Golf entertainment and gear company Topgolf Callaway (NYSE: MODG) exceeded the market’s revenue expectations in Q1 CY2025. Its non-GAAP profit of $0.11 per share was significantly above analysts’ consensus estimates.
Is now the time to buy MODG? Find out in our full research report (it’s free).
Topgolf Callaway (MODG) Q1 CY2025 Highlights:
- Revenue: $1.09 billion (4.5% year-on-year decline)
- Adjusted EPS: $0.11 vs analyst estimates of -$0.06 (significant beat)
- Revenue Guidance for Q2 CY2025 is $1.1 billion at the midpoint, below analyst estimates of $1.12 billion
- EBITDA guidance for the full year is $270 million at the midpoint, below analyst estimates of $454.6 million
- Operating Margin: 6.1%, in line with the same quarter last year
- Market Capitalization: $1.13 billion
StockStory’s Take
Topgolf Callaway’s first quarter results reflected continued margin improvement in its Golf Equipment business and a measured response to shifting consumer behavior at Topgolf venues. Management attributed margin gains to ongoing cost reduction and operational efficiency initiatives pursued over the past year, as well as a lease termination incentive in Japan that benefited segment profitability. CEO Chip Brewer highlighted that while Golf Equipment sales and operating margins outperformed expectations, the Active Lifestyle segment faced ongoing challenges, particularly in Europe, due to planned rightsizing at Jack Wolfskin. Topgolf venues experienced a notable decline in same venue sales, primarily tied to lower corporate event activity and a more price-sensitive consumer environment. Brewer acknowledged the risk of further consumer slowdown, emphasizing a cautious outlook on near-term demand.
Looking ahead, management’s guidance is shaped by continued macroeconomic uncertainty, tariff pressures, and a strategic focus on improving Topgolf’s value perception. Brewer explained that the company is accelerating cost management and operational adjustments to offset an expected $25 million tariff impact, while also implementing initiatives such as ‘Sunday Funday’ and expanded value offerings at Topgolf venues. CEO Artie Starrs detailed that while traffic trends have improved through targeted promotions and price adjustments, near-term venue margins will be pressured as the company invests in attracting more walk-in customers and enhancing guest experience. Management emphasized that the reset in value positioning is expected to drive long-term traffic and margin growth, despite current headwinds in corporate events and overall consumer spending.
Key Insights from Management’s Remarks
Management attributed the quarter’s performance to margin improvements in Golf Equipment, proactive cost controls, and a significant shift in Topgolf’s pricing and promotional strategies to address evolving consumer trends.
- Golf Equipment margin gains: The Golf Equipment segment benefited from improved gross margins driven by efficiency initiatives and a one-time lease termination incentive in Japan. Management noted these gains were implemented ahead of anticipated tariff headwinds later in the year.
- Topgolf value repositioning: To address declining same venue sales and a perception of relative expense among mid-income consumers, Topgolf introduced initiatives like ‘Sunday Funday’ and ‘Topgolf Nights’ to improve value perception and drive incremental traffic, especially among families and younger audiences.
- Corporate events under pressure: Management identified a significant decline in corporate events bookings as a major factor behind Topgolf’s revenue softness, attributing it to broader reductions in discretionary business spending rather than increased competition or brand issues.
- Active Lifestyle challenges and divestiture: The Active Lifestyle segment saw lower sales, primarily due to the planned rightsizing of Jack Wolfskin in Europe. The pending sale of Jack Wolfskin to ANTA Sports is expected to enable greater business focus and financial flexibility going forward.
- Cost reductions and liquidity: Across all segments, management accelerated cost-cutting measures and operational efficiencies to support profitability amid external pressures. CFO Brian Lynch noted available liquidity increased and leverage metrics improved, even as the company prepares for a potential separation of Topgolf from the core business.
Drivers of Future Performance
Topgolf Callaway’s outlook is shaped by ongoing tariff impacts, evolving consumer spending patterns, and a major reset of Topgolf’s value positioning, with management focused on cost controls and targeted growth investments.
- Tariff and macroeconomic headwinds: Management expects tariffs to have a $25 million unmitigated impact this year, but plans to offset this through operational optimizations and cost reductions. The company is closely monitoring for further economic slowdown, which could affect discretionary consumer and corporate event spending.
- Topgolf value-driven traffic growth: The new pricing and promotional strategies at Topgolf, such as expanded value offerings and flexible reservation models, are expected to boost traffic, particularly among walk-in guests. However, these initiatives will temporarily reduce venue margins as average spend per visit declines due to increased value mix and eliminated booking fees.
- Strategic portfolio actions: The planned sale of Jack Wolfskin and the proposed separation of Topgolf are intended to sharpen business focus and improve financial flexibility. Management reiterated that both businesses are being positioned with sustainable capital structures to support future growth.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the effectiveness of Topgolf’s new value initiatives in driving sustained traffic growth, (2) the company’s ability to maintain or improve margins amid ongoing cost pressures and tariff impacts, and (3) progress on the sale of Jack Wolfskin and the potential separation of Topgolf. Execution on these fronts, alongside evolving consumer demand trends, will be key indicators of future performance.
Topgolf Callaway currently trades at a forward EV-to-EBITDA ratio of 2.4×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
Stocks That Trumped Tariffs
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
