Callaway announces layoffs and cost- cutting steps, stock falls 9 percent

CARLSBAD, Calif. -- Callaway Golf is laying off 12 percent of its workforce and implementing a series of cuts that the company hopes will save about $52 million a year, company officials said Wednesday.

Callaway's stock closed at $5.66 per share on Wednesday, a drop of about 9 percent on the day. Before the drop, it was down about 8 percent over the past year.

"Callaway is down because of the (report on) job cuts. It indicates that their turnaround efforts are not working," Diana Katz of Lazard Capital Markets told Reuters.

Callaway's "business has not recovered at a satisfactory pace and we are taking actions to accelerate the recovery," said Callaway CEO Chip Brewer, who took over earlier this year. "The cost reduction initiatives we announced today are part of those actions and are consistent with the significant changes we are making in streamlining and simplifying our organization and in how we approach and operate our business.

"These changes, however, will have a greater impact on our financial results in 2013 and 2014 than on 2012," he added. "As a result, and given the slower than anticipated pace of recovery, we no longer expect that 2012 full year financial results will be significantly better than last year. At this point, we expect for full year 2012 a pro forma loss per share of $0.55-$0.75."

Estimated costs over the next year associated with these moves are $40 million, over half of which are expected to be non-cash charges, Callaway said.

Callaway has approximately 2,100 employees, according to Thomson Reuters, meaning about 250 empoyees will lose their jobs.

The layoffs and cost reduction program will impact all regions and all levels of the organization, officials said in a statement, as the company plans to streamline its operations and sharpen its focus on the core product lines of the Callaway and Odyssey brands. In recent months, Callaway sold its Top-Flite and Ben Hogan brands, licensed its North American apparel business and its footwear business and have made what officials call "significant changes in senior management, including new hires to oversee our global marketing and global operations organizations."

Based on current information, Callaway estimates net sales for the second quarter (ended June 30) of $280 million, an increase of 3 percent over the second quarter of 2011. First half 2012 net sales are estimated at $565 million, a 1 percent increase compared to the same period in 2011.

With founder and visionary Ely Callaway at the helm, Callaway Golf quickly grew rode its Big Bertha line of clubs from a start-up to one of golf's most popular and respected brands. It has stumbled in recent years, though, posting an $18.8 million net loss in 2012 and a $171.8 million net loss in 2011.