DALLAS — The Dallas-founded brand Topgolf in many ways pioneered America's booming "eatertainment" business by combining an easy-entry form of sports with all the offerings of a full-service bar and kitchen.
Now, whenever a similar venue pops up, it's often colloquially referred to as "The Topgolf of [insert sport here]."
So, where did things go wrong with the business? And why is there sudden speculation that the brand could possibly get sold off from its parent company Callaway?
Nothing seemed to secure Topgolf's place in the modern golf scene more than when Callaway, one of the major golf equipment and apparel manufacturers on the planet, acquired Topgolf in 2021, making the elevated driving range company a key part of its business at a time when golf was seeing a pandemic-era surge of interest.
That momentum apparently hasn't sustained itself through to 2024: According to Topgolf Callaway's second-quarter earnings report last week, sales at existing Topgolf locations are down 8% year over year through June 30 -- figures that the company says are "driven by softer-than-expected traffic" as it navigates what it calls "cyclical macro challenges."
Topgolf Callaway also reported an around an 8% year over year drop in revenue on the equipment side of the business through Q2 -- but that was to be expected after the launch of last year's Big Bertha woods and irons line, the earnings report said.
The company's bigger concern, the report indicated, remains the Topgolf side of the business. Which, it came to light in its recent earnings report, is why the brand is considering the possibility that Topgolf could be spun off from the larger company.
Topgolf locations have now seen continued drops in revenue in both quarters of 2024, according to data presented in the earnings report. Topgolf customers rent hitting bays by the hour, and revenue from rentals of one to two bays were down 5% in the first quarter and 8% in the second quarter, the data said.
The steeper drop was seen at the three-bay level, where revenue numbers dropped 16% in the first quarter and 9% in the second quarter. Topgolf attributed the three-bay revenue drops to fewer corporate events being held at the venues.
Topgolf Callaway president and CEO Chip Brewer attributed the decline in sales to a decrease in customers, not the amount those people are spending when they get to the facility.
"It's really mostly a traffic issue right now," Brewer said on the earnings call. "Our business is experiencing a slowness in traffic."
Brewer attributed the dip in customers to the current economic cycle and what he called a "post-COVID normalization." Brewer said the company is ramping up efforts in its digital sales and marketing to turn things around, as that's been a past path to success at Topgolf locations. Brewer also mentioned the company's focus on creating incentives for customers to visit their locations at least three to four times per year.
He said he remains confident Topgolf can succeed in a "normalized environment," although he warned that year-over-year sales might continue to dip throughout 2024. But the company is continuing to move forward with its plans to expand the total number of Topgolf locations by around 10 venues per year, Brewer said.
Still, the main takeaway from the report and earnings call was the company's plans "to conduct a full strategic review of Topgolf" -- and what those findings could end up meaning for the future of Topgolf Callaway.
Among the options, the report notes, is that Topgolf -- just three years removed from merging with Callaway in a deal that valued the driving range business at more than $2 billion -- could be spun off into its own brand once again.
It's a discussion that's currently on the table.
"There's not much I can say on that right now," Brewer said on the call. "Because it's a process that we're right in the middle of. We're considering all alternatives, but we've mentioned specifically a potential spin. We're looking at how do we best maximize long-term shareholder value? We'll report back on that when that work is done. We're in the middle of that work in present."
