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Hey if Chrysler can do it, why can’t Callaway?

Callaway Golf announced the start of a new Gas Giveaway promotion which offers a free American Express® Fill It Up® gas card with the purchase of a new FT-i,® FT-5® or Hyper X™ driver from authorized U.S. Callaway Golf retailers . With the purchase of one of these clubs at authorized Callaway Golf retailers between May 15 and July 15, 2008, consumers will receive by mail up to a $100 card value American Express Fill It Up card to help defray the cost of gas at the pump.

This promotion follows the introduction of a similar one by Chrysler last month. If consumers buy a Chrysler, a Dodge or a Jeep, they won’t pay more than $2.99 a gallon for fuel for the next 36 months. It’s limited to 700 gallons per year (approximately 12,000 miles annually).

What is Callaway Doing Right?

It seems that everywhere you look, golf retailing stinks. Pure plays like Golf Galaxy and Golfsmith are sucking wind big time with no end in sight. Yet, Callaway, the venerable equipment leader, is doing quite well thank you very much. Why?

Unlike Golf Galaxy and Golfsmith who are only located in the United States market, Callaway is an international brand and can shift their marketing focus to countries that are growing like Korea, Japan and China. They can also benefit from currency exchange rates. Things don’t seem to be looking up for Golf Galaxy and Golfsmith, but it does for Callaway. Here are the most recent quarterly results (April/May) for each company:

Dicks/Golf Galaxy — Comparable store sales for Golf Galaxy on a 13-week to 13-week proforma basis decreased 8.8 percent, or 9.8 percent after adjusting for the shifted retail calendar. In contrast, the parent, Pittsburgh-based retailer Dicks Sporting Goods reported net sales of $3.89 billion, up 25 percent from $3.11 billion the previous year. Net income increased to $155 million compared with $112.6 million a year ago.

Golfsmith — For the quarter ended March 29, the company lost $5.4 million , or 34 cents per share, compared with a loss of $4.9 million, or 31 cents per share, a year ago. Revenue grew 2 percent to $79.2 million from $77.7 million, in the year-ago period. Golfsmith said its results came in below its expectations due in part to a decline in rounds played and the challenging economic environment.

Callaway Golf — Callaway Golf posted quarterly earnings that beat Wall Street estimates and said it now sees full-year profits at the low end of its previously forecast range. The company, which has been cutting costs and making its operations more efficient, said first-quarter net income grew to $39.7 million, or 61 cents per share, from $32.8 million, or 48 cents per share, a year earlier. Revenue for the quarter was $366.5 million, up nearly 10 percent. Among other things, Callaway said revenue got a boost from foreign currency exchange rates.

When The Going Gets Tough, The Tough Sue

When everyone is making money there isn’t time to try to take down the competition. With shrinking margins, stagnate revenues and tougher competition, if you can’t innovate your way to profitability, the only choice is to sue.

Take the recent court cases brought by Callaway against Titleist, Bridgestone against Titleist and DogLeg Right against TaylorMade. All are suing each other because of supposed patent infringements.

In the case of DogLeg Right, they accuse TaylorMade of violating two patents that “…cover technology that allows the user to adjust the center of gravity of the clubhead in up to three dimensions in order to produce golf ball trajectories varying from high to low fades, high to low draws, and high to low straight shots.” The supposed clubs that violate these patents are TaylorMade’s r7 Quad driver, TaylorMade r7 425 Quad driver, and TaylorMade r7 CGB Max driver and fairway woods.

A recent court victory was awarded to Callaway over Acushnet, makers of the top-selling golf ball the Titleist Pro V1. The jury awarded Callaway a victory on “….the construction of a multilayer ball with a solid core and a polyurethane cover that are used in the Titleist Pro V1 ball.” Callaway acquired the patents in 2003 when it purchased Top-Flite Golf following the bankruptcy of parent Spalding Sports Worldwide.

Acushnet was recently involved in another golf ball case that has been settled out-of-court with Bridgestone Sports Co. Ltd., resolving a 2 1/2-year ball patent infringement suit. Acushnet will be required to pay Bridgestone on-going royalties for use of an undisclosed number of Bridgestone patents.

Lawsuits are part of the business landscape and suing your competition is generally the chosen path, but for the major golf businesses, if they spent more time on innovation and growing the game and less on legal court fights, maybe their businesses would perform better.

The Idiocy of Movable Weights and Draw Drivers

On the Chinese calendar, 2007 is the Year of the Pig, but in golf, it is the year of the Draw. The first major equipment company to the “Draw-ing” table was TaylorMade with their r7 Draw. Then Callaway added to their FT line and its innovative square head, but couldn’t help themselves and now offers a FT-5 in three flavors: draw, neutral and fade.

In 2004-06, we saw the introduction of moveable weight drivers. Then they expanded the concept to irons, hybrids and putters. Now we can move weight around on everything in our bag except maybe our ball retriever.

Lately, to gain a market edge, TaylorMade and Callaway have been trying to undermine each other’s credibility in the media. Creating a controversy of moveable weights versus square heads. This public fight may be good for equipment sales, but it does nothing for the average golfer. Neither of these product innovations will improve a 15-handicapper’s game.

You have just blasphemed!! May the legal departments of these companies smite you.**

Not hardly. Changing the configuration of your driver by throwing weight around a club is not going to make a difference to any golfer unless we have a REPEATABLE SWING. If we can’t do the same thing two consecutive times, what difference does it make if we can put weight in the toe, heel or anywhere else?

Every golfer wants to improve their game. It’s one of those great truths in the universe. Short of outright cheating (a little rule-bending is okay), we are all looking for the next golf magazine tip or Zen moment when everything is right with the golfing world and we shoot that elusive par round.

We are being taken for an expensive ride my friends. Buying that $499 driver isn’t going to mean a hill of beans to your game if you can’t do the same thing twice. Save your money and buy some lessons. That and your old trusty 360cc driver will help lower your score faster than any of the fancy new drivers on the market today.

**Insert “cover-your-ass” legal babble here.

Why Are Golfers So Gullible?

Many will say that “perceived” product innovation drives the golf club market each year. Knowing that, gullible golfers still wait in line to be the first to turn over their money and buy the latest, hottest or most advanced product on the market today.

So, shouldn’t it seem ridiculous to Mr. Gullible Golfer that Callaway, the big daddy of equipment, is coming out in 2007 with another “ultimate performance driver based purely on physics?” Obviously not.

I’m not picking on Callaway specifically, but all the equipment manufacturers out there. It used to be that once a year, around October, we’d get to see the unveiling of each company’s new line of golf clubs. Now, we see the cycle repeat itself every six months.

If I may, please refer to Exhibit A: the Callaway Fusion FT-i 460cc Driver.

Now how is this one different than the others? Wow! It’s got a square rear end. And it will come out at $599. Nike is going to have one too!! Last year it was screw weights, first introduced by Taylor Made, now its square butts.

As each new driver hits the market, the manufacturer mentions all the folks that are testing it on tour. Then they talk about the “performance enhancements”, “breakthrough technology” and the “unprecendented amount of pre-orders”. In the meantime, Mr. Gulllible is salivating at the prospect of getting his hand on one of these. If someone wins with it (perhaps an Annika or Phil), then it becomes the hottest seller….for a while.

Let’s see, since 2002, Callaway has introduced the Great Big Bertha, Great Big Bertha II, Big Bertha 454, Fusion, Fusion FT-3, X 460, and now the Fusion FT-i. That’s seven new drivers in FIVE years. With an average sticker price of $399, Mr. Gullible would have needed to spend $2793 to keep up with the Jones since 2002.

That doesn’t even include the new $899 set of irons, the $179 putter, the two $149 fairway woods, a $119 hybrid or the $42 Pro V1 golf balls Mr. Gullible’s needed to keep current.

I’m not faulting Callaway. I’m faulting Mr. Gullible the consumer. Instead of actually taking lessons to improve one’s game or even playing more than twice a month, Mr. Gullible wants the club to do all the work. Just think, at $125/lesson, he could have 16 lessons with a pro and still have money left over to buy that Callaway FT-i when it shows up on eBay three months later for only $299.

Isn’t there a point when a golfer has too many clubs or are we all just gullible equipment-buying fools?

Podcast #26: Norman Buys McGregor, Duo Jailed in Assault, North Korea Golf, Duffer is Found, Police Chase Stops Tournament

CLICK HERE to listen.

In Episode #26 of Golf Gear News, host Bruce Stasch reports at The Newstand that Norman Buys Controlling Interest in McGregor, Hockey Player Gets Hole in One and Callaway’s New Online Concept.

Hear about a Super Expensive Putter from Japan.

The Golf Gear Guru finally catches up with Duffer McDoughall Johnsen - the Socrates of Golf, in his local bar.

We travel to behind the DMZ to visit North Korea’s Diamond Country Club in Golf Around the World.

In Why Can’t We All Just Get Along Two Jailed for Unprovoked Golf Assault.

We never have a shortage of oddities in Golf of the Weird when a Burnt Body is Found on Course and a Tournament is Interrupted by a Police Chase.

Finally, explore the mental side of the game at www.zencaddy.com.

As always, our show is sponsored by Golfknockoff.com.

Check out our new Media Kit.

Next time listen for the next installment with the Socrates of Golf - Duffer McDoughall Johansen.

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