Earlier this month at the PLAYERS Championship, PGA TOUR Commissioner Tim Finchem went on the offensive over the current state of the game. “There's been some negative commentary about the game over the last couple of years. From our perspective, we see the game as stable and healthy in the United States,” Finchem proclaimed. It’s doubtful that sentiment is shared by the management or shareholders at Dicks Sporting Goods. Last year, Dick’s CEO, Ed Stack, touched off a firestorm when he declared, “The more concerning and unpredictable issue is the golf business. We anticipate softness, but instead we saw significant decline. With Golf Galaxy down 10.4% and Dick's Sporting Goods golf off by high single digit. Our overall golf business missed our first quarter 2014 sales plan by approximately $34 million.”
Turns out the start of 2015 isn’t looking much better for the golf retailer. Golf Galaxy sales decreased another 11.0%. Last month, Callaway Golf reported global sales down 19% for the first quarter. Its U.S revenues were down 9% from a year ago during this time period. Earlier this month, TaylorMade adidas Golf reported first quarter sales were off 9% on a currency neutral basis. Thus two of the larger equipment manufacturers, measured in terms of revenue, seem to validate what Stack first alerted the industry to a year ago. Meanwhile, Steve Mona, CEO of the World Golf Foundation, continued to read from the psalm book at the PLAYERS, “I want to state that we view the overall state of the golf industry as stable, and we view its future as encouraging.”
On its fourth quarter conference call, back in March, Stack updated the investment community on the state of his golf business. “Golf showed a slight improvement from the spring of 2014 or down versus last year. Golf Galaxy was down 7.1% with Dick's golf business slightly better,” he reported. “Our golf inventory is very clear. Our inventory is down versus last year. Our golf inventory really could not be in much better shape and I would say that the vast majority of a brand their inventories are in great shape too, so the whole channel doesn’t have the same inventory issues this year that we did last year.”
So fiscal fourth quarter of 2014, Golf Galaxy was down 7.1%. Looking back at the third quarter of last year, Golf Galaxy comparisons were down 8.9% and Dick's golf business was down a similar level. 2014-second quarter, despite promotional business centered on Father’s Day, saw Golf Galaxy sales off 9.3%; while Dicks golf business was down somewhat less. “What was very encouraging is that two million people took up the game of golf in 2014 for the first time, and that's the highest level since 2002,” Mona recited from his Hymn book at the PLAYERS this month.
A year ago, Dicks reported Golf Galaxy first quarter sales were down 10.4% and the Dicks Sporting Goods golf business in its 600+ locations was down by high-single digits. Which brings us back to today; where first quarter 2015 sales at Golf Galaxy came in lower by yet another 11%! So looking back from the first quarter of 2013, Golf Galaxy sales in 78 stores are down nearly 22% in 24 months!!
Finchem loves to point to the First Tee and its exploits as a means of a somewhat savior to golf. “The First Tee started in '97. Over 10 million kids either in the school program or in the facility program have been involved since its inception. In the last four years, the amount of dollars raised by chapters locally has gone from $50 million a year to $70 million a year, so the popularity of the program in communities is growing. It's in 8,500 schools today with school districts lined up to get it in, on the school side. So that's a program that I think the sky's the limit in terms of its overall impact.”
However, back in the real world, the sporting goods retailer isn’t seeing golf as a growth platform for its business. Perhaps, it explains why it let go more than 500 PGA golf professionals last July and reduced its square footage devoted to the game within Dicks stores in 2014. “The best thing we can do as an organization, the best thing we can do in terms of linking arms with the entities that are represented up here, are to join forces to grow the game,” stated PGA of America CEO Pete Bevacqua.
“Golf is going to continue to be difficult,” Stack stated on his 2015 first quarter conference call. “There isn’t a lot of growth in it.” He added that Golf Galaxy represents a little more than 3% of its total annual sales for Dicks Sporting Goods, which were listed at $6.8 billion for the 52 weeks that ended January 31, 2015. “We think longer term golf is going to be an okay business, it is an important part of our business and we’re going to stay in the golf business. We see certain categories of golf accelerating, the golf apparel business, I think a fair amount of growth will come from there. I think the golf equipment business will be stabilized and that will kind of move up or down a little bit one year to the next, but we think that longer term will be a good solid profitable business for us.”
Time will tell which side of the story has it right when it comes to golf’s fate. However, when you don’t have to share any financial performances, it does tend to make the argument more opinion based.