Topgolf Callaway Brands’ Nov. 1 acquisition of four BigShots venues from Invited Club (for a total of $29 million) was the first hint that Topgolf Callaway might be altering – even slightly – its strategies for growth of its Topgolf division, which now is the largest component in the company’s portfolio.
By acquiring what Topgolf Callaway Brands President/CEO Chip Brewer termed “the largest active competitor to Topgolf,” the company received one new-owned and operated venue and two franchisee relationships covering three venues, which are expect to convert to Toptracer accounts in the near future.
The acquisition, Brewer told Wall Street analysts on Nov. 8, also enhances and derisks future pipeline, “as we will now assume BigShots pipeline, some of which overlapped with ours.”
Topgolf Callaway Brands merchandise, including Callaway, TravisMathew, and OGIO product, will be prominently featured at invited more than 140 golf and country clubs, Brewer added, “all for approximately the same price of building a single Topgolf venue.”
That final statement sends a big message in regards to the way Topgolf Callaway Brands plans for build its Topgolf business – at least for the next couple of years.
“With the venue acquired through this transaction and the potential to add one additional venue in the first half of next year, we plan to build only eight to nine additional new venues in 2024,” Brewer said. “This change, along with the strategic assessment and resulting tightening of our other capital expenditure plans, will save us approximately $100 million in planned capital over the next two years.
This will improve our already positive cash flow and accelerate our expected debt paydown schedule. It will derisk our business over the near to medium term, something we believe some investors will appreciate.”
Topgolf Callaway Brands stock hit a 52-week low of $10.11 in early trading on Nov. 9. The company announced after market-close on Nov. 8 that it was revising down the Full Year guidance based largely on Q3 slow downs in Topgolf same-venue sales and corporate sales, the latter of which dropped approximately 17 percent in Q3 year over year.
However, Brewer said, corporate events business “appears to have stabilized” during the quarter.
“For Q4, we’re now forecasting corporate event demand down low teens year over year, which is consistent with actual current booking trends and would result in a two-year stack of approximately flat for this portion of our business,” Brewer said. “This decline is less than the corporate was down in Q2 and Q3 as we continue to see the business stabilizing.”