A challenging year

A challenging year

It is difficult to review 2023 against 2022 without recognising that the latter was very much a topsy-turvy year. The ending of lockdown, the war in Ukraine, increases in food and energy prices to mention but a few spilled over into the start of 2023.

Quarter 1 January to March 2023

The year started in an economic mess, a hangover from Liz Truss becoming Prime Minister on 6^th September 2022 and her Chancellor’s mini budget which upset the money markets, leading to substantial increases in mortgage rates. This and high inflation peaking during the quarter at 10.4%, seriously weakened consumers’ discretionary spending power of which golf is part. Her resignation led to Rishi Sunak taking over on the 25^th October. On 4^th January 2023 he made a major speech pledging to slash inflation in half by the year end. To achieve this the bank rate which at the time stood at 3.5% would have to be raised. In February it rose to 4.0% and in March to 4.25% putting further pressure on discretionary purchasing.

The all-important weather was mostly warmer than average. Rainfall was limited in the first two months and then it became very wet in the south tailing off towards Scotland. Sunshine started the year well above average but increasingly deteriorated through March. Not what you would expect for the time of year but relatively fair weather from a golfer’s perspective.

The above sets the background scene, so how did the golf industry perform? The year appeared to get off to a very poor start compared to 2022 at -17.6%. In reality, it was not a bad as it seemed owing to the massive bounce back following the closure of the lock down in the previous year. February improved the year to date figure to – 4.3% and the quarter closed at +0.3%. Disappointing figures, not keeping up with inflation that will have hit profitability.

From a hardware perspective, the results for the first quarter 2023 compared to the same period last year, in value terms, ranged from -20.4% for trolleys to +12.0% for bags. The higher price point items suffering most. Apparel faired better ranging from -1.3% for men’s trousers to +21.7% for women’s tops.

It is also worth reviewing unit sales as they cut out the effects of inflation. Here we find six out of the nine hardware products showing declines compared to the same period last year: trolleys -27.6%, irons -7.3%, balls -5.8%, putters -3.4%, distance devices -2.2% and woods -0.4%. Apparel performed well with only men’s trousers in decline to the previous year at -9.8%. The rest of the products showed increases from +4.4% to +29.8% for men’s tops.

Quarter 2 April to June 2023

During this quarter bank interest rates grew steadily from 4.25% to 4.5% in May and to 5.0% in June. Over the same period inflation started to fall reaching 7.9% by the end of the quarter. This and increasingly high interest rates continued to put the squeeze on consumer spending and in turn on discretionary spending power. Customers were still spending but increasingly searching out good deals. Pricing was clearly king.

Did the weather come to the rescue encouraging players out onto their courses? Well, mean temperatures started the quarter about average and then increasingly rose with June being warmest at 15.8°c in a series from 1884 and the sunniest since 1957. Little rainfall made it good for some but possibly a little too hot for others.

The year to date figures in value terms compared to the same period last year were relatively static ranging from +1.6% in April and finishing the quarter at +1.9%. Once again, the higher price points suffered the most with only irons, putters and trolleys failing to break even. At the other end, the top three performers were gloves at +10%, bags +7.1% and shoes +5.5%

The picture in unit terms showed an improvement with only four out of the nine products showing a decline: -21.0% trolleys, -6.9% irons, -4.6% distance devices and -1.6% putters.

Quarter 3 July to September 2023

The economic background changed little with continued pressures to squeeze down inflation. The Bank of England’s Monetary Policy Committee voted to raise their rate by a further 0.25% to 5.25% on 2nd August. Inflation fell during the quarter finishing at 6.7% by the end of September.

The all-important weather saw mean temperatures about average for July and August although there were areas that were either warmer or cooler. September was another record breaker temperature wise at 15.2°c equal to 2006. Rainfall was well above average in July, about seasonal in August but wet down the western side of the country in September. Sunshine was a little dull in July and August but average and above in Scotland and the Southeast of England. Overall changeable weather that golfers have become accustomed to but not generally hindering play.

Better news for a change with the quarter showing steady growth in year to date sales value ranging from +1.9% in July to 4.1% by the end of September. Only three products showed a decline: -6.5% trolleys, -4.4% irons and putters -2.1%.

Three hardware product sales in unit terms failed to break even compared to last year: -10.8% trolleys, -7.3% distance devices and -3.8% irons. An improving picture. Apparel sales were better with only men’s trousers showing a decline of -8.3%. other items ranged from +12.6% womens’ trousers and skirts to +49.1% for womens’ tops – unfortunately only a small percentage of the overall mix.

Quarter 4 October to December 2023

The bank rate held at 5.25% for the rest of the year. Inflation fell to 3.9% in November, the lowest since 2021, but finished the year at 4.0%. This achieving Rishi Sunak target of halving it by the year end.

Unfortunately, the usual boost in retail sales on the High Street in the run up to Christmas did not materialise. Customers held tightly to their wallets even after extensive promotional activity. The month compared to 2022 was a disappointing at +1.7%. Much lower than the +6.9% seen in 2022 compared to 2021. Many consumers switching their discretionary spending power to holidays.

Temperatures and rainfall fluctuated considerably in the final quarter. October and December’s were generally above average, while November was average. Sunshine was limited in October and December but brighter in November. Scotland tended to be the opposite to the rest of the country. All not too bad for the time of year.

So, how did the golf industry finish the year? Well with a flourish, with monthly sales values compared to the same period last year at +5.9% October, +6.3% November and +9.6% December. These in turn helped to boost year to date figures from +4.2% October, 4.4% November to +4.6% by the year end. Looking back to the last stable year 2019 sales were up by +18.5%. Encouraging but we must not forget the effects of inflation.

Out of the ten hardware products seven showed growth in value terms for the year. These ranging from +2.0% for wedges to +12.2% for bags. The three products failing to break even compared to last year were trolleys -2.5%, irons -2.4% and putters -0.4%. Apparel did well with only one product falling short on last year: men’s trousers at -4.7%. The others ranged from +4.8% for women’s skirts and trousers to +32.9% for women’s tops.

Unit sales, saw seven out of the ten hardware products showing growth from +1.4% balls to +13.9% shoes. Only irons, trolleys and distance devises failed to achieve last years sales. Apparel sales ranged from +9.7% for women’s skirts and trousers to +43.4% for women tops. Only men’s trousers and shorts saw a decline of-11.3%

Overview.

It’s been a tough year for retail in general with consumers still buying but seeking out best buys, even trading down to second hand merchandise. The High Street will have suffered more than the golf industry as our overall socio economic structure is up market, leaving most golfers with more discretionary purchasing power – cash in their wallets. At the club level however, this could vary considerably, dependent on the local economy.

The weather for the year has been warmer, the rainfall very patchy with England and Northern Ireland experiencing wetter conditions. The exception being the west coast of Scotland and much of the lake district. Sunshine was near to the norm for most of England although a ridge of brighter weather stretched across from the Wash toward the Lake District and up the western side of Scotland. Generally speaking, not the greatest weather from a golfing perspective owing to the above average levels of rainfall that few golfers appreciate.

So, what of the future? Economists see potential light at the end of the tunnel. This being based on lower inflation, reducing interest rate, increasing discretionary spending power and growing consumer confidence. But before this can materialise the first and second quarters could still be incredibly challenging as customers remain cautious about the future.

Golf Datatech is a world leader in golf industry research. It provides the trade with specialised market research covering retail sales, inventory, pricing, distribution, along with strategic sales and marketing consultancy. In the UK, Golf Datatech research is based on an average of 2,000,000 records per month, recorded by EPOS systems at the point of sale. For greater detail contact John Hassett on 07976 797081.