We noted the news that Callaway and Topgolf were looking to get a divorce here on the last Topgolf post. I didn't fully catch that the financial struggles were on the Topgolf side instead of the equipment (Callaway) side, but a WSJ piece lays it all out. The entertainment center business (i.e. the hi-tech driving range) is good--just not quite as good as it has been. There are big hopes in City Hall that Topgolf will drive serious tax revenue allowing the city to shoot for the green with a smooth pitch and sink some long putts. But.....
Serious golfers are reliably showing up on golf courses, spending money on their equipment and golf balls. But recreational players are no longer as keen on shelling out some $70 an hour on a driving range for fun these days. Lately, the Topgolf business has been hit hard by slowing consumer spending. Same-venue sales fell 8% in the second quarter from a year earlier, the fourth consecutive quarter of declines. The sales drop was even worse for big-group events because of “corporate belt-tightening,” according to the company. (Ed: think Westin, Hyatt, Marriott).
The company initially thought that visitors to Topgolf would become newbie golfers who might seek out its products after trying them out at those venues, which carry Callaway equipment. As it turns out, hitting a few balls at a recreational driving range isn’t enough to convert people into Callaway faithful.
The steeper price tag might be one contributor: In its location in Edison, N.J., for example, it costs about $155 to reserve one bay for a two-hour session during peak hours. And that doesn’t include food or drinks. Topgolf is trying out different ways to lure customers, including variable pricing, tweaks to its promotions and adding concerts and live DJ nights.
Here's the bottom line
Topgolf itself isn’t a lousy business—it is profitable and generated a 15.5% margin on the basis of earnings before interest, taxes, depreciation and amortization last year. Its top line grew at a healthy 27% compound annual growth rate between 2021 and 2023 before the recent slowdown, and it still has a long runway of new locations. (Ed: especially our little B'game location). It will, however, first need to prove that it can bring customers back after the first handful of visits.
Now, let's chat about those "DJ nights". I never went to the movie nights at the old driving range during Covid, but I recall they did draw a bit of a crowd to Boringame. What's the curfew policy these days on the Bayfront?
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