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COVID has driven 'unprecented growth' in golf: Callaway Golf CEO

Callaway Golf CEO Chip Brewer joins Yahoo Finance to discuss his company's earnings and the demand for golf equipment.

Video Transcript


ALEXIS CHRISTOFOUROS: Callaway Golf's third quarter earnings beat expectations, with revenue growth driven by high demand for Callaway's golf equipment and apparel products. Yahoo Finance's Brian Sozzi is joined now by Callaway Golf CEO Chip Brewer. Take it away, Brian.

BRIAN SOZZI: Thanks so much, Alexis. Chip, good to see you here. Thanks for taking some time. I really liked what you said on your earnings call. You said, quote, "When you invest in Callaway, you invest in modern golf." Talk to us a little about that.

CHIP BREWER: Thanks, Brian. And nice to be on with you.

We've really transformed this business over the last several years. And we started with one of the leaders in the golf equipment space, gained market share in that, and grew that business and now have added to that significantly with several key acquisitions and mergers in both the lifestyle apparel space and then most recently with Topgolf.

So we are now the leader in the, what I like to call, modern golf space, with a strong position in the traditional golf business but also the leading asset in the modern golf off-course sector, which is growing so significantly. We have an advantage in scale and reach to golf consumers of all types.

BRIAN SOZZI: I do want to talk about some of these acquisitions you have made, because I don't know how you're finding some of these. But you are light years ahead of many others in your industry with this. But just talk to us a little bit about your outlook for the golf industry next year. Has golf as a sport been reborn?

CHIP BREWER: Golf has got a lot of wind at its back right now, Brian. And it's got it coming from multiple directions because the reality is that COVID has really driven unprecedented growth in interest in the game, from rounds played, from demand for the equipment. We've never seen anything like this before.

I was talking to my team. And even we can't get tee times at local courses right now. There are so many people--

BRIAN SOZZI: That's wrong, Chip. That's wrong.

CHIP BREWER: I know, it is wrong. But we'll have to work on that later.

But then it's also benefiting from this great tailwind of Topgolf and off-course golf, where the number of golfers and the definition of a golfer is just changing dramatically. I mean, there's 24 million golfers in the US as measured by the National Golf Foundation. There will be 30 million people visiting Topgolf next year. And Topgolf, half of those will be golfers and half not. But it is going to be the avenue for further tailwinds and growth around the game. It's how you learn the game in the future.

BRIAN SOZZI: Yeah, a Topgolf by me on Long Island just opened. I mean, these buildings are huge. How many of these are going to open up over the next year?

CHIP BREWER: We're going to open up 10. 10 a year is our goal. And we're very confident we'll be able to achieve that. And by the end of this year, we'll have 70 owned and operated venues between the US and the UK.

BRIAN SOZZI: Is Topgolf making money? Are they profitable?

CHIP BREWER: Yes, they are. They are delivering very positively, as we covered in our earnings call, way above our expectations. The venues themselves are wonderful assets, strong competitive position. But the consumer loves them. And the cashflows from those assets are quite attractive.

BRIAN SOZZI: And hat tip to you guys, Chip, because you do make some of your product, or put it together, here in the United States. But you do rely on some overseas manufacturers. A lot of supply chain bottlenecks out there. Will there be any delay for some of your newest innovations in the front part of next year?

CHIP BREWER: Well, you're exactly right. We, like everybody else, do have some offshore manufacturing and sourcing. But we make all of our premium golf balls here in the US. And I believe that we're unique in that position. And we've invested very aggressively there.

The supply chain challenges that are hitting all consumer products companies, we're not immune to those. But we're working through them nicely. We're not expecting to have any material impact on our launches for next year, which of course, we're very excited about right now.

But having said that, supplies and inventories in the field are also quite light right now. So it is one of those positions where demand is stronger than supply. And we're anticipating that will be the case for the foreseeable future.

BRIAN SOZZI: Phil Mickelson is one of your sponsored athletes, the great Phil Mickelson. He's been very vocal recently about changes coming to the length of drivers here by the USGA. What's your stance on this as a company? And secondarily, is the USGA missing the boat here? I mean, isn't their job to grow the game of golf? Why try to limit what clubs and balls can do?

CHIP BREWER: Well, Phil is one of our sponsored athletes. He's also a good friend. And he's called "Phil the Thrill" for a very good reason, right? You never know what he's going to do on the golf course. It's always going to be entertaining. And he's not shy and sharing his opinions on multiple subjects, which I happen to enjoy and give him credit for.

We're also supporters of the USGA though. The USGA and the RNA are doing their best to do what they believe is right for the long-term interests of the game. The issue as it relates to the length of drivers, they are proposing a local rule on that right now. And that is to go in effect, I think, in the near future.

I don't think it's going to have a big impact one way or another on the game of golf or the business of golf in that particular instance. But it was one that Phil was a motive on, I guess. And we love that about him.

BRIAN SOZZI: I mean, do you think these rules ultimately trickle down to hackers like me? I mean, one of the reasons why I do play golf-- and I used to caddie for 11 years. But I love golf because I love all the new equipment. I love trying all these new things and improving my game. But if these regulatory bodies are going to clamp down, I mean, doesn't that hurt the industry?

CHIP BREWER: That would be the first view on it is that everything they do could have a negative impact on the technology cycle. But if you look at what's happened in practice, it often opens up new areas for us.

So the regulation of the driver length is going to be immaterial for the industry, for the consumer at large. I'm not going to get into whether I support it or not. I think maybe they're overthinking it a little bit. But we're able to continue to drive innovation and technology.

We invest very aggressively in that. You're exactly right. That is part of the fabric of the game. And when we've looked at changes they've made in the past, they have never had a material negative impact on the industry. That is clearly not their intent either. So it's one of those things that we're certainly alert to but not overly concerned about at this point. We're good at what we do. And their goal is not to limit or negatively impact the industry, per se.