Callaway Golf Diversifies Portfolio with Acquisition of Jack Wolfskin

In keeping with their ongoing strategic transformation as a company, at the end of last week Callaway Golf announced that they had entered into an agreement to purchase Germany-based Jack Wolfskin, a premium outdoor apparel brand.

In a conference call with investors, company executives shared how the transaction, worth some (USD) $476 million, falls in line with the long-term growth profile of the company. It follows past purchases of OGIO and Travis Mathew in 2017.

After a massive turnaround for the Callaway Golf brand, the leadership has embarked on a plan to invest in core and complementary areas as part of a growth strategy. That strategy is based on what they perceive as a “significant opportunity in the Outdoor and Lifestyle categories,” according to a company presentation.

“We are very excited to welcome the Jack Wolfskin brand into the Callaway portfolio,” commented Chip Brewer, President and Chief Executive Officer of Callaway. “Jack Wolfskin is a premium outdoor brand with tremendous international reach, being a leading brand in the European market and having a substantial presence in China. It also helps Callaway expand its presence in the high-growth, active lifestyle category.”

Mr. Brewer continued, “We are also very excited to work with Jack Wolfskin’s great leadership team, led by CEO Melody Harris-Jensbach, to maximize this brand’s growth potential.”

“We are thrilled at the prospect of joining Callaway’s growing portfolio of premium, active lifestyle brands,” said Jack Wolfskin’s Chief Executive Officer Melody Harris-Jensbach. “Callaway has proven over many years that they are great innovators and brand builders. We see that they really invest in the brands they acquire and couldn’t be happier to be working with them.”

Most notable in the investor presentation were the synergies in the companies in regard to geographic strengths with Jack Wolfskin having a very strong European and Chinese footprint. The 37 year-old brand currently does 52% of their $380 million net revenue in Germany, Austria Switzerland with another 21% in China. The deal will allow them to have a ready-to-use operation to delve deeper into the lucrative North American market and help Callaway into the European market, where they currently just do 13% of their sales.

That diversification is helpful to both companies and also aids Callaway into moving away from their reliance on the sale of hard goods (woods, irons, putters) which currently makes up 61% of their sales. With this acquisition their projection is those segments would represent about 46% of their sales. Apparel and accessories sales are much more profitable and have more potential for sales across all markets.

The move will also place less reliance on the United States market for overall Callaway Golf sales where they do more than 54% of their revenue in what is considered a very mature market. The presentation projection has U.S. sales contributing just over 40% of the overall sales with the new product variety added.

The deal is expected to close in the first quarter of 2019, subject to approvals and normal closing conditions. Jack Wolfskin will continue to operate from their headquarters in Germany.

To see the Callaway Investor Presentation on the Acquisition of Jack Wolfskin visit this link.

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