Is it really “The Economy, Stupid”?

Many years ago James Carville’s oft quoted phrase formed the foundation of a very successful presidential bid, turning that catchphrase into pay dirt for an up and coming politician from Arkansas.  In trying to understand 2018’s golf equipment sales expansion thru the On and Off Course Specialty channels, our analysis keeps coming back to the origins of that simple statement.  While there is a lot of very good product in the equipment market, there hasn’t been a quantum leap in technology or design that would typically spur substantial sales improvement.  So what is driving sales higher?

So far thru Q3 2018 we’ve seen the following sales increases in equipment:

Consumables/Light Durables              +4.8%

Golf Clubs                                               +9.1%

Total Golf Equipment                           +7.2%

Golf Datatech believes much of the 2018 sales improvement is based upon broad economic improvements in the US economy, coming on the heels of nearly a decade of very cautious spending, particularly on discretionary consumer durables, like golf clubs.

Macro Economic Positive Impacts

The following measures provide some evidence to support the economics of expansion:

-US GDP was +3.5% in Q 3018 vs. +3.2% in 2017, on a YTD basis total golf equipment sales have been outpacing GDP by more than 2:1.

-Consumer spending for Q3 was +4.0%, significantly higher than expectations from economists. Since consumer spending represents more than 2/3’s of US GDP, the consumer is a critical piece of how the economy performs.

-US Consumer Confidence Index = 138.4 in September of 2018, the highest since 2001, and continuing an upward trend since reaching a low of 25.8 during the Great Recession

-US Unemployment sits at 3.7%, down from nearly 10% during the height of the Great Recession

-Asset values for many Americans are up substantially, with the stock market at record highs before the most recent correction, however even with the downward move stocks remain well above Pre Recession levels.  And housing values have rebounded significantly from their lows, leaving many feeling better about their nest egg/retirement years.

-The 2018 tax cuts put extra dollars in the pockets of the average American, providing them with spending cash, some of which they are spending on golf products.

-All this positive consumer data is finally helping most Americans come out of the bunker they more or less stayed in since the Great Recession decimated their asset values, their retirement plans, and their lives in general.  For many those mental scars will never totally disappear, however distance and time provides some return to “normalcy”.

Golf Equipment Gains

In Consumables and Light Durables we’ve seen improvements in both units and dollars across all the various categories, led by shoes and bags (up 7%-8%), while balls and gloves edged slightly higher (2%-3%).

In Golf Club terms, the number of sticks sold in irons and woods had been declining for several years, however of late many of the club categories have seen bottoms form on their long term unit trend lines, and in some cases they are starting to move higher.  At the same time, average selling prices have exploded, the combination of unit improvement and higher ASP’s has the club category in particular, rocking like it hasn’t in many years.  Clubs are led by Wedges, Irons and Hybrids (all up 15%+) while drivers, fairways and putters have all hovered near flat to slightly higher.

Potential Headwinds

Looking forward, there are potential headwinds facing the golf industry, including but not limited to:

-Interest rates have moved significantly higher, and every indication is that they will continue to rise at least in the short term.  Higher rates have the potential to dampen broader economic growth, slow profit gains for corporations, and lower stock prices,  while also negatively impacting housing prices and potentially reducing consumer confidence, all of which could influence consumer spending moving forward.

-The full impact of the proposed tariffs and the potential for a full scale trade war with China could have an impact on the golf industry.  Higher prices on products due to tariffs will likely mean slowing demand, which is not where golf equipment wants to go, given that it’s just started to grow once again.  This is not a certain outcome, because the tariff situation thus far seems somewhat fluid, however longer term it could evolve and become an issue.

Summary

While golf companies rightfully focus on new designs, new materials, moving CG’s, improving MOI’s, and gaining the maximum distance for their golfers, the broader US economy will always have a substantial impact on sales of golf equipment.  Given the uncertainty and unease surrounding the results of the upcoming mid term elections, what happens to the US economically remains important to projecting where the golf industry will head in the short term.

 

 

Ever wonder how many really high priced golf clubs are being sold?

Prior to the 2016 the market for Ultra-Premium golf clubs in the United States was nearly zero, however the launch of PXG combined with the rapid expansion of Custom Fitting Specialty stores that feature precision digital fitting, allowing for more exotic shafts to be widely available, and the category took off.  For the first time we’re taking a look into the new world of $599+ drivers, irons over $200/stick, putters over $350 and wedges over $150.

“The Development of the Ultra-Premium Golf Club Category” is Golf Datatech’s latest consumer study, providing an in depth, deep dive into the golf equipment business.   Released in September of 2018, this study digs deep into the emergence of this category, including brand usage by product type and price point, attitudes about the purchase process, insights into the importance of club fitting, and the club fitter, when spending this kind of money on golf clubs.

While many golf industry experts felt the Ultra-Premium category was going to be a very small niche, this study suggests it’s likely much larger than most estimated, well into double digits (as a % of sales) in the categories measured.

And beyond just investigating their feelings about this most recent purchase, we also examined satisfaction levels along with future purchase intent.  What became obvious is that just because Serious Golfers spent significantly more on this most recent club purchase, the next time around they are not looking to spend anywhere near as much.  The implications are clear, not only will past purchasers of Ultra-Premium clubs have to be happy and satisfied with their purchase, they will also need to be given outstanding reasons to make their next purchase.  

Anyone interested in purchasing the Ultra-Premium study should contact Suzie Phillips at info@golfdatatech.com.

 

 

Golf Market Updates-Equipment Thru August 2018

New golf equipment data thru the month of August 2018 from Golf Datatech indicates the golf equipment business continues to roll along, with sales increases across almost every product category, and total sales up almost 8% on a YTD basis.

Green Grass grew by 7% while Off Course Specialty stores were up over 9%.  After taking more than a year to find their footing, the Specialty Channel has adjusted to Golfsmith closures from the back half of 2016, and is now solidly in the black.  What is interesting to note is that many of the Specialty Stores that remained in the business last year saw healthy sales increases, however the upside in their individual stores did not offset the decline impacting the category in total as the Golfsmith stores closed.

Golf Club sales are up double digits YTD, led by wedges and irons, while woods and putters are relatively flat.  On the consumable side, golf balls and golf gloves are both trending positively in both units and dollars, while semi durable purchases (bags and footwear) are up significantly more.

What is driving Equipment Sales so much higher?

Golf Datatech believes Golf Equipment sales are being impacted by a variety of factors:

-Improving economy, with GDP running a full percentage point higher than it was for the same quarter prior year

-More money in the pockets of the US consumer because of the tax cuts

-Substantially higher net asset values as their investments and houses appreciated

-Consumer Confidence is running high

What Potential Headwinds Exist for the rest of 2018?

-Potential impact of tariffs on raw materials and components used for golf clubs

-Potential economic slowdown due to the impact of tariffs on prices

-Random acts of political malfeasance…in today’s world anything is possible.  

What is the most likely outcome for the rest of 2018?

The November elections (and no one can predict what else) may cause a change in direction on the macro level, however by the time that occurs the bulk of 2018 will be in the books and it will be remembered as the year when golf equipment sales bounced back in a big way.

 

Good News Continues in Equipment…Apparel Still Lags

At the risk of “jinxing” the momentum in golf equipment sales, I’m happy to report that May was another very positive month for the US market. Golf Datatech’s latest US Retail sell thru for the month of May indicates continued strong sales gains in most equipment product categories for the fifth consecutive month.  Consumables/Light Durables were up 6% and Golf Clubs gained by double digits vs. same period year ago.  Stimulated by a robust US economy, strong asset positions due to stock market gains and improved housing prices, and more dollars in the every day American’s pockets due to a reduced tax burden, purchases of golf equipment was up sharply.  Add in the first decent month of weather nationally in May, and in total the golf equipment business is in a good place heading into the summer months.

Unfortunately golf apparel is not faring as well.  YTD Green Grass sales are down over 7% while the Off Course Specialty channel (by far the smaller of the two) is up nearly 5%.  Some of the On Course deficit is likely a result of very poor weather across much of the country in 2018, which has negatively impacted rounds played as well as apparel sales.

Equipment

While unit sales have not fully rebounded in all equipment categories, they’re up in seven of the ten segments we track in hard goods (balls, gloves, shoes, bags, drivers, fairways, hybrids, irons, wedges, putters).  The largest increase has been in wedges, a category with significant new product introductions and substantial positive momentum that is up over 20% for the first five months of 2018.

Iron sales are also up sharply, with Average Selling Prices soaring and at all time highs, while increases in driver pricing are moderating after several months of rapid growth.  It wasn’t that long ago (October of 2014) that ASP’s on drivers were in the $220 range, while today the average is nearly $360.  The only club category continuing to  struggle remains putters, which continue to see shrinking unit sales while ASP’s creep higher.

After struggling for several months due to less than ideal weather, ball sales finally rebounded in May and in total the category is growing marginally in units while ASP’s have stagnated.

Golf Apparel

Combined On/Off Course sales in golf apparel continues to trend lower in dollars, however the pace of the decline continues to lessen.  After a horrific start to the year due to severe weather (down 11% in January), total sales in golf apparel were only down 3% for the month of May, suggesting the category is moving closer to equilibrium, but the early season hole remains.

The one recent bright spot is men’s shirts, which represents the largest single sub category of golf apparel, and which have creeped back up level with YAG in May.  Generally speaking, as men’s golf shifts goes…so goes total golf apparel.  However, the only sub category that appears to have heavy inventory is Men’s Shirts, which might suggest heavy discounting could be lurking around the corner if sales for June do not turn positive in a big way.

 

Custom Fitting Evolution, 2018

On June 1, 2018 Golf Datatech released its newest consumer study, titled the Evolution of Custom Fitting Golf Equipment in the United States, Consumer Attitudes and Experiences.  The following are a few personal observations as well as highlights from the study, which is the only ongoing analysis of this means of selling golf clubs in the US.  The first investigation of the Custom Fitting business was done by Golf Datatech in 2001, and a LOT has chanced since.

There is no doubt that custom fitting of golf clubs has become widespread, particularly among private club players and those with significant assets/household income.  However, while the majority of Serious Golfers have been custom fit at some point in their golfing lives for clubs, about 1/3 have never done so, and the data suggests most of this group probably will never cross over to being fit, because they don’t believe fitting will improve their game enough to justify the costs involved.  And while many golfers get fit without any extra costs at their local Off Course shop or thru their golf professional, the costs of being fit at Custom Fitting Specialists (which is the fastest growing sub segment) is frequently substantially higher, frequently over $100/session.

During the weeks prior to completing the analysis and write-up I went to several Custom Fitting Specialists as well as traditional Off Course Specialty Stores for individual driver fittings.  I paid full price for fittings and none of the Fitters were aware I was doing research on the fitting.  Immersing myself in the fitting process allowed me to better understand how consumers view being fit, and ultimately led to a much more informed and insightful analysis of the category.

As someone who has been in the golf industry for 33+ years, with many of my early years spent in club design, marketing, and development, I’ve been witness to the evolution of fitting.  And it certainly has changed.  What was once a category owned by Ping in the 1980’s with their bright yellow full-page ads for static fitting in Golf Digest or Golf Magazine, has now evolved into a high-tech world of data driven instant feedback utilizing clubs that can be adjusted and modified on the spot.

However, even with all the high-tech equipment and technology built into the fitting process, the Fitter themselves are still the key to the final outcome.  Fitting golf clubs remains more of an art than a science, and the skill level of the fitter is critical to not only getting a proper fit, but also for controlling the direction of the session.  My experiences in fitting varied widely, from highly technical and data driven to loosely constructed sessions where I directed the brands and models I was interested in.   But in every case the “numbers” associated with the new product that was recommended were superior to my current “gamer” driver, improving the launch angle and reducing backspin closer to my ideal to maximize distance and minimize off target hits.

Custom fitting does work. When properly fit by an experienced fitter, it improves most players ability to strike the ball more consistently, which usually results in more distance and better control.

The real question golfers have to answer prior to being fit, is just how important is it to absolutely optimize their potential, and how much are they willing to pay?  There are several unique shafts in the marketplace that may work for an individual golfers swing, some of them significantly more costly than the ones offered by OEM’s in their stock clubs, some at the same price as stock. However the process of sifting and separating the wheat from the chaff requires time, a lot of swings, and the willingness to seek out the best possible fit.

For more information on the results of the Study please visit the Golf Datatech website by clicking on the link below.

Press Release on Custom Fitting 2018

To discuss pricing or purchase the full report from Golf Datatech, please email info@golfdatatech.com

 

 

April Key Data-Rounds Played, Equipment & Apparel

It’s been a busy few weeks at Golf Datatech US, with the release of the April Retail Sell thru data, April Rounds Played, and the 2018 Evolution of Custom Fitting study, the 7th edition (going back to 2001) which tracks attitudes and opinions of the custom fitting process by nearly 1,700 Serious Golfers.

Some of the Rounds Played/Retail Sell Thru highlights (or lowlights depending upon your perspective) are as follows:

Rounds Played

One of the key metrics in golf, rounds played are the engine that makes all others go.  Long term if you don’t have rounds, you don’t need golf equipment or golf apparel, so this critical measure looks at the foundation of the business.

And unfortunately, April rounds played (down 13.5%) were a bit of disaster, negatively impacted by poor weather, particularly heavy precipitation and very cold weather in northern markets during the month.  YTD the Southeast continues to struggle after a dismal Q1, fighting thru cold and wet weather.

YTD April Retail Sell Thru Data-Golf Equipment and Apparel

With four months in the books, retail sales of golf equipment remained healthy thru April even with some significant headwinds due to weather which have dampened rounds played…but not equipment sales.  On the other hand, apparel has not fared as well as equipment and is lagging vs. 2017.

Equipment

Consumables (Balls & Gloves):  Down 1.8% YTD in total dollars, likely negatively impacted by the poor weather situation which continued, particularly in the Southeastern US.

Light Durables (Bags & Footwear): Up 6.6% YTD, led by footwear which enjoyed a very good start to 2018.

Clubs:  Up 12.9% YTD, led by wedges, with irons and woods up the most while putter sales remain flat. Clearly the weather has not negatively impacted club sales, with sharp sales increases in both the On and Off Course channels.

Apparel

Total golf apparel sales are down over 5% YTD, primarily impacted by weak Green Grass sales due to the aforementioned weather issues.

No single product category grew thru April 2018, however the two which got closest to breakeven were outerwear and men’s tops, both of which tend to sell more when the weather is poor.

The Off Course Specialty channel, which is the smaller of the two channels had marginal growth while the Green Grass was down significantly.

Bottoms which are primarily shorts and skirts were substantially down in the Green Grass (20%).

 

 

2018’s Hot & Cold Start-Q1 Golf Roundup

With the First Quarter of 2018 equipment and apparel sales data released over the past few weeks and Rounds Played coming out late last week, it’s time to take stock of where the Golf Industry stands.  

Looking at the big picture, rounds played have been hampered by cold and rain (and unfortunately anecdotal evidence suggests April won’t be much better), however new product offerings have generated substantially improved consumer demand, driving club and shoe sales substantially higher.  Golf Apparel, which has been the shining star in golf products for the past 7 years is off to a slow start in 2018, with weather issues hitting a lot of warm weather golf courses and resorts.  

Rounds Played

Rounds during the month of March fell by 3.8% and remained down 5.6% Year to Date.  Poor weather across the southeastern US has been the primary culprit with cold temps and higher precipitation creating a negative environment for golf.  Rounds in the South Atlantic are down 10.5% and 15.2% in the South Central, two regions that typically represent a disproportionate percentage of rounds early in the year. 

And while the northern tier doesn’t typically play a lot of golf in the winter months, normally some diehards are on the links, particularly by March, however a late spring has slowed those markets to a crawl and they’re all down substantially.

Retail Sell Thru YTD Thru Q1-Golf Equipment

Consumables/Light Durables

Consumables (Balls & Gloves)

Negatively impacted by the weather situation, both golf ball and golf glove sales were down low single digits vs. Year Ago in units and dollars.

Light Durables (Bags & Shoes)

The Golf Shoe category was up sharply in both units and dollars the end of Q1, improving by double digits, while the bag business was level in units and up 4% in value.

Total Consumables/Light Durables:  +3% vs. Q1 2018.

Golf Clubs

Woods

Driver, Fairway and Hybrid ASP’s were all up significantly thru the first quarter of 2018, and even though units were slightly lower than year ago, the total value of woods improved by 7%.  After a very slow start due to changes in launch strategy/timing by some of the larger Brands, the wood category flourished in March and is expected to continue to be strong throughout the first half of the year.

Irons

Iron sales surged in Q1, increasing by 5% in units and 17% in dollars, a substantial increase in value sales in both the Green Grass (+36%) and the Off Course Specialty channels (+15%).  Pent up demand, a significant increase in Custom Fitting (which also increases the per stick ASP), and some exciting new products have driven demand for irons.  And unlike woods, units (sticks) within the iron category were also up for the quarter, suggesting a strong under lying foundation to iron sales early in 2018.  

Wedges

Wedge sales in dollars were up 29% thru the end of the first quarter, while units were up 31%, and ASP’s were slightly lower.  New product launches in March and lower prices on second generation product helped buoy the market early in Q1, longer term success will ride on the back of continued sell thru of premium priced wedges.  

Putters

The putter category is the “odd man out” thus far re: growth in 2018 among the various club products, with units up 2% and dollars flat.  In several recent years, any category that was “treading water” and not declining would have been considered a top performer, not so this year.  It’s worth noting however than new Scotty Cameron/Titleist putters were not available for sale until the very last day of the month, so it would not be a surprise to see a significant pop in category sales in April.

Total Golf Clubs:  +12% vs. Q1 2017

Total Golf Equipment:  +9% YTD

Retail Sell Thru YTD Thru Q1-Golf Apparel

YTD every product category of Golf Apparel is down on a YTD basis in value, and in total Golf Apparel sales fell by 6%.  The Off Course Specialty channel is performing better than the Green Grass, with the former down 1% and the latter down 8%.

Men’s Apparel

Men’s Golf Apparel sales were down 7% On Course but up 3% Off,  with all categories declining thru the Green Grass and all Specialty store product segments showing sales improvement.  

The largest category of Men’s Golf Apparel is Men’s Shirts, and those are down 6% thru Q1 On Course, but are up 2% Off Course, with ASP’s remaining relatively level thru the first quarter in each channel.

Women’s Apparel

Retail sales of Women’s Golf Apparel was down in all product segments across both channels thru the end of Q1, with Green Grass sales down 14% and the Off Course falling by 8%.  Sales declines in Women’s Golf Apparel are broadly based, however both Women’s Tops and Women’s Bottoms were off by more than 20% YTD.

Outerwear

Outerwear is a gender neutral category, and YTD sales are down 2% with the Green Grass level and the Off Course dropping by 8%, with ASP’s dripping by 2%+.

Total Golf Apparel:  Down 6% YTD

Total Golf Sales, Equipment and Apparel Combined, On/Off :   +8% YTD