per share for the third quarter. Analysts' estimates typically exclude special items.
The company said its third-quarter loss was adversely affected by a charge of $0.04 per share associated with its preferred stock and $0.01 per share related to gross margin improvement initiatives. Loss per share for the third quarter of 2008 includes after-tax charges of $0.04 per share for gross margin initiatives.
Net sales is estimated to decrease 11% to $191 million from $213 million in last year. Analysts are expecting revenues of $194.78 million for the quarter.
Though the company is presently witnessing an improving trend in revenues after the declines in the first two quarters of 2009, changes in foreign currency exchange rates adversely impacted net sales by $3 million for the quarter.
On a currency neutral basis, by translating third quarter net sales at third quarter 2008 exchange rates, estimated net sales would be $194 million, a 9% decrease compared to the third quarter of 2008.
As the heavy promotional period comes to an end, gross profit for the quarter is estimated at $60 million, or 31% of net sales, compared to gross profit of $80 million or 38% of net sales in the third quarter of 2008.
Reflecting the company's strategy of balancing reductions in spending with investments in growth initiatives, operating expenses for the quarter are estimated to improve 9% to $85 million from $93 million in the comparable quarter last year, a statement said.
Inventory as a percent of trailing twelve month sales at the end of the quarter was in line with the company's target, at 21.2%, owing to improvements in supply chain, which helped mitigate the impact of dramatic drop in sales this year.
George Fellows, chief executive officer of Callaway Golf, said "Our gross margin initiatives have continued to over deliver cost savings compared to our plan, partially offsetting the effects of a shift to lower price points by consumers, an increased promotional environment, as well as the negative impact of a stronger dollar."
Looking forward, the company said it sees improvement in global economic conditions as well as foreign currency rates becoming more favorable. The company also expects positive impact following the International Olympic Committee's decision to include golf as an Olympic sport beginning 2016, following which countries will begin to invest in golf programs in preparation for the 2016 games. Growth is expected particularly in emerging markets such as China, India, and Latin America.
The company plans to report its actual third quarter financial results on October 29th.
ELY closed Thursday's regular trading at $8.75, down $0.05 or 0.57%, on a volume of 1.46 million shares on the New York Stock Exchange.
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