Less than a month after disclosing that its Topgolf brand was under strategic review, parent company Callaway today announced its plans to spin off the eatertainment brand. Callaway completed its acquisition of Topgolf in March 2021 for $2.6 billion and changed its name to Topgolf Callaway Brands to reflect the merger.
At the time, Topgolf had around 70 venues with plans to open 11 per year for the next five years. The first several quarters went swimmingly, with Topgolf generating nearly 40% of the company’s total revenues by 2022. The company finished 2023 with 89 locations, according to Technomic data.
That momentum has since slowed, however, and advisors were hired in the second quarter after an 8% same-store sales decline and a guidance adjustment downward, including a slowed growth to the mid-single-digit range. Executives cited “macroeconomic volatility” for the decline, which accelerated to -11% in July. Now the ball is in the board’s court and, in a release posted Wednesday after market, Callaway noted that it will continue to evaluate options for separation, though Topgolf spinning into a standalone company is the most likely scenario.
In a statement, chief executive officer Chip Brewer said he believes Callaway as a standalone business will “be well understood and valued by the market,” adding that Topgolf is a high-quality, free cash flow-generating business with a “significant future value creation opportunity.”
“Since our merger with Topgolf, we have made considerable investments in the Topgolf business that have dramatically expanded its scale, digital capabilities and venue profitability. These investments, combined with the hard work of the Topgolf team, have allowed us to outperform our original growth and free cash flow expectations,” he said. “Topgolf is transforming the game of golf and is expected to deliver substantial financial returns over time. At the same time, Topgolf has a different operating model, capital structure and investment thesis than Callaway, and as a result, the Board has determined that separating Topgolf will best position Topgolf and Callaway for success and maximize shareholder value.”
The company added that creating two separate companies will better enable them both to enhance their strategic focus, optimize capital allocation, simplify their operating structures, and development a distinct investment thesis.
Moving forward, the Topgolf business will exist without Toptracer, which will be part of Callaway. However, some co-opportunities will remain. Callaway will continue to be the exclusive golf equipment partner for Topgolf, for instance. Topgolf’s portfolio will initially include over 100 U.S. and international venues, while its strategic priorities will remain to: drive profitable same venue sales growth; increase venue operating margins through further improvements in operating efficiencies; and pursue new venue development. Topgolf’s long-term growth opportunity, the company adds, will be supported by its “significant cash balance and no financial debt,” as Callaway will retain all existing debt.
Callaway will continue to be led by Brewer, while Topgolf will continue to be led by CEO Artie Starrs. The final separation is contingent on approval by the board of directors and is expected in the second half of 2025.
Contact Alicia Kelso at [email protected]
