Navigating Tariffs and Trade Wars: Which Golf Giant Has the Stronger Hand?

The golf industry is in the throes of a tariff-induced shakeup, with U.S. manufacturers like Acushnet (GOLF) and Topgolf Callaway (MODG) scrambling to mitigate costs from punitive duties on Chinese imports. With tariffs on golf equipment components reaching as high as 515%, the pressure to retool supply chains and adjust pricing strategies has never been greater. Here's how the two companies are faring—and why one may offer a safer bet than the other.

Acushnet: Diversifying Supply Chains to Shield Margins

Acushnet, the maker of Titleist and FootJoy, has emerged as the better-executed play in this environment. By shifting production from China to Vietnam, Taiwan, and the U.S., the company aims to offset over half of its projected $75 million tariff burden in 2025. This proactive reconfiguration has kept its net profit margin stable at 8.7%, even as rivals falter.

Key Moves:
- Supply Chain Overhaul: Acushnet's pivot to lower-tariff regions like Vietnam has reduced reliance on Chinese components, shielding its premium products (e.g., Titleist Pro V1 golf balls) from price hikes.
- Pricing Power: While smaller brands face margin erosion, Acushnet's brand loyalty allows it to pass costs to consumers. For instance, Titleist's premium positioning has sustained demand despite a 15-20% price increase risk.
- Financial Fortitude: With a P/E ratio of 19.1x and a dividend yield of 1.3%, Acushnet offers a balance of growth and stability. Its liquidity and disciplined cost management suggest it can weather tariff volatility.

Topgolf Callaway: Struggling with Execution and Debt

Topgolf Callaway, meanwhile, faces a steeper climb. Its Q1 2025 results revealed a $25 million tariff impact, with revenue slipping 4.5% YoY despite cost-cutting measures. While the company is pursuing strategic moves like selling its Jack Wolfskin business and spinning off Topgolf, its execution risks are glaring:

Weak Spots:
- Tariff Mitigation Gaps: Unlike Acushnet, Topgolf Callaway hasn't yet achieved comparable supply chain flexibility. Its Golf Equipment segment saw a $6.2 million revenue dip due to foreign currency headwinds and over-saturation from competitors' product launches.
- Debt and Liquidity: Despite a 12% rise in liquidity to $805 million, Topgolf Callaway's Debt/Equity ratio of 1.30 remains a red flag. Its net profit margin of -34.1% (due to massive losses) underscores operational fragility.
- Valuation Risks: While MODG trades at a "Deep Value" price-to-book ratio of 0.56, its forward P/E of 87x is unsustainable without a turnaround in profitability. Analysts' mixed ratings (Hold consensus with a 27% upside potential) reflect this uncertainty.

The Investment Call: GOLF Over MODG, But Watch the Risks

Acushnet (GOLF) is the safer bet. Its supply chain agility, brand strength, and stable margins position it to outperform in a tariff-heavy environment. The stock's P/E of 19.1x is reasonable given its 7.59% earnings growth forecast, and the dividend provides downside protection.

MODG remains a gamble. While its valuation is compelling, its reliance on turnaround strategies (e.g., Topgolf venue sales, asset divestitures) carries execution risk. Investors should wait for clearer signs of margin improvement or a sustained revenue rebound before dipping in.

Final Take

In a sector where tariffs are rewriting the rules, supply chain resilience and pricing discipline are kingmakers. Acushnet has mastered both, while Topgolf Callaway's struggles highlight the perils of delayed adaptation. For now, GOLF's combination of premium brand power and financial prudence makes it the better long-term play.

Investment Recommendation:
- Buy GOLF with a 12-month target of $80 (upside of 14% from current levels), contingent on positive Q2 earnings.
- Avoid MODG until it proves it can stabilize margins and reduce debt—or wait for a deeper correction to buy at a discount.

Stay tuned as both companies report Q2 results this summer—they'll be a litmus test for their strategies in this tariff-laden landscape.