All parties agree it is a good idea. Better safe than sorry, even though such decisions never are easy. When the LPGA announced late Sunday it has cancelled two more events in Asia because of the coronavirus, there was obvious disappointment, especially from players who front-loaded their schedules in the hopes of vaulting up the world rankings. This is, after all, an Olympic year and the biennial UL International Crown is on this summer’s schedule as well. Those on the cusp of qualifying want as many starts as possible to increase their chances of making the teams. But not one of them said they think cancelling is a bad idea.
The release that went out at 8:30 Sunday evening summed up the situation pretty well.
“Due to the continued health concerns and recent advisories in some Asian countries that large-scale events should be cancelled or postponed as a result of the coronavirus, the LPGA and its partners have made the decision to cancel the 2020 Honda LPGA Thailand, which was scheduled to take place Feb. 20-23 in Pattaya, Thailand, and the 2020 HSBC Women’s World Championship, which was scheduled to take place Feb. 27-March 1 in Singapore,” the statement read.
“It is always a difficult decision to cancel events and the LPGA greatly appreciates the understanding and all the efforts made by our title sponsors (Honda and HSBC) as well as IMG to host incredible events for our players. The health and safety of our players, fans and everyone working on the event is always our highest priority. While we are disappointed that these tournaments will not take place this season, we look forward to returning to Asia soon.”
The vast majority of coronavirus infections and deaths are in China, and the nature of the virus and its impact are still largely a mystery. At the moment the “R-naught,” which is the average number of people infected by a single carrier, is estimated at 2.2. But statistics out of China are notorious for being unverifiable.
On Wednesday, the PGA Tour Series-China also announced postponements for events in Bintan, Indonesia, and Phuket, Thailand, while also postponing the first four tournaments of its regular season.
“We watched and scrutinized the situation closely, and we did not make this decision lightly,” PGA Tour Series-China executive director Greg Carlson said in a statement. “This is a major international health issue, and we will do everything possible to ensure the safety and well-being of our players and everybody else associated with these two tournaments.”
Meanwhile, medical experts continue in efforts to define the potential extent of the danger.
“The rapid acceleration of cases is of concern,” said Dr. Michael Ryan, executive director of the World Health Organization’s emergencies program, during a recent news conference.
That’s one of the reasons organizations like the LPGA and the R&A, which canceled the Women’s Asia-Amateur Pacific, are taking no chances, even though Thailand had only 33 confirmed cases of the virus as of Wednesday and Singapore had 47.
Other areas of golf are being impacted as well. Chip Brewer, chief executive officer of Callaway Golf, addressed the matter on the company’s quarterly investor call this past Monday.
“As we work through this challenging situation, our thoughts and prayers are with the people of China, including our employees, customers and their families in that region, as well as those affected by the virus globally.” – Chip Brewer
“We’re projecting market conditions to be flat to slightly up on a global basis (in the coming quarter) and we expect revenues to grow faster than the market at approximately 4 percent,” he said. “Our guidance here reflects our best estimate of the impact of the coronavirus. Needless to say, this situation is very uncertain right now, and we’re still assessing the potential impact and there’s a lot we just can’t know yet.
“We believe it will certainly have an impact on our supply chain, near-term demand for our products in China, as well as potential demand in the markets outside of China, particularly neighboring markets. Given the lack of visibility, we’re really guessing on the financial impact at this point.
“However, I can confirm we have adjusted our forecast down over the last week or so by approximately $25 million. … This estimate assumes our suppliers’ factories get up and running slower than normal but ramp up to some sense of normalcy by the end of the month, and the consumer demand in China returns to some normalcy by the end of March. Across all of our businesses, we believe we’re well-positioned comparatively to manage through this.
“As we work through this challenging situation, our thoughts and prayers are with the people of China, including our employees, customers and their families in that region, as well as those affected by the virus globally. We hope and pray for a speedy resolution. We also believe in the resilience of the Chinese people and we retain our optimistic view on the value and importance of this market over the medium to long-term.”
More than 1,000 deaths have been confirmed in China from the virus. Some experts are concerned that the number could be far greater.
Golf seems trivial in the midst of such a catastrophe. But there are impacts to the game and to the business that could extend well beyond the lifespan of the virus.
There also are mitigating factors that will shield bottom-line interests to a degree, according to investment analyst Casey Alexander, who covers publicly traded golf entities for Compass Point Research and Trading.
“Golf companies caught a huge break in terms of timing,” he said. “As a rule, golf equipment companies build massive amounts of inventory in the fourth quarter. So, the vast majority of inventory for the first half of the year was already built. If this had happened in August, we might be having a different conversation.
Unlike a decade ago, when most golf-club components were manufactured in China, shaft companies have diversified into countries such as Vietnam and Malaysia and golf balls are mostly made in North America.
“But also, because of the tariffs, several golf equipment companies, especially the public ones, have already been diversifying their supply chains away from China. The expectation was that by the end of the year, they would have diversified almost their entire supply chain away from China. This is only going to accelerate that effort.
“So, because of two forms of what I call ‘unintended consequences of fortuities,’ this is not nearly as bad as it could be.”
Unlike a decade ago, when most golf-club components were manufactured in China, shaft companies have diversified into countries such as Vietnam and Malaysia and golf balls are mostly made in North America. And despite the Callaway estimates, the golf industry remains in a decent place despite this outbreak. That is reflected in the current price of equipment throughout all retail markets.
Usually, no matter how much gasoline is in inventory, one oil fire in Saudi Arabia sends the price per gallon skyrocketing. Not so with golf clubs. If anything, according to Alexander, prices may have dropped in recent weeks.
“I’ve seen some pricing coming down,” he said. “I heard from some people that (one company) was up to about eight months inventory in the field, which is more than is comfortable. That’s the first time in a while that I’ve heard about too much inventory in anything causing a price decline. You just haven’t seen the discounting in three or four years now as companies have done a better job of managing their inventories.”
As for the coronavirus and its worldwide impact on business, Alexander admitted, “It’s going to be a part of the conversation for some time.”