Disappointing same-venue sales prompts full strategic review of Topgolf
Topgolf Callaway Brands (NYSE: MODG) closed down at $12.22 on Aug. 7 (from an open of $14.36) after its earnings report fell short of analysts’ expectations in Q2 2024. Revenue was down 1.9% year on year to $1.16 billion. The golf entertainment company’s Q3 revenue guidance of $980 million also underwhelmed—13.8 percent below analysts’ estimates.
MODG reported Q2 earnings of $62 million, compared to $117 in Q2 of 2023. Year-to-date, the company reported earnings of $68.6 million, compared to $142.4 in the first six months of 2023.
Revenue for Topgolf entertainment venues in Q2 increased $20 million compared to Q2 of ‘23 to $474 million. Year-to-date, Topgolf entertainment revenue came in at $879 million, a nearly five percent increase.
Perhaps of most concern to Wall Street, Topgolf’s same venue sales of minus eight percent were below expectations, driven by softer-than-expected traffic as the business navigates the current cyclical macro challenges.
Meanwhile, MODG reported that Q2 equipment sales fell eight percent to $414 million, and year-to-date equipment sales dropped five percent to $656 million.
The Aug. 7 drop in Topgolf Callaway Brand’s stock price was no surprise, as MODG, despite generally strong quarterly earnings resorts, has rarely been a Wall Street darling. This is much to the frustration of company President Chip Brewer, who said his company is “in the process” of conducting a full strategic review of Topgolf.
“As we look forward, we remain convinced that Topgolf is a high-quality business with significant future opportunity,’’ Brewer said. “It is transforming the game of golf, and we believe it will deliver substantial growth and financial returns over time.
“At the same time, we have been disappointed in our stock performance for some time, as well as the more recent same-venue sales performance. As a result, we are in the process of conducting a full strategic review of Topgolf. This review includes the assessment of organic strategies to return Topgolf to profitable same-venue sales growth, as well as inorganic alternatives, including a potential spin of Topgolf.
“Our strategic review of Topgolf is being conducted with the help of outside advisors and is focused on maximizing long-term shareholder value. We are active in this work at present and expect to complete it expeditiously.”
Photo courtesy of Topgolf Callaway Brands
