IR & Research Intelligence, Sessa Investment Research

Sessa Investment Research

IR & Research Intelligence

Sponsored research focusing on Japanese small cap.

Equity Bottom-Up

<ul><li>While FY24/12 consolidated financial results paint a challenging environment, the solid achievements in GDO’s mainstay Golf Merchandise Sales business, which accounts for 34% of total consolidated net sales, should not be overlooked.</li><li>The graph below comparing golf gear sales for one of the largest brick-and-mortar retailers ‘Co. A’ with the largest online retailer GDO highlights the success of GDO’s initiatives, GDO turning in +7.3% YoY growth versus Co. A -0.6% YoY. Co.</li><li>A noted in its 1H FY25/6 briefing that for its Golf business (34.8% of consolidated net sales), existing store sales declined YoY, citing weak performance of golf clubs due to differences in new product launches and price reductions. </li></ul>

While FY24/12 consolidated financial results paint a challenging environment, the solid achievements in GDO’s mainstay Golf Merchandise Sales business, which accounts for 34% of total consolidated net sales, should not be overlooked.The graph below comparing golf gear sales for one of the largest brick-and-mortar retailers ‘Co. A’ with the largest online retailer GDO highlights the success of GDO’s initiatives, GDO turning in +7.3% YoY growth versus Co. A -0.6% YoY. Co.A noted in its 1H FY25/6 briefing that for its Golf business (34.8% of consolidated net sales), existing store sales declined YoY, citing weak performance of golf clubs due to differences in new product launches and price reductions. 

Golf Digest Online (3319 JP) - FY25/12 Key Initiatives for Japan and Overseas

<ul><li>9M consolidated EBITDA -17.4% YoY, OP before goodwill amortization, etc. -87.5%, operating loss expanding sharply, and profits on down turning into loss could paint a dire picture.</li><li>However, deployment of MTP upfront investments and volatile swings of the forex rate are masking steady progress in underlying MTP business expansion initiatives, in SIR’s view.</li><li>Regarding the impact of the forex rate on Overseas segment P/L and the consolidated B/S, please refer to our special TOPICS section in the Q1 Follow-up Report (June 3). </li></ul>

9M consolidated EBITDA -17.4% YoY, OP before goodwill amortization, etc. -87.5%, operating loss expanding sharply, and profits on down turning into loss could paint a dire picture.However, deployment of MTP upfront investments and volatile swings of the forex rate are masking steady progress in underlying MTP business expansion initiatives, in SIR’s view.Regarding the impact of the forex rate on Overseas segment P/L and the consolidated B/S, please refer to our special TOPICS section in the Q1 Follow-up Report (June 3). 

Q3 Follow-Up: Golf Digest Online (3319 JP)

<ul><li>GDO announced 1H FY24/12 consolidated financial results at 15:00 on Thursday 8/8, and it held a results briefing at 16:00 via Zoom webinar, hosted by CEO Ishizaka, COO Yoshikawa and CFO Nakamura.</li><li>Headline figures were net sales +10.2% YoY, EBITDA -26.9%, the operating loss expanding and profit attributable to owners of parent dropping into loss.</li><li>While headline numbers on the surface appear to indicate an extremely challenging environment, it is worth noting that the trend for 2Q-only profit improved sequentially at all levels (see red circles in the table below), and management is confident that profit will return to profitability in the 2H as measures to improve GPM and control costs contribute going forward.</li></ul>

GDO announced 1H FY24/12 consolidated financial results at 15:00 on Thursday 8/8, and it held a results briefing at 16:00 via Zoom webinar, hosted by CEO Ishizaka, COO Yoshikawa and CFO Nakamura.Headline figures were net sales +10.2% YoY, EBITDA -26.9%, the operating loss expanding and profit attributable to owners of parent dropping into loss.While headline numbers on the surface appear to indicate an extremely challenging environment, it is worth noting that the trend for 2Q-only profit improved sequentially at all levels (see red circles in the table below), and management is confident that profit will return to profitability in the 2H as measures to improve GPM and control costs contribute going forward.

Golf Digest Online (3319 JP) - 2Q Follow-Up

<ul><li>Numerical targets for FY24/12 initial guidance are shown in the exhibit below.</li><li>Despite initial guidance for consolidated OP of ¥800mn, an increase of ¥420mn (+110.3% YoY), the Company cites conservatively forecasting non-operating and extraordinary items such as interest expenses, restructuring costs, and exchange rate fluctuations for initial guidance for ordinary profit break-even and a net loss of (¥600mn) for profit attributable to owners of parent (see P2).</li><li>Key initiatives and expectations for 2024 include: 1) in Japan, aim to provide more data-oriented and efficient services (online golf equipment sales GPM improving after 4Q inventory adjustment), 2) GOLFTEC golf lesson cash sales set to improve on coach issue addressed and marketing campaigns such as “7 shots better,” and 3) expand SkyTrak sales distribution channels. </li></ul>

Numerical targets for FY24/12 initial guidance are shown in the exhibit below.Despite initial guidance for consolidated OP of ¥800mn, an increase of ¥420mn (+110.3% YoY), the Company cites conservatively forecasting non-operating and extraordinary items such as interest expenses, restructuring costs, and exchange rate fluctuations for initial guidance for ordinary profit break-even and a net loss of (¥600mn) for profit attributable to owners of parent (see P2).Key initiatives and expectations for 2024 include: 1) in Japan, aim to provide more data-oriented and efficient services (online golf equipment sales GPM improving after 4Q inventory adjustment), 2) GOLFTEC golf lesson cash sales set to improve on coach issue addressed and marketing campaigns such as “7 shots better,” and 3) expand SkyTrak sales distribution channels. 

Golf Digest Online (3319 JP) - 1Q FY24/12 Profits Down YoY Is Temporary

<ul><li>On the surface, FY23/12 consolidated OP -68% YoY, profit ATOP -53%, and FY24/12 initial guidance for a profit ATOP net loss may appear to indicate a challenging earnings environment. </li><li>However, closer examination reveals steady earnings improvement, and the new MTP through FY26/12 targets recouping major overseas growth investments.</li><li> The table below shows sequential improvement in the amount change YoY for Group EBITDA, OP and profit ATOP every quarter, with profits at all 9 levels posting YoY gains in the 4Q.</li></ul>

On the surface, FY23/12 consolidated OP -68% YoY, profit ATOP -53%, and FY24/12 initial guidance for a profit ATOP net loss may appear to indicate a challenging earnings environment. However, closer examination reveals steady earnings improvement, and the new MTP through FY26/12 targets recouping major overseas growth investments. The table below shows sequential improvement in the amount change YoY for Group EBITDA, OP and profit ATOP every quarter, with profits at all 9 levels posting YoY gains in the 4Q.

Full Report - Golf Digest Online (3319 JP)

Japan

Golf Digest Online Inc. an online retailer sells and trades golf products. The Company also provides golf reservation services and delivers golf related news.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Golf Digest Online (3319 JP)