By Mike Mazur
Many golf industry observers had predicted that 2004 would be a breakout year for retail sales. But with each passing month, it’s turning out to be more of a disappointment.
Strong sales growth during the first four months of the year has given way to a market that – while still growing overall – has weakened significantly. Product categories once growing at double-digit pace in units and dollars have slowed, while inventory levels at many retail outlets have swelled.
Meanwhile, growth in rounds played nationally has slowed, and retailers say profits have been hurt by heavy discounting of equipment, especially metalwoods.
“Through the end of April, we thought this was going to be a great year,” said Al Whalen, co-owner of Eugene, Ore.-based Fiddler’s Green, one of the largest independent golf retailers on the West Coast. “But in June, July and August, we’ve definitely given some back.”
At Games People Play Golf Equipment, a large off-course store and practice facility in Beaumont, Texas, owner Jeff Williams said sales were up about 15 or 16 percent through the first four months of the year. But “now (year-to-date) we’re flat or down a point,” he said. “We’ve had some months where we were off 8 or 10 percent, and that’s been enough to be pretty significant.”
Business recently has been only “fair” at Carl’s Golfland, a major retailer in the Detroit area, according to owner Carl Rose. “The year started out pretty decent through the first three or four months. It had a pretty good feel that I hadn’t seen for a few years.”
But business has slowed in recent months, a fact he attributes to foul weather, weakness in the Michigan economy and the loss of manufacturing jobs in the state.
The drop-offs many retailers have experienced have paralleled a leveling off in rounds played as reported by the National Golf Foundation.
According to the NGF, rounds played increased 6.9 percent during the first quarter compared with the same period in 2003. But the gain was only 0.9 percent during the second quarter. The NGF reported a 4.9 percent rounds increase in April, but a 0.1 percent drop in May, followed by a 0.8 percent decline in June.
Despite these indicators of stagnation, Tom Stine, partner at Kissimmee, Fla.-based research firm Golf Datatech LLC, said that total retail sales are up for 2004.
“We have seen some inventory build in the past couple months, but by the same token, if you’re selling more, you’re carrying more,” Stine said.
One sign of problems is in metalwoods, the industry’s largest equipment category. According to Golf Datatech, unit sales of woods in June increased 5.1 percent, but sales, in dollars, fell 4.6 percent, indicating widespread discounting. In April, the category had registered gains of 12 percent in units and 8.2 percent in dollars compared with the same period in 2003.
The market slowdown’s impact is far-reaching.
True Temper, the Memphis, Tenn.-based shaftmaker reported decreased sales and profits for the second quarter, citing in part a slowdown of product introductions by its client manufacturers during the period. For the quarter, the company reported net sales declined 22 percent and net income fell 55 percent.
Scott Hennessy, True Temper’s president and CEO, said equipment sales at retail seemed stable in terms of units, but “many products are being sold at a discount in order to clear the existing inventory.”
Said Gary Updegraff, who operates four Nevada Bob’s locations in Iowa: “I think (discounting) has single-handedly hurt the industry more than anything else. The consumer is tired of paying $399 for a driver, and then coming in and seeing it at $200, and then getting a trade-in value of $80. And it’s over a cycle of, what, three months?”
Added Whalen: “We’re realizing that the stuff is a whole lot more perishable than it used to be. We kid our customers a little about why we keep (equipment) in plastic on the floor – it’s kind of like lettuce, after 90 days, if you don’t, it’s going to rot.”