It’s not difficult to see the consequences of the recession in the faces of customers at the World of Golf store in New York City.
"There’s less leisure time to play because people are more focused on keeping their jobs," says Dan, a customer in his thirties who declined to give his last name. He has been cutting back spending on golf equipment since golf "is a very expensive sport."
As this week's Master's tournament brings golf back into the spotlight, the golf industry itself is struggling. Fewer golfers are playing—and they're spending less money on everything from new clubs to travel. Golf-equipment makers, hit with declining sales, have been forced to lower prices and look for business outside the US.
"The biggest trend is survival in the economic turbulence," said Rick Horrow, a sport business analyst and CEO of Horrow Sport Ventures. The economic downturn, he says, has forced companies involved in the business of golf to become "more creative in reaching out people."
Still, companies involved with the manufacturing of golf equipment believe the market will eventually bounce back. That's because golf is not only a sport, it's a pastime—even a lifestyle—for many people.
"The macroeconomic situation hasn’t been kind to golf," said Michele Szynal, vice president of Communications at Callaway Golf. "I’m positive that we will be fine though. Golf is a guilty pleasure."
Matt Masso, a New York-based banker and avid golfer, has been taking advantage of all the lower prices. "There are a lot of sales going on," he says. "I’m probably buying more stuff because it’s cheaper."
A Swedish businessman who identified himself just as "Car" and was shopping in New York for new clubs, agrees. "It’s much easier to find a bargain now," he says.
Still, Car has been cutting back in other ways. "I have been traveling a lot less for golf," he says. "I only play in my country now."
Callaway , the leading company in golf club production and sales, has been concentrating their efforts in developing the most advanced technological equipment, a goal that hasn’t changed over the years.
"Sales are soft, but we are meeting expectations," says Szynal. "In times like these, the leading manufacturers are the ones that will do well."
"Their brand is strong. They have a clean balance sheet with no debt," says analyst Tom Shaw, who covers Callaway stocks at Stifel Nicolaus & Co.
Another golf manufacturing giant, Fortune Brands, has been recognizing the challenges created by the global economic crisis as sales dwindle.
"Fourth-quarter golf revenues were $212 million. That’s 13 percent below the year ago quarter," said Fortune Brands CFO Craig Omtvedt in a January conference call.
Fortune Brands , which manufactures a wide array of goods from Jim Beam bourbon to Moen faucets, owns a number of golf brands including Titleist, Cobra, FootJoy, Pinnacle, and Scotty Cameron.
Profits for the golf division have been relatively constant in the past three years. Fortune Brands said 18 percent of its net sales and 11 percent of its operating income before charges comes from sales of golf balls, shoes, and clubs.
As part of their strategies, both Fortune Brands and Callaway have put their faith in possible opportunities to grow outside the U.S.
"Our strategy is investing in the international markets, not only Europe, which has continued to grow, but predominantly in Asia," said Fortune Brands CEO Bruce Carbonari, at a conference in February. "Korea, China and Japan continue to be very strong footholds for golf and great growth opportunities."
Carbonari added that 42 percent of its total golf sales came from outside of the United States.
Similarly, 50 percent of Callaway’s sales came from outside. "Japan is doing particularly well," said Szynal.
Foreign markets may create a challenge, however, as foreign currencies are weaker.
"Foreign exchange is killing them," says Shaw, speaking of Callaway. "You’re looking at a 35 to 40 cent impact."
According to Shaw, the company’s sales were down about 15 percent in the last quarter of 2008 because golf is an expensive sport and it’s hard to buy discretionary equipment. As people are more cash-strapped, they don’t have as much time to play.
Still, he agrees that as these companies are reevaluating their position across the world, they will be able to come out stronger in the long run when the economy finally recovers.
"[Callaway] shares are fairly valued at the moment," Shaw says. "...People are going to be watching from the sidelines."
As the golf industry continues to make headlines with the return of Tiger Woods and the outrage over Northern Trust’s sponsorship tactics, the proven strength of golf brands and their flexibility to buy back shares allows manufacturing companies to tackle the challenges presented by economic recession more comfortably.
In the meantime, golfers who've stayed with the game have found one advantage with the downturn.
"The golf courses are more empty," says Masso, a Bank of America employee. "It’s easier to get a tee time."