NEW YORK – Callaway Golf’s new interim president and CEO, Anthony Thornley, said Thursday that the golf equipment maker will put some savings from planned job cuts toward boosting marketing spending and gaining back market share.
Callaway Golf Co. has suffered losses as the golfing industry has been slow to rebound after the recession. Late Wednesday, the Carlsbad, Calif.-based company announced layoffs in an effort to cut pretax costs by $50 million, said CEO George Fellows would step down and issued a weak forecast for the second quarter. It said it must take “immediate and aggressive actions” to return to profitability.
In a conference call with analysts on Thursday, Chairman Ron Beard said Fellows, 68, resigned after six years at the helm for personal reasons, partly including the cross country commute to his family’s home in New York. The board felt Thornley, who has sat on Callaway’s board since 2004, was a “natural choice” to lead the business until the company can conduct a search for a permanent CEO.
“It is the board’s view that the company’s performance is not at all what we want it to be and Tony’s charge is to lead the next steps in the efforts to improve the results that we deliver to shareholders,” Beard said. Describing the 65-year-old Thornley as an “avid golfer” with a handicap in the low single-digits, Beard said the board believes that he has a “passion for our sport and for this company and that he has the skills and discipline that Callaway needs as it takes its next steps forward.”
Thornley, a former president and chief operating officer of wireless tech company Qualcomm Inc., noted that Callaway’s rivals have been investing considerable sums on media advertising and tour expenses and that’s hurt Callaway’s business. He said the company will look to boost marketing spending to better attract customers.
“While it is clear that it was the global economic recession that derailed our record sales and earnings pace, it is also clear that our business is not keeping pace with the industry recovery,” said Thornley. “While we have the best performing products in the industry, that message has sometimes been overshadowed by the sheer volume of competitive marketing. In addition, the actions we are announcing today will also result in a leaner organization that is better able to respond to changing market conditions.”
Thornley said job cuts will take place at all levels of the organization. The projected cost savings will reduce operating costs and allow the company to redeploy some funds toward its core business. The number of jobs to be eliminated wasn’t disclosed. The company expects to give more details on the reorganization when it reports quarterly results in late July.
Callaway forecast a loss of $55 million for the second quarter, including a $46 million charge related to deferred tax assets and an $8 million charge on the job cuts, and revenue of $270 million. That’s well below the $307.1 million in revenue expected by analysts, according to FactSet.
KeyBank Capital Markets analyst Lisa Brozewicz called the forecast “disappointing,” but believes the management change is positive for Callaway.
“The interim CEO appears to be taking necessary actions to return the organization to profitability,” she wrote in a note to clients.
Callaway shares fell near its 52-week low of $5.80 during Thursday’s regular session, before paring some losses and closing down 11 cents at $6.22.