MODG Likely to Take a Mulligan on Its Topgolf Business, Conducting Strategic Review

In its Q2 earnings announcement Topgolf Callaway Brands (MODG) management stated, “…we have been disappointed in our stock performance for some time, as well as the more recent same venue sales performance. As a result, we are in the process of conducting a full strategic review of Topgolf.” The review will include the assessment of organic strategies to return Topgolf to profitable same venue sales growth, as well as inorganic alternatives, including a potential spin of Topgolf and is being conducted with the help of outside advisors.

In its earnings announcement, the company reported EPS of $0.42 vs FactSet $0.28 but missed estimates on revenue at $1.16Bn vs FactSet $1.19Bn. While the company blew away earnings expectations, next quarter’s revenue guidance of $980M underwhelmed, coming in 13.8% below analysts’ estimates.

“Despite macro headwinds including the cumulative impact of negative FX trends, persistently high inflation and recent softer-than-expected traffic to our Topgolf venues, I am incredibly proud of our team’s ability to drive market share gains in our products business as well as the continued strengthening of the digital capabilities and fundamental venue profitability at Topgolf,” commented Chip Brewer, President and Chief Executive Officer of Topgolf Callaway Brands.

The stock is currently down ~5% in the PRISM Consumer Products Index