Monday, June 12, 2006

Golfsmith sells out

I love Golfsmith. I'd say 99% of my golf purchases come from their stores. Being a ClubVantage member, I always get a fair shake when I need club repair done, and I always feel at home when I'm in what I call the tinkerers golf store.

So I was sad to see that Golfsmith has decided (or rather their bankers have) to go public. This week they plan on making $100million +/- by raising capital from public equity via the dreaded IPO.

I'm sad because they plan on using the money the old fashioned way: to retire debt, buy out a private consultant, expand stores, and increase e-commerce.

Excuse me while I yawn.

Golfsmith started out as a little club-making shop in NY. Things progressed, and the family moved the operations to where it now stands in Austin TX. They now have over 55 stores, and is considered the largest retail golf establishment in the world. Pretty good record for a private company, so why go public?

Simple: their appetite for growth has outstripped their cash. They (or rather their bankers) are looking to you to provide them with future cash flow.

Golfsmith should have stayed true to its roots by strictly focusing on being a club-makers shop. Where it's going (through more expansion) is putting it in the cross-hairs of every Tom-Dick-and Harry golf store that competes on price only. PGA Superstores are opening everywhere (one just opened next to the Golfsmith by can literally walk to it from there) and they are very nice. That company is run by former Home Depot guys, so failure is not an option.

It makes sense that Golfsmith (symbol: GOLF) would go public the week of the US Open...the height of golf season, as they would get no interest (which equals less raised money) if they filed in the winter.

So while it might be cool to say you own stock in Golfsmith, don't give your hard-earned money to them. Instead, invest the money in a golf'll get more satisfaction.
Thanks for reading. Keep it in the short-grass,

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