2004: Business - Callaway to miss sales target, seeks better game plan for ’05

Callaway Golf suspended its earnings guidance for the remainder of 2004, reporting that it no longer expects to reach its projected revenues for either the third quarter or the full year.

The Carlsbad, Calif., equipment maker announced that some equipment launches, which had been scheduled for later this year, might be delayed until 2005, contributing to the lower-than-expected sales. William C. Baker, Callaway’s chairman and interim chief executive officer, said in a Sept. 14 statement that delaying product introductions will “permit a more powerful launch, with better developed marketing plans and stronger inventories.”

Baker, however, also indicated high retail inventories were a factor in the decision to postpone some introductions. The company cut prices on its metalwoods and 2-Ball putters in July, spurring sales of existing inventory. But Baker said that free product given to retailers who have had to cut prices, along with severe weather in parts of the country, “may negatively impact the clearing of inventory at retail.”

Callaway reported that it does not expect to reach its previously announced sales target of at least $975 million for 2004. This is the second time in the past three months that Callaway has announced that it would not hit revenue targets. In June, Callaway lowered its annual guidance as much as $75 million, citing weak reorders, difficulties at its Top-Flite Golf unit and weak sales in Japan.

Baker was appointed CEO on Aug. 2, following the forced resignation of Ron Drapeau. The company noted that while Baker is “interim” CEO, his “term in the office has not been specified by the board, and no search process for a different CEO has been commenced, nor is one planned for the immediate future.”

Wall Street analysts interpreted that statement differently, ranging from speculation that the company either is being positioned for a sale or that Baker hopes to become the permanent CEO.

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