Topgolf Callaway Brands’ (NYSE: MODG) disappointing Q2 earnings report this past Aug. 7 set off alarm bells in some parts of the golf industry and Wall Street, particularly those that follow the company’s Topgolf division. Topgolf Callaway reported its Q2 same-store sales dropped eight percent, which prompted a $3 decline in the stock price, speculation of a possible Topgolf spinoff and a strategic review of Topgolf.
Topgolf Callaway Brands stock price closed this past Aug. 9 at $11.21 per share.
The biggest culprit for Topgolf’s same-store sales drop in Q2 of 2024. Topgolf Callaway Brands President/CEO Chip Brewer told Wall Street analysts, was the deterioration of the Events business this past May and June.
“We believe the events business results reflect a normalization from a post-COVID surge, as well as softness in demand typical of slowing economic conditions and corporate belt tightening,’’ Brewer said. “Based on sales lead data, we now expect this slowness to continue through Q3 with the potential to level off by the end of the year.
“Looking at the most recent data, we saw our combined U.S. same-venue sales deteriorate in June as there was a step change in macro demand starting in late May. This was despite the rollout or more likely partially mitigated by the rollout of our free 30 promotion and advertising campaign, both of which had tested quite well in May.’’
June’s U.S. same-venue sales drop of eight percent came as a surprise. Brewer said Topgolf Callaway had expected “slightly positive’’ results.
“July was down approximately 11 percent on a retail calendar basis, with the last two weeks of the month trending better than the first few weeks,’’ Brewer said. “With this as the backdrop, we’re now forecasting our full-year same-venue sales to decline from very high single digits to low double digits.
“This implies the trends we’ve been seeing in June and July continue for the balance of the year. Given the fact that August through mid-December should be a period of relatively easier comps, this forecast also allows for some additional slowing of overall demand.’’
Despite that slowing of demand – at least temporarily – Topgolf Callaway Brands plans to continue to add Topgolf venues. “We expect to add an average of 10 per year, some years a little more, some years a little less again starting in 2025,’’ Brewer said.