Callaway Golf

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faced a rough session Wednesday after slicing second-quarter sales and earnings guidance to reflect stiffer competition and problems at a recently acquired subsidiary.

The golf club manufacturer expects to earn 10 cents to 14 cents a share on sales of $290 million to $295 million in the quarter. The earnings estimate includes an integration charge of 9 cents a share. For the full year, Callaway expects to earn 15 cents to 25 cents a share on sales of $975 million to $990 million. The earnings estimate includes an integration charge of 25 cents a share.

Analysts surveyed by Thomson First Call had been looking for second-quarter earnings of 60 cents a share on sales of $330.6 million, and full-year earnings of $1.21 a share on sales of $1.06 billion.

Among other things, Callaway said, sales of its titanium drivers were hurt in the second quarter by close-out sales by a competitor, and by shifting consumer tastes toward bigger-headed clubs. Golfers are buying more clubs in the "super-oversized" range approaching the professional limit of 460 cubic centimeters, while its Big Bertha and Great Big Bertha clubs carry 360- and 380-cubic centimeter heads.

Callaway said its Japan business continued to deteriorate in the second quarter, falling 20% to 25% below 2003 levels, and said business in all foreign markets is being hurt by local economic issues and currency fluctuations.

"Japan continues to be a struggle for us," Callaway said. "We are evaluating product and operational changes, and will advise shareholders of a timetable for improving this business over the next several months."

Callaway also cited efforts to eliminate poorly returning product lines at Top-Flite Golf, which it acquired out of bankruptcy in September.