The gulf had just come out of the rough when the pandemic hit. After an initial shock last spring, the sport is poised for its best year since Tiger Woods lived up to its popularity two decades ago. There is still a lot of green that investors need to focus on.
Rounds played in the United States fell 8.5% in March and a whopping 42% in April compared to a year earlier, according to the National Golf Foundation, as many courses were closed. But the socially distanced nature of the sport provoked a furious rebound. Last month, the rounds played were 37% higher and rose to a good level throughout the year, even with the spring locks. While other parts of their business, such as restoring clubhouses, remain depressed, golf courses are in a much better financial shape than a few years ago.
In 2016, a quarter of public golf courses surveyed by the NGF said they were in a “poor” or “very poor” financial state, slightly worse than after the 2008-09 financial crisis. Last year, only 8% of public courses reported similar conditions. The proportion indicating that he was in “good” or “good” shape had doubled.
Stock market investors have few opportunities, if any, to directly benefit from investing the fortune of the courses, but there are other parts of the golf business that depend on healthy financial streets.
The handful of stocks that offer investors exposure to the sport have generated strong returns after an initial pandemic shock. Equipment and clothing manufacturer Acushnet Holdings,
known by brands such as Titleist and FootJoy, it has increased the S&P 500 by 14 percentage points over the past year. Galaxy Golf owner Dick’s Sporting Goods has outperformed the market by 32 percentage points. Callaway Golf equipment seller,
which lost three-quarters of its value in the first weeks of the Covid-19 bear market, has rebounded, surpassing the market by 13 percentage points. Along the way, Callaway gained even more exposure to the sport by merging with practice field operator Topgolf.
Clothing and sportswear giant Nike surprised many by leaving the golf business in 2016 and competitor Adidas sold some brands the following year. Retailer Golfsmith filed for bankruptcy in 2016. Between 2003 and 2017, the number of U.S. players on the court dropped to less than 24 million, from about 31 million. Part of that was a “negative hangover” after the financial crisis that caused less business golf, says Randeries Konik, an analyst at Jefferies.
But equipment sales began to pick up soon after. In 2019, the number of American players for the first time reached 2.5 million, surpassing the previous high of 2.4 million in 2000, when Tiger Woods won trophies and inspired young players. One reason is that more baby boomers have started playing golf.
“People aren’t thinking enough about how America ages,” Konik says. “Golf is the perfect sport for this part of the population.”
A more recent boost to the sport comes from younger professionals who now work remotely. Lacing 18 holes on weekdays was an expensive and lengthy way to cultivate business contacts. The more flexible schedules make it easier to connect with the links closest to home.
But the really significant boost to the game could be in the younger, casual players. While Topgolf’s most recent traffic data was even lower in the fall compared to the previous year’s period (not surprising given the socially distanced nature of its facilities), executives they see promising trends. The interior mountain ranges have a lower barrier to entry. There were only 5.4 million golfers off the field in 2014, but nearly 10 million in 2019, according to the NGF. Just over half of Topgolf guests identify as non-golfers and 75% of these did not declare themselves interested in playing on a course.
A study by Golf Datatech showed that it was beginners who generated strong sales of golf equipment in 2020. Expenses for serious golfers decreased, although total equipment sales increased. Among the items that sold very well were the so-called box sets that include the entire set of clubs in a single package, which are usually inexpensive and favored by beginners, noted Tom Stine, a partner at Datatech Golf.
Callaway posted its highest net sales and earnings in its most recent quarter, with sales up 11.6%, despite a tough year of comparison. In the third quarter of 2019, Callaway had recorded a growth of 62.3% in sales over the previous year, thanks to the acquisition of the European clothing company Jack Wolfskin. Acushnet experienced 26% growth in U.S. sales in the third quarter compared to the previous year. According to the Acushnet market, sales in Japan are still the hardest hit by Covid-19 restrictions, they were 24% lower.
What could make the recent rise of golf even better? The kind of excitement that Tiger Woods created in the late 1990s could be revived by some of the young players who are there now, such as Dustin Johnson and Jon Rahm. Tiger himself shows flashes of his old brilliance.
Even without him coming back, golf returns with a throat roar.
As golf courses face off across the country, the courses designed by Jack Nicklaus thrive to a great extent. WSJ’s Shelby Holliday talks to golf legend about adapting during her 50 years in the business.
Write to Jinjoo Lee at [email protected] and Spencer Jakab at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8