Covid-19 pandemic derails Japanese golf manufacturer Honma’s business plan even as second-half sales outlook improves

Eric Ng
·4-min read

Honma Golf, a Japanese premium golf club manufacturer backed by Chinese entrepreneur Liu Jianguo and Thailand’s biggest conglomerate, said the coronavirus pandemic will derail its business plan after lockdowns and travel curbs hit sales.

The Hong Kong-listed firm expects to take a year longer than expected to achieve its target of doubling sales by the financial year ending March 2022, chief financial officer Bian Weiwen said. Changes to its product lines and higher costs to develop new markets also hurt its bottom line.

“Our plan was to sharpen our focus on the premium performance products segment, grow our non-golf club business and expand our market share in the US,” she said in an interview with the South China Morning Post. “The pandemic will delay [our targets] by a year.”

Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.

Under its three-year business strategy, Honma aimed to increase sales to US$500 million by March 2022 from US$270 million in 2019 and restore its gross profit margin to 20 per cent. It was also banking on growing its non-golf business such as golf accessories and apparels to 40 per cent from 10 per cent of sales.

Instead, the pandemic has slammed many Asian and western nations Honma was counting on for revival. More than half of the respondents in a GolfNow survey of some 300 North American golf club operators spent the spring and summer without their second-biggest asset, the clubhouse, while almost 70 per cent had reduced F&B operations, according to a report published this month.

Honma’s stock has declined about 12 per cent this year. Photo: Facebook
Honma’s stock has declined about 12 per cent this year. Photo: Facebook

Even so, the survey showed more than 81 percent of facilities reported rounds increased year to date (through September), including 36 percent where revenue was up more than 25 percent during the peak summer season. Honma expects the industry to gradually return to new norm, following a steady and visible increase in the sport, and rounds played in most of its active markets, according to its November 27 report to shareholders.

Bangkok-based Charoen Pokphand Group, controlled by Thailand’s richest tycoon Dhanin Chearavanont, doubled its stake in Honma to just under 30 per cent at HK$6.40 per share in early March, a 42 per cent premium to the prevailing market price. Japanese trading house Itochu Corp bought a 6.2 per cent stake in 2018.

Honma last traded at HK$4.83 on Friday for a 1.7 per cent gain. The stock has, however, declined about 12 per cent this year.

The golf club maker reported a net loss of US$7.8 million in the six months to September 30, surpassing US$7.1 million setback for the 12 months ended March 31. Sales in Japan slumped 60 per cent from a year earlier as the company shut its retail outlets between March and May due to the pandemic.

Honma counts Chinese entrepreneur Liu Jianguo among its backers. Photo: Weibo
Honma counts Chinese entrepreneur Liu Jianguo among its backers. Photo: Weibo

Bian said despite the loss, the interim results offered some encouragement in its core markets. Sales in its biggest market, Japan, should recover strongly to make up as much as 80 per cent of last year’s performance.

Its second-biggest market, South Korea, posted a 17 per cent year-on-year gain while China logged 52 per cent more sales. Both markets were helped by new product launches before the onset of the first wave of the pandemic in the year’s first quarter, she said.

“The golf demographics of South Korea is very strong,” Bian said. “Although it has just 51 million people, it has over 6 million golfers, whereas there are only one million golfers among 1.4 billion people in China.”

Under travel restrictions amid the pandemic, Honma’s target customers spent more of their leisure time in their own countries, Bian said.

In China, the company is giving its golf apparels business a big push, with plans to increase the number of shops to 50 by end-March, versus 37 at the end of September. Under its three-year plan, Honma is also investing heavily in the US to grow its market share to as much as 10 per cent from less than 1 per cent now.

“We have seen an increasing number of young apparel customers in China in their 20s, especially women, who aspire to become golf players and like to buy the clothes as fashion,” she said.

More from South China Morning Post:

This article Covid-19 pandemic derails Japanese golf manufacturer Honma’s business plan even as second-half sales outlook improves first appeared on South China Morning Post

For the latest news from the South China Morning Post download our mobile app. Copyright 2020.