Comments on the golf business from the recent Fortune Brands conference call:
seekingalpha.com
Now golf. Our golf business closed another record year with strong momentum. Fourth quarter revenues reached $245 million, up 13%. The top line benefited from growth in all product categories lead by a double-digit increase in sales of golf balls, as well as favourable foreign exchange.
As is common in the seasonally smallest quarter of the year, operating income was negative, a loss of $6.7 million, down $1.9 million from the year-ago quarter. The line was impacted by the close out of certain golf products in advance of new product launches, R&D in brand building expenses, modest restructuring costs, and patent defence litigation costs.
For the full year our golf revenues hit a new industry record of $1.4 billion, up 7%, on individual record performances for the Titleist, FootJoy and Cobra brands. Those results reflect the success of our industry-leading innovations. Record results in all product categories and records in all major markets, including the US, Canada, Europe, Korea, Japan, China, and Australia. Golf ball sales increased at a high-single-digit rate as we benefited from favourable mix shift to the next generation Titleist Pro V1 and NXT families that we launched in 2007.
We continue to gain market share in golf balls, adding about 1 point in units and 2 points in dollars at on- and off-course US golf shops. Successful innovations, including the Titleist D1 and D2 drivers, the Cobra LV4 drivers and UFI irons, the FootJoy Realfit and the new DryJoy golf shoes further added to our results in 2007. Sales for the Cobra brand advanced at a double-digit rate for the year.
At the operating income line, full year OI in golf was level with a year ago at $166 million. OI trailed sales for the year largely due to investments in R&D and our significant ramp up of investments in international markets.
As we enter 2008 we look forward to capitalizing on the unparalleled strength of our brands. Our development of advanced technology products, our industry-leading sales organization, and our growth initiatives around the world. We’ve already launched several next-generation products this month, including a new four-model iron family from Titleist, and there’s more to come. We see excellent opportunities in international markets where golf is growing rapidly in popularity and we’re determined to capitalize on favourable long-term demographic trends in the US as well.
Similar to our approach in 2007, we’ll continue to invest in the growth of our brands, to expand in international markets, and also to protect and defend our intellectual property in the interest of long-term returns. Including these initiatives, we’re targeting operating income before charges in golf to be up modestly in 2008. |
