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Non-Tech : Golf Stocks and Industry Buzz

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From: caly	9/20/2010 12:10:46 PM
	1 Recommendation of 178

blogs.forbes.com Kurt Badenhausen Sep. 18 2010 - 5:08 pm New Wedge Rules Boost Golf Sales The golf business has taken its lumps the past couple of years as the economic downturn has kept people off the course and their wallets closed when it comes time to buy that new driver. Sales at Nike Golf fell 2% for the fiscal year ending in May to $638 million (they peaked at $725 million two years ago). Dick’s Sporting Goods announced last month that it would close 12 of its Golf Galaxy stores due to under-performance. The numbers for golf’s future don’t look so hot either. The number of golfers has shrunk 10% over the past five years and now stands at 27 million. Rounds played are down 2.7% over the same period and 6.2% over the past decade. There were 140 golf courses that closed in the U.S. last year while only 50 new ones opened (check out the chart below for course openings/closings this decade). There is one silver lining in the golf business and retailers can thank the United States Golf Association for it. The USGA implemented its “groove rule” change this year on the PGA Tour which requires that the grooves on clubs must now have 70% of the depth and size of grooves on the old clubs. This particularly impacts more lofted clubs like wedges where the smaller grooves mean less spin on the ball. It has been an adjustment for PGA players used to pinpoint accuracy with their wedges. Starting in January golf club manufacturers will no longer be allowed to ship the “old” grooved clubs. While the pros are banned from using the clubs already, recreational players can keep swinging the “old” clubs until 2024 when they will be required to use the new clubs if they want to post scores towards a handicap. The result of this policy is that golfers are stocking up on their favorite wedges ahead of manufacturers ceasing production. One retailer taking advantage of this new rule is $340 million (sales) Golfsmith International. The 42-year-old retailer has 76 stores across the U.S. that carry golf and tennis equipment and apparel with plans to open 14 more stores over the next two years. “Customers are stocking up on wedges, more than they ever have,” says Marty Hanaka, chief executive of Golfsmith. Sales on wedges are up 22% at Golfsmith for the first eight months of the year. Golfsmith is a micro-cap with a market value of just $50 million. It has posted a net loss in each of the past four years, but analysts are expecting a slight profit in 2010 at $0.03 per share. The big jump comes in 2011 when analysts are looking for earnings per share of $0.27 compared to a recent stock price of $3.12. The stock is up 21% over the past twelve months. The new groove rules could be the gift that keeps on giving for golf retailers as golfers make the switch over to the new clubs. The average golfer carries three wedges in their bag and the average wedge sale at Golfsmith is $109 in 2010. If half the nation’s 29 million golfers replace their wedges in the next few years that is a badly needed $4-5 billion jolt for the golf industry. Now if the USGA can just do something about Tiger’s putting to get him back on track. Course Openings Closings 2000 399 30 2001 284 32 2002 220 38 2003 171 68 2004 151 63 2005 125 94 2006 120 146 2007 113 122 2008 72 106 2009 50 140 Source: National Golf Foundation

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