Topgolf's parent company could spin off the golf entertainment venue business as it conducts a "strategic review" after a disappointing stock performance and drop in year-over-year venue sales performance.
Topgolf Callaway Brands Corp., based in Carlsbad, California, plans to conduct a strategic review of the Topgolf business with the help of outside consultants after being "disappointed in our stock performance for some time" as the company grapples with "softer-than-expected traffic to our Topgolf venues," President and CEO Chip Brewer said in a statement.
"We are in the process of conducting a full strategic review of Topgolf," Brewer said in the statement. "This review includes the assessment of organic strategies to return Topgolf to profitable same venue sales growth, as well as inorganic alternatives, including a potential spin of Topgolf.
"As we look forward, we remain convinced that Topgolf is a high-quality business with significant future opportunity," he added. "It is transforming the game of golf, and we believe it will deliver substantial growth and financial returns over time."
A Topgolf Callaway Brands spokesperson declined further comment to CoStar News. A timeline of the strategic review was not immediately available, although Brewer said it would be conducted "expeditiously," and the executive team would report back once that work was complete.
In its second quarter 2024 earnings call last week, Brewer and his team lowered expectations for Topgolf revenue in the second half of the year after seeing persistent inflation over the past few years leading to "belt tightening across wide portions of consumer discretionary spending," affecting the company's sales, Brewer said.
"We see it in an internal and external survey data where price is the biggest concern of our customers as well as those in both the leisure and restaurant industries," he said, adding, "Topgolf same venue sales declined 8% in the quarter, driven by soft overall traffic trends."
The golf equipment giant acquired Topgolf in a deal valued at $2 billion in 2021 after golf saw a surge in popularity during the early days of the pandemic when it became the perfect social distancing sport. Executives at Callaway, which had been an investor in Topgolf since 2006, saw this merger as an opportunity to reach new potential golf customers.
At the time, the growing company had big plans for the future, with executives anticipating about 200 Topgolf venues in the United States by 2030. Topgolf currently has more than 80 U.S. venues.
This year, Topgolf has added venues in Bryan, Texas; Durham, North Carolina; and Montebello, California. There are four remaining venues under construction and scheduled to open by year's end.
Topgolf plans to build a two-story, 50,000-square-foot facility, with eight hitting bays, at the southeast corner of Ikea Place and State Highway 161 in Grand Prairie, Texas, a suburb just west of Dallas. The $20 million project is expected to begin this November, according to a state work permit, with completion scheduled for the following year.