Callaway Golf Proves Nike Should Have Left Clubmaking to the Experts

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Amid an improving U.S. economy and wealth effect from rising home and stock values, people are back paying the pretty penny it costs to play 18 holes. The number of golf rounds played in the U.S. has increased 2.7% this year, according to the latest data from Golf Datatech. Rounds on U.S. public and private courses have gained 3.3% and 0.4%, respectively. And June was even better than the trend so far this year, notes Golf Datatech, with U.S. rounds played surging 5.3%.

More rounds being played has translated to most golf equipment manufacturers selling more balls, clubs and apparel. Callaway’s second-quarter sales increased on all product categories, led by a 14.9% surge in golf balls. At Adidas, its Taylormade-Adidas Golf segment saw second-quarter sales increase 7% on the back of double-digit growth at Taylormade.

Then, in early August, the traditional golf equipment makers got some more good news inNike (NKE) saying it would stop producing golf clubs, balls and bags. Instead it will take a page out of the likely more profitable model used by rival Under Armour (UA)  — simply hawk golf apparel and footwear. The news — which essentially means market share will be up for grabs at key retailers such as Dick’s Sporting Goods (DKS) — lit another fire under Callaway’s stock, which was already enjoying a good year due to its own performance. Shares are now up about 24% year to date, out-performing the S&P 500‘s 6.8% increase. Since Nike’s announcement on Aug. 3, Callaway’s stock has jumped about 9%.

As icing on the cake for Callaway this year: long-time pitchman, 46-year-old Phil Mickelson, is still at top of his game, and fellow veteran and spokesman Jim Furyk had a bag full of Callaway gear when he recently shot the lowest ever round in PGA Tour history of 58 (video below). TheStreet talked with Callaway Golf’s CFO Robert Julian, who totes a 14.5 handicap, about the company’s solid year and state of the golf industry. What follows is a condensed, edited version of our conversation.

[Source:-The Street]