Feb 18, 2010
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2010 tees off recovery for US golf-gear makers

Feb 18, 2010

By Viraj Nair -Analysis

BANGALORE (Reuters) - The much-publicized Tiger Woods sex scandal that handicapped the game's biggest asset, brought the curtain down on a cheerless year for makers of golfing gear, already reeling from American golfers' reduced spending on the pricey sport.

The future, however, looks brighter as pent-up domestic demand and international growth, driven in part by the game's impending return to the Olympics, gives a fillip to U.S. golf equipment makers like Callaway Golf Co.

"We sense some optimism heading into the 2010 season, despite an uncertain economy and the absence of the sport's biggest star," Stifel Nicolaus analyst Thomas Shaw said.

According to industry research firm Golf DataTech, total U.S. retail sales for golfing hard goods fell about 12 percent to $2.3 billion in 2009.

But its consumer research also revealed latent demand for golfing equipment among "serious" golfers who had held back on spending over the past 18 months, Golf DataTech co-founder Tom Stine said.

"Our indications are that (golfing equipment sales) have already hit their bottom mark and have been climbing over the past two or three months," Stine said.

Both Callaway Golf and Fortune Brands Inc's Acushnet Co, which makes golfing gear under the Titleist, FootJoy and Cobra brands, noted higher sales during the holiday quarter.

Analyst Shaw, who has a "buy" rating on Callaway, expects domestic markets to grow at a "modest" single-digit rate this year.

Golf's reinstatement as an Olympic sport should also help the sport gain visibility and participation, Stephens Inc analyst Rick Nelson said.

The sport's return to the 2016 Olympics, after an absence of over 100 years, is expected to prompt government investment in infrastructure and training to develop the game.

"While (a return to the Olympics) will have a positive impact on U.S. markets, we think it'll have a far greater effect on the international environment," Callaway's Chief Executive George Fellows told Reuters.

Callaway Golf, known for its Big Bertha range of clubs and balls, expects to make significant strides toward recovery this year and forecast a 4 percent to 10 percent rise in sales in 2010.

Stifel's Shaw expects the company to outpace its peers and grow 7 percent in 2010.

"This is hopefully going to be a very strong recovery year, (but) we don't think the industry will return to its normal traditional levels probably until 2011," Callaway CEO Fellows said.

Callaway, which also competes with Adidas AG's TaylorMade unit, privately held Ping, and Nike Inc's golf division, is betting on the game spreading in India and China, the world's two most populous nations.

"Clearly the expansion rates in places like China and (those) I fully expect to see in India are going to far, far outstrip anything the rest of the world does," Fellows said.

(Reporting by Viraj Nair in Bangalore; Editing by Anthony Kurian)

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