U.S. Golf Trends
In the past dozen years, golf facilities have grown at a faster rate than either golfers or rounds played. In 2002, golfers played fewer rounds than the 518 million played in both 2000 and 2001.
Number of Facilities199012,846200015,487200115,689200215,827Growth 1990-200223%
Number of Golfers199023 million200025.4 million200125.8 million200226.2 millionGrowth 1990-200213.9%
Rounds Played1990421.2 million2000518.4 million2001518.1 million2002502.4 millionGrowth 1990-200219.2%Note: A golf facility includes at least one course, possibly more.
Source: National Golf Foundation
The collection -- amassed by 55-year-old Ronnie Watts, who co-founded the retail chain 35 years ago with older brother Edwin -- also boasts the negatives of some 500,000 golf-related photographs. The trove includes pictures from the golden years of Hogan, Snead, Palmer and Nicklaus. Watts proudly shows off his favorites, including a 1954 classic of Snead, knee and nose to the ground, lining up a putt, and a shot of Hogan and Palmer relaxing with cigarettes during the 1966 Master's.
Over the past few years, Watts has had reasons to enjoy his role as historian more than that of businessman. After a big surge in the number of players in the 1980s, interest in golf flattened. Nationally, rounds played have fallen by more than 5% since 2002. In Florida and some other states, developers created too many courses in some places or built the wrong kind of courses in the wrong places.
"It was thought, 'any price point, any place,' " says Tom Williams, a consultant for Billy Casper Golf, a golf course management company based in Virginia.
Compounding the problems is the fact that there haven't been any major product innovations -- a key factor in driving sales -- since the introduction of titanium drivers more than five years ago.
For Edwin Watts Golf, the trends translated into the business equivalent of a three-putt. After decades of strong growth in both its retail stores and catalog operations, sales have been flat or down slightly for the past three years, with the possibility of a modest uptick this year, says Watts. The company last opened stores three years ago, in Jacksonville and San Antonio. And it hasn't made a significant acquisition since 1998, when it bought six former Pro Golf Discount stores in Atlanta.
To grow, Watts needs both duffers and experienced players looking to shave a few strokes off their scores to buy more equipment. A new player typically spends about $250 to $300 on clubs, balls, a bag, putter and gloves to get started.
Overall, clubs account for 80% of the firm's business. Catalog and internet orders represent about 30% of sales -- a volume high enough that UPS leaves an empty truck trailer parked at the warehouse overnight for pickup the next morning.
Internet sales lately have been growing faster than catalog orders, Watts says. Last year, more than 2 million online shoppers visited the site.
Edwin Watts Golf
Headquarters: 85,000-sq.-ft. office/warehouse in Fort Walton Beach.
Stores: 49 in 10 states, including 20 in Florida. All but seven are company-owned.
Internet: Website displays more than 1,000 products and images from 75 manufacturers: www.edwinwatts.com.
Catalog: Nearly 15 million catalogs mailed in 2003; more than 200,000 packages shipped annually. Catalog and internet sales combined account for 30% of sales.
Employees: 650.
Owners: Founders Edwin Watts, 58, and Ronnie Watts, 55, sold a majority interest in December to Wellspring Capital Management, a New York City private equity investment firm. The brothers retain ownership interests and will continue management.
The partner: "Given golf's growing preference among mainstream America as the leisure sport of choice, we believe the golf equipment sector is poised for growth." -- Wellspring Capital principal Jason B. Fortin. Wellspring also has interests in Lionel trains, aluminum manufacturing, post-secondary education, food distribution and residential heating and cooling installation.
Watts startup: As boys, Edwin and Ronnie Watts caddied at a golf course close to their home in Niceville; they learned the game and even taught it. When a new municipal course opened in Fort Walton Beach in 1961, Edwin and Ronnie became assistant professionals. Edwin also ran the pro shop. In 1968, with $380 worth of inventory, they opened their first retail store, Edwin Watts Golf, at the city golf course.
What's next: Opening eight to 10 stores within three years, including two in Fort Lauderdale and one in Miami.
Sales driver: 80% of the business is clubs.
Loyalty and longevity
From modest beginnings -- both Watts brothers started as caddies -- the business has grown to consistently place in the top 50 in sales among sporting goods retailers. Watts ranked 41 in 2002 in Sporting Goods Business' annual listing, with sales quoted at $200 million.
But with slow sales denying the company the capital it needed to keep growing, the brothers faced a quandary. In December, after months of rumors about its future, the Watts brothers announced that they had sold a majority interest in the company to a New York equity investment firm, Wellspring Capital Management LLC.
"Edwin Watts is a unique company," says Wellspring managing partner Greg Feldman. "You rarely find a company of any kind, let alone retail, where they have that kind of loyalty and longevity of the employee base, both on management and store levels. Second, we think because of 14 million catalogs mailed every year, there's a natural umbrella we can expand under."
Neither Feldman nor the Watts brothers would disclose the financial particulars of their deal. The entire management team will remain in place, with Edwin and Ronnie Watts leading a renewed expansion as co-CEOs. In the next three years, the company plans to open up to 10 stores, including at least five in Florida. Leading that charge is Ronnie Watts' son, Jody Watts, who has worked at the golf retailer since he was 10. The company also will look at acquiring established regional chains.
The central assumption behind the Wellspring-Watts strategy is that golf will rebound along with the nation's economy. "I think we're bottoming out in the economy on the golf side," says Ronnie Watts. "That's why we brought on a financial partner, so we could grow the business."
Others in the industry expect players to return to the greens as the economy brightens. "When there's a downturn in the economy, the first thing that goes is play money, and that's what happened here," says Junior Ingram, owner of Southern Golf, a regional publication out of Pensacola.
Another fact that bodes well for the industry: Golfers spend more on the sport once they hit age 50. And 78 million Baby Boomers are just starting to reach that point.
On the fringes
Plenty of question marks remain. "Edwin Watts has a pretty good foothold in the market for retail," says Terry McAndrew, an industry analyst and publishing editor of the online Web Street Golf Report, based in Phoenix. But he adds that golf is expensive and time-consuming, and "the economic slump in the country does not bode well. Companies with a pretty good presence may have to work hard to maintain it, and growth opportunities are going to be tricky."
Watts says the company also needs a boost from golfers overseas. "We lost a lot of play when international economies were down, even before 9/11," says Watts. "We used to see groups of 40 to 80 Japanese players at our Orlando store, and every one spending thousands of dollars. There's millions of rounds from overseas that aren't coming back yet. When they do, it will be awesome."
McAndrew predicts the industry may not get back in the fairway for a while. "There will be some winners and losers. Across the board, I'd expect more of the experience of the past couple of years."
In the meantime, at least one younger player says the glut of courses will begin to work in the company's favor. "It's easier to get a tee time, and it's more affordable" -- meaning more players and more equipment buys, says John Watts, Edwin Watts' son and the company's internet and mail-order manager.
Collectibles:
Ronnie Watts grabs a rusty, green MJB-brand coffee can off the warehouse shelf and pulls out one of the rolls of carefully wrapped film negatives. They're images from the 1930s -- and probably untouched since -- part of a 50,000-piece collection Watts bought last year and hasn't yet had a chance to catalog.
Since 1998, he's purchased 10 times that many negatives of golf photography, the life's work of nine professional photographers, archiving what's probably the biggest collection of images of the sport. Watts sells a selection of prints from the original negatives.
Besides photos, Watts owns a treasure trove of golf memorabilia, including a golf club, circa 1640, which Watts describes as "the oldest club in the world."
Items from the collections will become part of a golf museum to be constructed on a site already purchased near Disney World. Work on the project will begin this year, Watts says.
What's Hot at Watts
New-technology, multimaterial clubs with titanium composite construction, such as the Callaway ERC Fusion and Mizuno MP-001 drivers designed for more distance and accuracy.
Hybrid-design irons, which combine the shape of a wood and the blade of an iron to make it easier to hit the ball with the long iron.
Odyssey's new two-ball putter, with a larger head and two actual-size white-ball images on top to help with alignment. One of 2003's best sellers.