Callaway Golf Co (ELY): Unconventional Consumer Confidence Benefactors

Retail exposure

Sporting goods giant, Dicks Sporting Goods Inc (NYSE:DKS), a retailer offering a broad assortment of brand name sporting goods equipment, apparel and footwear in a specialty store environment has great exposure to the golf industry. Through its acquisition of Golf Galaxy, a chain of golf focus retail stores, the company stands to benefit from growth in the golf industry. Similar to Callaway Golf Co (NYSE:ELY), the company will benefit from the refresh cycle and the housing recovery. Dicks Sporting Goods Inc (NYSE:DKS)‘s offers investors a more diversified vehicle for exposure to the industry.

The company recently announced it plans to open an additional 40 Dick’s locations to finish out the remainder of the year in addition to a standalone Golf Galaxy location. Dicks Sporting Goods Inc (NYSE:DKS)‘s is looking to refresh its stores through a series of  80 remodels set to be finished this year. From personal experience, I have visited a few new locations where the company has placed increased focus on its “Pro Shop” which features expanded golf offerings. I would expect the company to place similar focus when remodeling current locations.

Dick’s has a great relationship with industry leader NIKE, Inc. (NYSE:NKE), whom recently reported a strong uptick in North American revenues. Nike Golf sponsors a long list of world class golfers including Tiger Woods, Rory McIlroy, and Paul Casey. In recent months golfing great, Tiger Woods, has improved his performance and is again a major contender in the remaining majors this year. Nike Golf stuck with Tiger, unlike many sponsors, during times of turbulence. NIKE, Inc. (NYSE:NKE) offers consumers an array of golfing merchandise including equipment, balls, shoes, clothes, sunglasses, watches, hats, and bags. The refresh cycle may be coming exactly at the time when Nike’s star performers sit at the top of the leader board. As a result, I think NIKE, Inc. (NYSE:NKE) stands in a great position to capture market share in the fragmented industry in the years ahead.

Conclusion

As consumer confidence rises and the housing market recovers, I believe the golf industry will recover from its recession lows. My two part thesis is built on a refresh cycle set to take place and the increased number of golf memberships which will result from a strong housing recovery.

The article Unconventional Consumer Confidence Benefactors originally appeared on Fool.com and is written by Nathaniel Matherson.

Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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