Preparing to launch the premium, European outdoor brand in North America sometime between Q2 and Q3 of 2020, Callaway last week lowered its FY19 sales and EBITDA outlook for the Jack Wolfskin business it purchased for $476 million late last year.
Citing softer market conditions in Central Europe and China and ongoing currency exchange headwinds, Callaway said Jack Wolfskin’s FY19 revenues will be 2-3 percent lower on currency-neutral basis from initial projections, down 4-6 percent on a reported basis. Jack Wolfskin is now forecast to provide its parent $20-26 million in adjusted EBITDA in FY19, down from prior guidance of $33 million. In Q1, Jack Wolfskin generated $93 million in sales and was “slightly profitable from an EBITDA perspective.”
Shortly after announcing the Jack Wolfskin acquisition, Callaway said it would leverage its operational infrastructure to broaden the brand’s geographical footprint and expand its annual FY performance to $400 million in revenues and $50 million in EBITDA over the next few years.
“Although we are lowering our guidance for the Jack Wolfskin business in 2019, we remain excited about the long-term prospects of this business,” Callaway CFO Brian Lynch told analysts. “And we believe our other businesses will cover the short-term effects of the softer market conditions in Central Europe and China are having on the Jack Wolfskin business.”
Central Europe and China currently account for approximately 75 percent of Jack Wolfskin’s overall revenues.
At Acushnet, consolidated Q1 revenues were down 1 percent to $434 million on a constant currency basis despite a 16 percent gain in golf ball sales during the period and a 3 percent increase at FootJoy. Titlelist club sales, down 20 percent year-over-year, were said to be in line with plan. U.S. sales were 5 percent higher.
H1 consolidated net sales at Acushnet are projected at flat year-over-year, ahead of planned new irons launches in Q3 that should bolster H2 revenues. Meanwhile, in Korea, the company is transitioning its apparel line to a more Korea-centric, locally designed line from one that was globally-inspired and shifting more of its FootJoy business to own retail and away from wholesale.