A big bet on U.S. golfers by Dick’s Sporting Goods (DKS) is solidly in the weeds.
Sales at the company’s 79 Golf Galaxy stores dropped 10 percent in the past quarter, the company said this morning. And golf revenue has continued to drop “in the low teens” in the current period versus the year-earlier quarter.
CEO Edward Stack said the sport, at the moment, is “unpredictable,” a description that unsettles Wall Street as much as any other. “We really don’t know what the bottom is in golf,” he said on a conference call this morning. “The industry has a real issue.”
Adidas (ADS:GR), which has been doing a brisk trade in soccer cleats, saw its most recent results crushed by a poor performance from TaylorMade, a golf brand that accounts for about one in 10 sales dollars.
The sport is even bigger for Dick’s. Golf and hunting (another category in decline) comprise almost one-third of its business. It’s what sets the company apart from Nike stores and Under Armour outlets. About half of Dick’s sales come from “hardlines,” gear like golf clubs, fishing pools and $150 duck-calls from the Duck Dynasty clan.
On its face, golf seems like a savvy play for a sports retailer. The difference between clubs is relatively complex and fitting them to a consumer is critical. Given that nuance, customers are less likely to just order them up via Amazon.com like a baseball bat or tennis racquet. What’s more, golfers tend to be relatively affluent.
That’s the case Dick’s M&A team probably made in 2007 when the company bought Golf Galaxy for $225 million. It seems like a reasonable price at the time, given the brand was logging about $250 million a year in sales. But two years later, Dick’s wrote down the value of Golf Galaxy by about $150 million.
The problem is there aren’t as many golfers anymore. Last year, 650,000 U.S. men quit golfing, according to the National Golf Foundation. U.S. courses only saw 462 million rounds played in 2013, the fewest they’ve logged in almost 20 years.
Golfers who are left aren’t hitting the links that often. Recently, they’ve been shoveling snow, playing Candy Crush and buying cars instead of clubs. Golf rounds dropped 3.6 percent in January, 4.6 percent in February and 23 percent in March.
For retailers like Dick’s, the problem compounds over time as unsold clubs and spikes and balls pile up in its warehouses and those of its competitors. Dick’s is now selling $300 drivers for $100. With prices like that maybe it can lure some hunters onto the links.
