Dick's Eliminates PGA Instructors as Golf Sales Shrink
Sporting goods retailers are grappling with weaker demand for golf equipment, as fewer Americans take up the sport.
Dick’s Sporting Goods (NYSE:DKS), which has seen golf sales book negative results for the better part of a year, continues to reel from declines in golf participation. The company fired the vast majority of its golf instructors this week, with the PGA of America confirming that 478 of its members were laid off.
PGA professionals provided in-store lessons and club repairs at Dick’s and Golf Galaxy, a specialty retailer owned by the company. Based on the Pittsburgh-based company’s latest annual report, Dick’s employed 593 PGA and Ladies Professional Golf Association instructors as of Feb. 1.
“We are extremely disappointed by the news as any time even one PGA member loses a job we are extremely sensitive to such matters,” PGA of America said in a statement. “While we are sincerely disappointed with this news, we continue to support our PGA Professionals who are extremely dedicated to share, teach and grow the game of golf.”
Dick’s did not respond to a request for comment.
Dick’s moved to bolster its footprint in the golf business in recent years, adding more Golf Galaxy stores and buying the rights to Callaway Golf’s (NYSE:ELY) Top-Flite brand in 2012.
But with demand for golf merchandise waning, Dick’s plans to use some floor space allotted for golf to expand its selection of women’s and youth apparel. Dick’s also indicated it would consider closing, relocating or remodeling Golf Galaxy stores as leases are set to expire.
When Dick’s reported first-quarter earnings in May, chief executive Edward Stack said the retailer was looking for a slight rebound in golf sales. Instead, golf sales missed the company’s expectations by $34 million.
Same-store sales at Golf Galaxy, which was acquired by Dick’s for $226 million in 2007, were down 10.4%. The retailer’s namesake stores posted a 2.3% increase, while total comparable sales rose 1.5%.
“We are selling drivers in our stores this spring for $99 that were $299 approximately 21 months ago,” Stack said during a conference call with analysts, according to a transcript.
Sales volume for men’s drivers was down 2% in the first quarter, he added, but the average price of those clubs fell 16%.
Analysts largely attribute the weakening golf market to the dwindling number of people playing the sport. The National Golf Foundation estimates that 400,000 U.S. golfers left the game in 2013. According to a survey from the Sports & Fitness Industry Association, the number of individuals who golfed at least once dropped 2.5% year-over-year, the fifth consecutive year that showed a decline.
Sterne Agee analyst Sam Poser said Dick’s would be better off getting out of its Golf Galaxy business, but the company appears unlikely to back away from golf entirely.
“I would argue that Dick’s, as a big-box sporting goods store, is the best in the business” when compared to rivals like Sports Authority, Poser said. “But when you compare them to retailers like Golfsmith (NASDAQ:GOLF), those are more service-oriented places. That’s not where you’re going to be the best.”
Despite the struggles, Stack told analysts that Dick’s remains committed to the golf business, but he left the door open to trimming the company’s exposure to the sport.
“We think we need to be exposed to the category just because it is part of the sports industry. Do we need to be as exposed as we are today? That’s what we are rethinking,” Stack said, adding that Dick’s isn’t ready to make that decision. “I would expect that we will be less exposed to the golf business a couple of years from now than we are today.”
Poser suggested the decision to cut back on PGA professionals may have been “short sighted,” noting how Dick’s sponsors a PGA Tour event.
“The question is, do you lose more [sales] because even less people show up?” Poser said.