We can finally put some numbers to the COVID-19 effect on golf’s second-biggest player. Acushnet’s Q2 2020 Financial Report says pretty much what you’re expecting it to say. Sales were down and net income – or profit – was way, way down.

Specifically, global sales for all Acushnet brands in Q2 were an even $300 million. That’s down 35% compared to Q2 of 2019. What’s more, Acushnet is reporting a Q2 Net Income of $2.3 million. That’s down 94%.

As always, please note we are not, nor are we claiming to be financial analysts or investment counselors. We simply follow the golf industry, and we like to read. And with financial reports, the headlines may be sexy, but the real meat is in the details.

And Acushnet’s Q2 2020 Financial Report is no different.

A Groin-Kick of a Quarter

Considering the golf world was effectively closed for roughly half of the entire second quarter, a 35% drop in sales could actually be considered a small victory.

Sort of.

“Following the re-opening of our production facilities and distribution centers in late May, we have seen strong demand across all segments of our business,” says Acushnet CEO David Maher. “Most notably for Titleist golf balls, which have directly benefitted from increased rounds of play.”

Specifically, Titleist ball sales were down 41% ($71 million) in Q2. Club sales were down 32% ($35M), Titleist gear (hats, gloves, bags) sales were down 31% ($14M) and FootJoy sales were down 40% ($46M). Regionally, U.S. sales were down 43% year over year, Europe was down 42% and Japan down 44%.

Korea, due to a more rapid market recovery compared to other regions, was actually up 14% year over year.

On the surface, a 94% drop in Net Income (aka “profit”) with a net sales drop of only 35% might be a bit of a head-scratcher. A deeper dive into the Income and EBITDA statements, however, fill in the blanks.

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Where Did The Money Go?

As mentioned, overall sales for Q2 were down by 35%. As you’d expect, the Cost of Good Sold was also down by a similar percentage, as was gross profit.

Operating Expenses, however, took their toll. Selling, General, and Administrative Expenses – which includes all sales, marketing, operations, and administrative costs, were also down, but only 23% year over year. R&D expenses were unchanged, which ate into Net Income, as did $1.4 million in Restructuring Charges. Acushnet says those costs relate to severance and other costs associated with management’s approved restructuring.

There’s also another $10 million in “Other extraordinary, unusual or non-recurring items.” Those items include salaries and benefits paid to associates who could not work due to government mandated shutdowns, fringe benefits paid to furloughed associates, spoiled raw materials, costs to support remote work, and the cost of additional health and safety equipment.

Added together with other accounting items and assorted expenses, that’s about $36 million taken off the bottom line.

Looking Forward

While not exactly bullish on the rest of 2020, Acushnet does appear to be cautiously optimistic. While April sales were clearly in the toilet (down 68% YOY), May wasn’t quite as bad and June sales actually exceeded 2019. Acushnet also says it has a healthy order backlog, so there appears to be plenty of business in the pipeline.

For those of you hoping for big discounts and equipment blowouts due to COVID-19, you may be in for a letdown. Titleist reports its inventories are in-line with demand, and it says channel inventories – meaning on-course and off-course retailer stock – are down compared to last year. That means neither Acushnet nor the retailers have excess inventory they need to get rid of. No excess inventory means no blowout sales.

Also fueling optimism is a slew of new products. The new Titleist Tour Speed golf ball was announced yesterday, while new drivers, fairways, and Concept irons are in the pipeline for the rest of the year.

As you’d expect, Wall Street didn’t take kindly to yesterday’s news. Acushnet stock opened at $39.31 per share Wednesday and tanked to as low as $35.59 during the day before closing at $36.70. However, it’s important to put that into context. When the Q1 reports came out in May, Acushnet stock was at $28.40 per share.

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