Golf in the rough as thousands leave sport

05/24/2014 2:15 PM

05/24/2014 2:15 PM

The golf industry is in the rough.

Once the go-to activity for corporate bonding, the sport is suffering from an exodus of players, a lack of interest among millennials and the closure of courses.

About 400,000 players left the sport last year, according to the National Golf Foundation. While almost 260,000 women took up golf, some 650,000 men quit. A severe winter on the East Coast worsened the situation this year by delaying the start of golfing season for many. Slow sales of clubs and other gear dragged down results for Dick’s Sporting Goods last week, sending its stock on the worst tumble since the retail chain went public in 2002.

“Golf is in a bit of a drought,” said Allen Adamson, managing director at brand consulting firm Landor Associates in New York. “It’s a pretty high-price sport, and leisure time is getting crunched.”

Slow golf sales over the past 15 months created a glut of golf inventory at wholesale and retail outlets, forcing them to slash prices. Dick’s is selling some drivers for $99 that were priced at $299 just 20 months ago, CEO Ed Stack said this week on a conference call. Golf sales missed Dick’s target about $34 million in first quarter.

“We don’t feel we’ve found the bottom yet in the golf sales number,” Stack said.

The bleak outlook rippled through the golf industry. Shares of Callaway Golf, a Carlsbad, Calif.-based maker of golf clubs, tumbled 9 percent to $7.60 on May 20. Callaway, which sells the Big Bertha driver, had delivered its own dim forecast last month. The company warned that full-year profit could come in at the low end of its previous guidance, especially if discounting is heavier than expected.

“We anticipate a heavy promotional environment while the industry works through excess inventory,” CEO Chip Brewer said on a conference call in April. The company hasn’t reported an annual profit since 2008.

TaylorMade, the Adidas AG-owned brand that makes clubs and golf accessories, also is suffering. The business saw a 34 percent sales drop in the first quarter, Adidas said earlier this month.

Still, not all golf equipment is in decline. Overall, manufacturers’ sales rose 1.2 percent last year, according to the Sports & Fitness Industry Association. While sales of golf balls fell 4.9 percent, clubs grew 4.2 percent.

Though cold weather and the sluggish economy are providing temporary headwinds, a generational shift may be a bigger cause for concern. The sport is suffering a big decline among younger players, according to the National Golf Foundation, with 200,000 players under 35 abandoning the game last year.

“Everybody’s hooked up to their handhelds, so it’s social networking instead of sports,” said Gerald Celente, publisher of the Trends Journal in Kingston, N.Y. The motivation for wannabe executives to spend hours chasing small balls no longer exists, he said.

“It’s something that’s associated with boom times,” he said. “Most of society’s not moving up, and golf is associated with moving up.”

There also are fewer places to play golf. Only 14 new courses were built in the U.S. last year, while almost 160 shut down, the National Golf Foundation said. Last year marked the eighth straight year that more courses closed than opened.

The people sticking with the sport are playing fewer rounds than before, often opting for nine holes rather than 18. In total, U.S. golfers played 462 million rounds last year, according to Golf Datatech. That was the fewest number since 1995.

“Golf has been a crummy business for a long time,” said Paul Swinand, an analyst at Morningstar Inc. in Chicago.

Golf advocates, though, are working to change those numbers, especially among young players.

Some courses have even added wider holes to make the sport less intimidating, with a Golf.com story last month asking, “Could a 15-inch hole be the answer to golf’s growth problem?”

TaylorMade sponsored a 15-inch cup tournament last month, aiming to make the sport faster and easier. The brand also cosponsors a website with the PGA of America with the goal of “crowdsourcing the future of golf.” The site endorses Hack Golf, a movement to figure out the parts of golf that aren’t fun and fix them.

Even with the decline in participation, the sport of golf may be healthier than people think, said Casey Alexander, a New York-based analyst at Gilford Securities Inc. With better weather, the number of rounds played is likely to rebound – along with sales, he said. Growing interest in golf in Asia could also are helping offset a slump in the U.S.

“In Asia, golf is growing just fine,” Alexander said.

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