William L. Coney Blog: Callaway to Acquire Apparel Brand Travis Mathew

Thursday, August 3, 2017

Callaway to Acquire Apparel Brand Travis Mathew

Callaway Golf has purchased lifestyle clothing manufacturer...I mean, progressive sportswear brand, Travis Mathew. Well, technically, the two companies have entered into a definitive agreement, but intricacies of language aside, this ends with TM (the other TM) as a Callaway company.

The agreed upon price is $125.5 million in cash, subject to a working capital adjustment.

The parallels between this acquisition and January's acquisition of OGIO are uncanny.

As it with OGIO, with Travis Mathew Callaway expands its footprint both inside and outside of the golf world. Perhaps more importantly, it expands its footprint further outside the hard goods category, and its bottom line will almost certainly benefit from the addition of a high-margin soft goods line. Travis Mathew's net sales are projected to be in the $55-60 million range, with an estimated $10-15 million of that contributing to Callaways' 2nd half results (assuming the transaction closes in Q3). In the golf world, that's a big chunk.

While the specifics come as a bit of a surprise, that Callaway would seek to expand its soft goods catalog certain isn't. Callaway understands the reality of the golf equipment market where it's tough to keep your head above water selling little more than golf clubs. Without soft goods, the next best option - perhaps the only option - is a very understanding parent company who's willing to eat a loss because golf is fun.

Too Cool For Quality Issues?

While the Travis Mathew brand remains popular both inside and out of the golf world, as with OGIO, my opinion is that the quality of the product has steadily declined over the past several years. The dropoff has been severe enough that my pro shop stopped carrying the brand (not before I added what turned out to be three garbage shirts to my wardrobe). As is the case with OGIO, Callaway will need to evaluate the product and determine whether or not changes need to be made. I believe they do, but it's not my $125.5 million.

I suspect that as long as a segment of the market continues to view Travis Mathew as cool and trendy, not much will change - and while that doesn't get us better shirts, it's not a bad thing for Callaway's steadily improving bottom line either.

Ultimately, I expect this purchase will prove to a proverbial home run that will further solidify Callaway's position as the top brand in golf. When viewed alongside the OGIO acquisition, there's a case to be made that we need to reclassify Callaway as something more than just a golf brand.