MODG Q2 Deep Dive: Value Initiatives Drive Traffic Gains, Guidance Trimmed on Apparel Weakness

Golf entertainment and gear company Topgolf Callaway (NYSE:MODG) reported Q2 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 4.1% year on year to $1.11 billion. On the other hand, next quarter’s revenue guidance of $900 million was less impressive, coming in 4.3% below analysts’ estimates. Its non-GAAP profit of $0.24 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Topgolf Callaway’s second quarter performance prompted a positive market reaction, with results surpassing Wall Street’s expectations despite a year-on-year revenue decline. Management credited improved consumer engagement in golf equipment and the successful rollout of value-focused offerings at Topgolf venues as key drivers. CEO Chip Brewer highlighted, “the excellent consumer response to Topgolf’s value initiatives, which has significantly improved our traffic and sales trends.” The company also benefited from cost reduction efforts and the recent sale of Jack Wolfskin, which sharpened operational focus and lifted segment margins.

Looking ahead, Topgolf Callaway’s updated guidance reflects optimism around momentum in its golf equipment segment and continued traction from value initiatives at Topgolf, offset by ongoing headwinds in the active lifestyle apparel category and increased tariff pressures. Management acknowledged the need to further refine its offerings and closely monitor the evolving tariff landscape, with Brewer noting, “We have that [tariff impact] embedded in our guidance net of the mitigation efforts that we’re taking as we speak.” Planned product launches and a new Topgolf subscription program are expected to support engagement in the coming quarters.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to strong execution of value initiatives at Topgolf, resilient demand for golf equipment, and ongoing cost control efforts, while apparel softness and tariffs weighed on results.

• Topgolf value initiatives: Expanded promotions such as Sunday Funday and weekday discounts drove a 6% increase in traffic, with CEO Brewer emphasizing the impact of value offerings on repeat and new customer growth. Notably, the Summer Fun Pass sold twice as many units as its previous offering.
• Margin stabilization despite lower comps: Despite a 6% decline in same-venue sales at Topgolf, management maintained flat venue-level EBITDAR margins through labor model changes and technology upgrades, including the rollout of the Toast point-of-sale system.
• Golf equipment resilience: The equipment segment benefited from healthy U.S. demand and stable rounds played, with flat operating margins despite increased tariffs and foreign exchange pressures. New product launches like X Forged irons and Opus SP wedges are expected to reinforce brand leadership.
• Apparel segment under pressure: The Active Lifestyle segment’s revenue declined due to continued softness in the athleisure market and the sale of Jack Wolfskin, though cost initiatives improved operating margins. Growth in TravisMathew’s women’s category partially offset broader weakness.
• Strategic focus and separation update: The completed sale of Jack Wolfskin delivered financial flexibility and aligned the business for a potential separation of Topgolf. Leadership transition at Topgolf delays the timeline for a possible spin-off, with both spin and sale options still under evaluation.

Drivers of Future Performance

Topgolf Callaway’s outlook is shaped by continued investment in value propositions, new product launches, and cost discipline, but faces challenges from tariffs and apparel demand.

• Further Topgolf engagement strategies: Management plans to pilot a new subscription program and introduce football-themed games to attract families and sports fans. Expansion of value-focused offers and digital reservation tools aims to build on recent traffic momentum.
• Tariff headwinds and mitigation: Escalating tariffs are expected to impact results by approximately $40 million this year, but management is pursuing cost reduction and supply chain initiatives to offset part of this pressure, with ongoing monitoring of trade policy changes.
• Active Lifestyle recovery uncertain: Weakness in the athleisure market is likely to persist, limiting near-term growth in the apparel segment. However, leadership expects product innovation and category expansion, especially in women’s lines, to support gradual recovery.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will be watching (1) the initial uptake and retention of Topgolf’s new subscription offering, (2) whether value-driven promotions can sustain traffic gains without eroding margins, and (3) evidence of stabilization in the Active Lifestyle segment, particularly as new women’s products and digital tools come to market. Developments on the Topgolf separation process and tariff management will also be closely tracked.

Topgolf Callaway currently trades at $8.43, down from $8.80 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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