The golf boom is continuing this year as people look for fun, socially distanced outdoor activities during the pandemic. And that has caused executives at Dick's Sporting Goods (DKS) to reach into their cash coffers to upgrade the shopping experience at their important Golf Galaxy stores so they keep pace with rivals such as the PGA Superstore.
Somewhat under the radar, Dick's said on an earnings call Wednesday it would spend $20 million to bolster its Golf Galaxy stores in a bid to capture market share in the red-hot golf equipment market. Among the investments, Dick's is installing Trackman technology (essentially large digital screens that one can hit balls into and receive data feedback on ball flight, etc.). The technology is now available in 80% of Golf Galaxy's nearly 100 locations.
Meanwhile, the company has gone live with online booking for lessons and club fittings — which has become the industry standard.
"The game of golf is in great shape. Our golf business has been tremendous. With Golf Galaxy comps significantly outperforming the company average in recent quarters, we're leaning into this streak by investing in our Golf Galaxy business," said Dick's Sporting Goods executive chairman Ed Stack.
To be sure, the investments make sense just given where the game of golf stands today.
The number of rounds played in the U.S. rose 24.3% through March, according to the latest available data from the National Golf Foundation. March alone saw a 45.3% surge from a year ago. The number of rounds played rose 13.9% in 2020.
"Dick's investment in the sport [golf] shows that the go-forward outlook is strong, and strength cannot simply be attributed to a one-time COVID benefit," said Jefferies analyst Randal Konik in a research note to clients.
Konik thinks Callaway Golf shares are a good way to invest in Dick’s renewed commitment to Golf Galaxy.
"In our recent survey we found Callaway's recommendation frequency among sales associates for college graduates encouraging, as it suggests ELY is poised to benefit from the extended equipment tailwind, as new players invest more in the sport over time. Bottom line... new (young!) people are continuing to enter the sport of golf, with spend likely over-indexing to Callaway," Konik explained.
The analysts has a Buy rating in Callaway Golf shares with a $60 price target.
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