Callaway announces $52 million cost-reduction initiatives
By mustang6560 on 7/13/12
Watch out TaylorMade, Callaway and its new CEO Chip Brewer are coming for you!
"It's a new day now," he said. "The golf club and golf ball business is what gets our excitement levels up. Clearly, we're very grounded in reality and we're going to come out with more aggressive, authentic and relevant programs, and that's going to extend from sales to marketing to product. In the past, they've claimed to be authentic and they haven't always been authentic, in my opinion. They've been high quality but they haven't always driven innovation and been as responsive as they could. We're changing all that and the team is excited as hell about that.The new day Chip is referring to is not a good day for everyone at Callaway. In order to get back on track, the Company announced its $52 million cost-reduction initiatives, which included a worldwide layoff of 250 employees. And this cut is in addition to the $50 million operating reduction former interim CEO Tony Thornley announced a year ago.
Chip was able to successfully save Adams Golf, so I'm willing to bet he'll be able to right the ship that is Callaway.
Image via onlinegolfdeal
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You had to figure things weren't going well when both Callaway and TatlorMade dropped prices on their new clubs in late June - seemed to be an earlier price drop than usual.
The layoffs and cost reductions reflect the general state of the golf industry now...fewer rounds played, courses closing, etc. If one of the biggest brands in the business in having problems then the issues are deep seated.
Bryan K says:
In all honesty, I think that the best way for a company like Callaway to make money is to sell a good quality two-piece ball for a good price that mid to high handicappers can use, and Callaway has that with the Warbird. Plus, they own Top Flite. So in my opinion, they are positioned strong for keeping a continuing income. When I look at the fundamentals of the company's stock, what I see is a company that has really one big problem. They don't make enough money to cover expenses. The value of the company is higher than what the stock is selling for, and they have a small amount of debt in comparison to the amount of liquid assets they have on hand. They are a strong company, and I'm suddenly intrigued with the possibility of investing some money since they have brought in a CEO with a proven history.
Interestingly, though, I do not use any Callaway equipment at all.
Callaway sold Top-Flite to Dick's.
Callaway lost a lot of money with their uPro disaster last year, and to waste time re-releasing it this year is stupid. They're gonna lose more money on the same product twice! What Callaway needs to do is undercut their competition by lowering their prices from the get go to garner greater market share/penetration. Get your products out there on the courses and it'll sell itself. Maybe take a loss for a few years, but gamble on the later returns. This is what MS did with the XBOX 360, and it worked.
Bryan K says:
Thanks, Mustang. Wasn't aware that Callaway had sold Top Flite. Bad move, IMHO. Sure, a company gets a name for itself by producing high quality, high-end products that people rave about, but they keep a solid revenue flow by selling mass quantities of entry level items. Now Callaway does still have their Warbird line of balls, and maybe that's why they sold Top Flite. Or maybe they just needed some revenue to keep their head above water. They did lose quite a bit of money last year, and it hasn't gotten any better so far this year.
Callaway still owns Top Flight, as evidenced by their logo on the TopFlight.com website. Dicks owns Maxfli as their house golf ball brand.
While it's nice that they didn't cut R&D, I think the fact that they chose to make their major reductions within the Support areas may not bode well for customer retention.
@jhs545- The paperwork may not be final yet but Callway did sell Top-Flite to Dick's:
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