Golfsmith International Holdings (GOLF)
Mickelson Master’s Win Means Golfsmith Giveaway
Last Sunday, professional golfer, Phil Mickelson cruised to a three-stroke victory in the first major golf tournament of the year: the Masters at Augusta National in Georgia. As a result, Golfsmith (GOLF: Charts, News, Offers) and partner Callaway Golf (ELY: Charts, News, Offers) will be giving away one million dollars worth of golf clubs. Golfsmith certainly jumped up several rungs on the publicity ladder on the strength of their bet, but now the company is on the hook for $1 million worth of product – product that has already been sold and taken out the door. Was Golfsmith secretly rooting against Phil so that they would not have to cover their bet? Probably not, since the wholesale value of the product is probably somewhere around half of the sticker price: $500,000 or less, furthermore, Golfsmith took out an insurance policy on their gamble. The premium is said to be ten percent of the loss that Golfsmith might suffer as a result, so it is possible that Golfsmith generated all of the excitement, goodwill and publicity for $50,000 or less.
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Golfsmith International Holdings Inc. is the nation’s largest chain of golf stores, sports cards and memorabilia. There are 74 Golfsmith brick and mortar locations as well as a huge retail website. In March, Golfsmith made the announcement that any golfer who purchased a Callaway driver between March 12, 2010 and April 7, 2010, would have the purchase price fully refunded if Phil posted a victory at the Masters. Three Callaway drivers were included in the promotion: the Diablo Edge, FT-Tour or the FT-iZ. The three drivers, purchased from any Golfsmith store in the country were eligible for the “If Phil Wins, You Win” promotion.
Initially, the Golfsmith offer did not seem all that bold even with Mickelson projected as the favorite going into the tournament. Prior to Sunday, Mickelson had only won three other major tournaments over the past six years and, more importantly, his arch-rival, Tiger Woods was returning to the field after a five month tour absence. However, CEO Marty Hanaka’s comments after the announcement certainly seem prescient now: “Phil is the hottest player on tour and Callaway’s new drivers are better than ever before. There is pent up demand from golfers for new clubs, and with this promotion exclusively at Golfsmith, it’s a great way to inspire golfers everywhere to root for Phil at this year’s Masters.”
Golfsmith is planning a similar promotion for the next USGA major, the US Open at Pebble Beach in June. It is a good bet that the insurance premium will go up quite a bit this time, but the visibility of the promotion will also go up. Serious golfers who buy golf clubs knew about Golfsmith’s promise regarding Phil going into the Masters, but now that Mickelson won the tournament and triggered the prize, everyone will know about it the next time. This is a creative promotion and a good investment on the part of Golfsmith.
Phil Mickelson is not the only golfer who is generating sales for Golfsmith. The company also sells a great deal of Tiger Woods branded products and with the cloud surrounding Tiger, those sales were in doubt this year. However, Golfsmith recently announced that sales of Tiger endorsed hats, shirts and belts grew 8% from October 2009 through mid-March of this year when compared with the same period last year. There are times when anticipation is greater than the actual event. One has to wonder if the increase in Tiger sales will continue now that the anticipation for Woods’ return to competitive golf is over. The Masters last week was all about Tiger Woods during the first two days of the tournament, but by Sunday, it was all about Phil Mickelson. Tiger had faded into the background. Phil Mickelson’s wholesome image, compelling story and increasing competitiveness might signal a transition from the Age of Tiger to the Age of Phil.
Golfsmith has that bet covered either way.
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Joshua Caucutt is long-time market follower and finance writer. Debt management, entrepreneurship and government economic policy are areas of emphasis. He regularly contributes to the
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Hi Joshua,
I handle the PR for Golfsmith and want to clarify that Golfsmith PURCHASED AN INSURANCE POLICY SO THEY DO NOT PAY OUT $1 MM IN EQUIPMENT. Your reporting on this promotion is not accurate.
Feel free to call me if you have questions 860-313-1426. Also you made one reference to GOLDsmith it’s GOLFSMITH. We would appreciate your correcting this. thank you!
Lynn
Lynn, I did mention the insurance policy in the first paragraph. I will request that the type be changed. Thanks!
I just wanna say thanks for the free Driver…I need a new set of irons…when is that promo gonna start?
What the heck are these people talking about. It’s like you morons didn’t even read the post. Get with the deal already!