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Golf’s $25 Billion Market Rides Economy to Gain on Woods’ Return

By Thomas Black – Apr 4, 2012 12:01 AM ET


Golf in the U.S. is growing for the first time in five years as an economic recovery strengthens enough to be measured in the clubs, cleats and plaid shorts that fuel the sport’s $25 billion consumer market.

The number of rounds played on American golf courses has climbed for four straight months through February. Club maker Callaway Golf Co. (ELY), mower-maker Toro Co. (TTC) and Nike Inc. (NKE), which makes golf gear and clothes, are registering revenue growth and stock gains outpacing the Standard & Poor’s 500 Index.

The rebound is reflected on the links. Americans are feeling secure enough in their jobs to increase leisure spending, returning to a sport basking in the media spotlight with this week’sMasters Tournament and Tiger Woods’s first PGA victory in more than two years.

“It will probably be the strongest year since the recession,” Cindy Davis, president of the golf unit of Beaverton, Oregon-based Nike, said in an interview. “I’d say it’s definitely one of the indicators that maybe consumer confidence is coming back.”

In the past few years, rounds played on U.S. courses dwindled as unemployment surged to 10 percent in 2009, and golf courses closed after a building boom mirroring the housing bubble that started to burst in 2006.

The number of golfers dropped to 26.1 million in 2011 from about 30 million in the middle of last decade, said Greg Nathan, a senior vice president for the National Golf Foundation.

“We were bouncing along the bottom and expect we’ll see a modest recovery in 2012,” said Nathan. “The signs since the beginning of the year have been positive.”

Mild Winter

He said golf’s consumer market draws about $4 billion from equipment, $1 billion from apparel sales and $20 billion from green fees.

The number of golf rounds jumped 10 percent in February, the most recent month for which data is available. That capped four months of year-to-year gains from the economy that were helped by a mild winter in the northern U.S., Nathan said.

Even in California, where the average temperature was about the same as last year, rounds rose 16 percent in February.

Callaway Golf, the Carlsbad, California-based maker of Razr Fit drivers, has jumped 25 percent this year compared with a 12 percent gain for the S&P 500 Index. (SPX) Toro, which has about a quarter of its sales tied to the golf industry, has risen 18 percent. Nike has climbed 14 percent.

Golf’s renaissance shows the effects of improving U.S. economic data. The country’sunemployment rate dropped to 8.3 percent in January and February, while payrolls increased more than 220,000 per month in December, January and February.

Older Equipment

Gross domestic product rose 3 percent in the fourth quarter, the highest rate since the second quarter of 2010. The consumer confidence index topped 70 for two straight months in February and January for the first time in four years, the Conference Board said March 27.

With the economy and golf industry showing signs of rebound, course managers are willing to spend on equipment, driving up sales for Toro and agricultural machinery-maker Deere & Co. (DE), based in Moline, Illinois.

“There’s older equipment out there that has quite a bit of hours and courses are realizing that they need to go ahead and re-fleet and purchase new equipment,” said Denny Docherty, Deere’s director of global strategic marketing at the Agricultural and Turf unit.

Toro, based in Bloomington, Minnesota, raised its forecast for 2012 revenue growth in February to as much as 7 percent from 5 percent in December, partly because of increased sales to the golf industry, said Kurt Svendsen, chief of investor relations. The company announced in December it bought the Graden golf greens-roller line for an undisclosed amount.

‘Tiger is Back’

Sales of clubs, balls, shoes and other equipment measured from 600 pro shops and 250 off-course golf specialty stores rose 1.3 percent last year to $2.41 billion, reversing a slide since 2007, said Tom Stine, co-founder of Golf Datatech LLC, which provides statistics on golf-related sales.

Sales probably will accelerate this year, he said, though they remain below the 2007 peak of $2.91 billion.

“There’s been a lot more attention being paid to the PGA tour this year,” Stine said. “Tiger is back playing a lot.”

Textron Inc.’s (TXT) Jacobsen unit, which sells golf mowers, sprayers and machines that rake sand bunkers, has seen purchases increase as returning players bolster golf courses’ budgets.

“We’re pretty much riding the wave of the economy right now,” said Glenn King, marketing manager for Jacobsen. “We’re seeing a lot of pent-up demand.”

‘Not Getting Worse’

ClubCorp, the largest owner and operator of private golf clubs, sold the most memberships last year since 2005, said Eric Affeldt, chief executive officer of the Dallas-based company.

“People are feeling more comfortable spending money again because things aren’t getting any worse,” he said.

ClubCorp which operates in 26 states, bought four golf courses last year and is looking for more, Affeldt said.

“We are rebounding and like what we’re seeing in terms of the recovery,” he said.

Nike Golf’s Davis, who took over as the unit’s president at the beginning of 2009 when the industry was in free fall, finally will reap the benefit of new club and ball designs that the company invested in during the lean years.

“It’s going to be a good year for Nike Golf,” Davis said. “It will be a year where the industry will see more positives than it has in the past three years.”

To contact the reporter on this story: Thomas Black in Dallas at