Despite the Golf Course Boom Amid COVID-19... FILA Fails to Smile

[Asia Economy Reporter Park Hyungsoo] Despite the COVID-19 pandemic, golf courses have been bustling with activity. The domestic golf population has increased, and the related markets for golf wear and golf equipment have also expanded. However, ironically, companies owning golf brands are generally struggling with poor performance. Although the market has grown, competition has intensified as golf brands have proliferated rapidly. The consumption market downturn caused by COVID-19 is expected to serve as a turning point to distinguish the wheat from the chaff among the numerous golf wear brands. Those who survive the fierce competition may accelerate their growth. We reviewed the current status of companies owning golf brands.

Although domestic golf courses are so popular that it is difficult to make reservations even on weekdays, the global golf equipment and golf wear markets continue to struggle. Due to the impact of COVID-19, overseas situations are tough to the extent that the PGA Tour events in the United States have been canceled. Dark clouds have gathered over the performance outlook of Acushnet, an affiliate that significantly affects FILA Holdings' earnings and stock price.

Looking at FILA Holdings' sales by brand, FILA Golf's sales last year amounted to 7.711 billion KRW, a 78% increase from 4.332 billion KRW the previous year. FILA Golf is a golf-specialized brand launched in 2001. In 2016, the brand redefined its direction and established two lines: the 'Active Performance' line, designed and made with functional materials optimized for golf, and the 'Stylish Performance' line, which reflects trends based on functionality. Since 2018, FILA Golf has shifted its distribution method from mainly department stores and agencies to wholesale channels such as specialty stores and golf course clubhouses. This year, it is collaborating with CJ ENM O Shopping's golf wear brand 'Jean Michel Basquiat' and Kakao VX's golf equipment brand 'Kakao Friends Golf.'

Although FILA Golf grew significantly last year and the domestic golf wear market outlook is bright this year, its impact on FILA Holdings' overall performance is limited. Last year, FILA Golf sales accounted for only 1.3% of FILA Holdings' total sales. FILA and FILA Underwear sales accounted for 61.1% and 11.6%, respectively.

As the global fashion market shrinks due to the COVID-19 impact, there are forecasts that FILA Holdings' profits will decline this year. Meritz Securities estimated that FILA Holdings achieved sales of 770.8 billion KRW and operating profit of 93.1 billion KRW in the first quarter of this year, down 7.6% and 19.6%, respectively, compared to the same period last year. This is the result of the domestic fashion market being directly hit as COVID-19 cases continue to occur.

Kim Hyewon, a researcher at Korea Ratings, analyzed, "Domestic fashion companies experienced severe performance declines as first-quarter sales decreased. Although there are differences by brand, most companies saw sales drop by about 20-30% compared to the same period last year."

FILA Holdings raised expectations by achieving high targets in January and February this year. However, as COVID-19 cases surged sharply in March in Korea, the US, and Europe, consumer sentiment froze. Sales in March decreased compared to the previous year, and the consumption contraction trend is likely to continue into the second quarter. US apparel retail sales in March remained at about half the level of the same period last year.

Unlike domestic markets, overseas golf wear and equipment markets are also inevitably sluggish. Acushnet owns various golf brands such as Titleist, FootJoy, and Scotty Cameron. As COVID-19 spreads worldwide, PGA and LPGA tournaments have been canceled. The PGA expects the Charles Schwab Challenge to be held on the 11th of next month, but the situation of COVID-19 in the US must be monitored.

If global golf tournaments cannot be held, equipment companies cannot properly market new products. Many companies are postponing new product launches. Many golf courses in the US and Europe remain closed. It is highly likely that operations will not be conducted properly even during the peak golf seasons in the second and third quarters.

Researcher Baesong from KTB Investment & Securities analyzed, "The impact of COVID-19 is expected to deepen the downturn. Since the business proportion in North America and Europe is high, performance uncertainty is significant."

This content was produced with the assistance of AI translation services.