Q4 2023 Acushnet Holdings Corp Earnings Call

Participants

David Maher; President, Director & CEO; Acushnet Holdings Corp

Sean Sullivan; CFO & EVP; Acushnet Holdings Corp

Megan Alexander; Analyst; Morgan Stanley

Randy Konik; Analyst; Jefferies

Joe Altobello; Analyst; Raymond James

George Kelly; Analyst; Roth MKM

Presentation

Operator

Yes, hello, everyone, and welcome to the Acushnet Holdings Corp. 4Q 2023 earnings call and thank you for standing by. My name is Daisy, and I'll be coordinating this call today. (Operator Instructions)

Good morning, everyone. Thank you for joining us today for Acushnet Holdings Corp's fourth quarter and full year 2023 earnings conference call. Joining me this morning are David Maher, our President and Chief Executive Officer; and Sean Sullivan, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances Actual results may differ materially from these expectations.
For a list of factors that could cause actual results to differ, please see today's press release. The slides that accompany our presentation and our filings with the US Securities and Exchange Commission. Throughout this discussion, we will make reference to non-GAAP financial metrics, including items such as revenues at constant currency and adjusted EBITDA Explanations of how and why we use these metrics and reconciliations of these items to a GAAP basis can be found in the schedules and today's press release.
The slides that accompany this presentation and in our filings with the US Securities and Exchange Commission. Please also note that references throughout this presentation to year on year sales increases and decreases are on a constant currency basis, unless otherwise stated, as we feel this measurement best provides context as to the performance and trends of our business. And when referring to year-to-date or full year results or comparisons, we will refer to the 12 month period ended December 31st, 2023 and the comparable 12 month period.
With that, I'll turn the call over to David.

David Maher

Thanks, Sandra, and good morning, everyone. I am pleased to report on Acushnet to its 2023 results and our outlook for 2024. As you see here on slide 4 2023 net sales of $2.38 billion and adjusted EBITDA of $376 million represent growth of 6% and 11%, respectively. The Company also generated $372 million in operating cash flow for the year. These results are made possible thanks to the talented and dedicated Acushnet team growth was fueled by Titleist golf balls, which increased 13%, led by strong demand for our new Pro V1 models.
Golf ball sales increased in all regions with the U.S. and EMEA markets setting the pace. The continued strengthening of our golf ball supply chain and our team's ability to flex cast urethane production throughout the year were key contributors to these results.
Titleist golf ball usage across worldwide professional tours indexed at 73% last year and Titleist ball counts at the 2023 and CAD. one, men's and women's championships were 88% and 90%, respectively, reaffirming golfers trust in the quality, consistency and total game performance of Titleist. Titleist golf club sales of $659 million were up 10%, fueled by healthy gains in irons, Scotty Cameron putters and metals.
The Titleist golf club story is built upon our commitment to product innovation and custom fitting and similar to golf balls. Clubs benefited from continued supply chain optimization as our team had strong demand while achieving elevated quality and service targets. Our club business has great momentum and Titleist has been the most played driver iron and wedge at every PGA Tour event this year.
Turning to gear. Sales increased 7% with gains in all categories and steady demand for custom Gear Products growth was led by the US, Korea and EMEA regions. We talked on recent calls about excess footwear inventories in the channel, and I am pleased with how FootJoy has navigated the ensuing retail correction period. Footjoy finished the year down 2% as double-digit apparel gains helped to offset footwear declines.
Footjoy is unwavering commitment to performance, comfort and design innovation are the foundation for FDA's long-standing claim to the number one shoe in golf posted strong financial performance, supported ongoing investment across our businesses and accelerated capital returns with share repurchases and dividends totaling $332 million and $52 million, respectively, and furthering our commitment to return capital to shareholders, I am pleased to announce Acushnet as Directors have approved a 10% increase to our quarterly dividend to $0.215 per share and a $300 million increase to the Company's share repurchase authorization bringing this total authorization to $1 billion. These actions reflect the board's confidence in Acushnet's ability to execute and generate cash flow and their positive outlook towards the company's strong position within the healthy golf industry.
Now moving to slide 5, you see an overview of our regional results. Our U.S. business was especially robust with all reportable segments posting growth in the year. Emea sales were up 1%, yet golf balls and clubs were vibrant, up 9% and 7% respectively. Given macro concerns about the region where we grew 20% in 2022. We are pleased with golf's resilience across EMEA and especially the UK market, which continues to benefit from very strong tourist demand. As you see, sales in Japan were flat for the year with golf balls, again the highlight and up double digits.
Korea was down 2% with gains in Titleist balls clubs in gear more than offset by declines in FootJoy and Titleist apparel. And lastly, our rest of world sales increased a healthy 12% with every segment posting gains as we now look forward and plan for 2024. We are encouraged by strong golfer participation and enthusiasm for the game, including a US golfer base that grew for the sixth consecutive year and where the fastest growing cohorts are juniors and women's.
According to the National Golf Foundation, global rounds of play were vibrant in 2023, up about 2% and led by the US market, which increased 4% to more than 530 million rounds. Sales are up double digits since 2019 in almost every region with the US, Korea and UK, all growing by more than 20%. And the only down markets during this period are China and Southeast Asia. For context, the number of golf courses and rounds played annually in China are comparable to the golf profile here in the state of Massachusetts market fundamentals are strong. Trade partners are financially stable and channel inventories are seasonally in line. The past few years have seen expansive investment by golf courses and retailers seeking to improve their facilities and experiences to meet the evolving preferences of tomorrow's golfers.
As a result, it's a great time to be a golfer now looking forward at our segments and starting with golf balls, we successfully launched new AVX Tour Soft and TruFuel models in the first quarter. Initial response has been favorable in Sunbelt markets, and we are in good shape to support our global launch over the next two months as northern markets open up within Titleist golf clubs, we look to build upon our T Series iron momentum and at Energy with new Voq ESM. 10 wedges and Scotty Cameron Phantom putters.
We expect these new products and the expanded execution of our fitting strategies will drive our first half performance. Our gear business is well positioned for growth, both organic and from the recent inclusion of club glove effective at the start of this year. We have successfully integrated club glove into Acushnet and are committed to enhancing supply chain, B2B and digital platforms in 2024, then pave the way for accelerated investment in growth expectations for golf's leading travel brand and with Club clubs addition to the Acushnet portfolio, we have scaled back some of our Titleist branded travel gear offerings. However, even with this skew reduction still expect growth from Titleist gear in 2024.
Footjoy is launching a wide range of new products in the first half, led by new Pro SL X and Quantum golf shoes and several style updates to our leading premier franchise. Golfers will notice refinements to the FJ. apparel line and additions such as our performance-oriented thermal and tempo series, middle layers and a new golf fitness collection as we continue to build upon for choice, unmatched authenticity in the golf wearable space. And we're enthused about our opportunities to continue developing our shoes, performance, outerwear business and anticipate double digit growth in 2024, driven by our golf product lines in the U.S. and U.K. and measure growth within ski. In addition to the full assortment of new products we have scheduled for the first half.
Our positive outlook is also shaped by several new initiatives as we adapt and invest to position the Company for future success. First, our new Titleist golf ball and Milky wedge selection apps will supplement our in-person fitting efforts. We are enthused about the opportunity to connect with a wider audience of golfers to help them make the best equipment choices for their games. In the coming months, we will mobilize for Choice proprietary new fit lab performance footwear system to help golfers select the best performing, best fitting and most comfortable golf footwear.
We are confident that all golfers can benefit from this innovative and value added fitting experience and are prepared to invest behind this initiative, similar to our comprehensive ball and club fitting programs. Our investment in technology will also support trade partners as we implement improved B-to-B capabilities and empower their use of Acushnet's proprietary online pro shop to support their own DTC engagements with emphasis on club logo interment opportunities. In 2024, we will begin operating a new state-of-the-art golf ball customization technology that our team has been developing for the past few years.
This new automation will expand our throughput capabilities, resulting in greater efficiencies and faster lead times for custom imprinted, Titleist golf balls. Earlier this year, we started fulfilling orders from our new 500,000 square-foot distribution and custom embroidery center located in nearby Lakeville, Massachusetts.
This facility is representative of the company's commitment to providing leading service and the highest quality distribution experience. Initially, we will fulfill wholesale demand for FJ. footwear, Titleist gear and club love and over time, expect to support D to C and additional product groups from this new facility. We also recently expanded our apparel customization capabilities in the UK, bringing much of this work in house to improve quality, reduce lead times and meet growing demand for embroidered FJ. and choose products in this call fridge region.
And lastly, within golf footwear, we continue to progress towards our objective of establishing a more resilient and geographically diverse supply chain. And this year expect to produce roughly half our footwear in Vietnam as we leverage the expanded capabilities of our long-time JV footwear production partner to supplement our China factory. We are confident these investments in golfer connection technology and supply chain will benefit golfers and trade partners while positioning the Company for sustaining success.
In summary, we are optimistic about the structural health of the golf industry, the great momentum behind our Titleist FootJoy shoes and club club brands and the resilience and engagement of the game's dedicated golfer.
Thanks for your attention this morning. I will now pass the call over to Sean.

Sean Sullivan

Thank you, David, and good morning, everyone. Turning to the financial results for the quarter and the full year.
On slide 8, in line with expectations. Our fourth quarter net sales were down 8.6% when compared to 2022, with lower net sales across all reportable segments, except for golf balls, adjusted EBITDA was a loss of $1.5 million, approximately $27 million lower than Q4 of last year. The net sales decline in the quarter was primarily due to golf clubs and FootJoy, which were down 17% and 14%, respectively. Golf balls partially offset these declines with a 5% increase on higher sales volumes and average selling prices of our Pro V1 family of golf balls.
In golf clubs, net sales were down as higher sales volumes of our newly introduced T-Series irons were more than offset by lower sales volumes of TSR drivers and fairways, which were launched in Q3 of 2022. Lower footwear sales volumes in the quarter drove the decrease in FootJoy net sales. As David highlighted, for the full year 2023, net sales and adjusted EBITDA increased 6.2% and 11.1%, respectively. Driven by increased net sales across all reportable segments, except for FootJoy.
The net sales increase for the full year was primarily driven by higher sales volumes in golf balls, golf clubs and Titleist gear up 13.5%, 9.5% and 7% respectively. Footjoy was down 2.1% compared to 2022 on lower sales volumes mainly in footwear, partially offset by higher apparel volumes, which increased by a double digit percentage sales volumes for products that are not allocated to one of our four reportable segments. Also decreased versus prior year.
Turning to results by region. In the fourth quarter, the U.S. and Japan were down mainly due to lower net sales. Comparing to the prior year launch of TSR drivers and fairways previously mentioned, as well as lower footwear sales volumes in the U.S. full year growth was led by the U.S. and rest of world with gains across all reportable segments and those regions.
Gross profit in the quarter was $210 million, down 6.2% compared to 2022, primarily due to decreased sales volumes in golf clubs and FootJoy gross margin of 50.8% was up 80 basis points, largely due to favorable manufacturing costs in golf balls and lower inbound freight costs. Gross profit for the full year was $1.3 billion, up 6.2%, primarily resulting from increased volumes and average selling prices in golf balls, golf clubs and Titleist gear as well as lower inbound freight across all reportable segments and lower royalty expense in golf clubs.
Lower sales volumes in FootJoy and products not allocated to one of our four reportable segments partially offset the increase. Gross margin of 52.6% was up 70 basis points, mainly due to lower inbound freight costs. Sg&a expense of $213 million in the quarter increased $17 million or 8.8% across all operating expense categories, mainly due to higher employee related expenses, partially offset by lower IT expenses R&D expense of $18 million was also up mainly due to higher employee related expenses.
Sg&a expense of $888 million for the full year increased $55 million or 6.6% from 2022, primarily due to higher advertising and promotional expenses across all reportable segments to support new product launches and higher employee-related expenses and selling and admin, partially offset by lower retail commission expense in Korea and lower IT related expenses. We also incurred about $12 million of one-time charges in 2023 of which $10 million related to the optimization of our distribution and custom fulfillment operations.
R & D expense of $65 million was up to support new product introductions. Our increase in intangible amortization was due to the acquisition of trademarks related to Titleist golf clubs and golf gear in the fourth quarter of 2022 and first quarter of 2023, respectively. Interest expense was up $6 million in the quarter and $28 million for the full year due to an increase in borrowings and interest rates with a little more than half the increase coming from higher debt. Our effective tax rate in Q4 was 26.9%, and our full year effective tax rate was 17.8%, down from 20.9% last year. Decreases in both periods were primarily driven by a shift in our mix of jurisdictional earnings.
Moving to our balance sheet and cash flow highlights on Slide 9. Our balance sheet and cash flow positions continue to be very strong, allowing us to continue to execute our capital allocation strategy with our ongoing investments in the business and return of capital to shareholders being our highest priorities.
Our net leverage ratio at the end of 2023 was 1.9x. As expected, inventories increased sequentially from Q3 in support of 2024 product launches, but declined from year end 2022. We are comfortable with our inventory quality and net position given the current state of demand and the supply chain as we move into 2024.
Capital expenditures for 2023 were in line with expectations at $75 million and are projected to reach approximately $85 million in 2024. As David noted, in 2023, we returned roughly $384 million to shareholders with $332 million in share repurchases and $52 million in cash dividends. Quarterly dividend announced today of $0.215 per share will be payable on March 22nd to shareholders of record on March 8th, 2024. This increase in our quarterly dividend is the seventh increase since the dividend was implemented in 2017, which highlights our continuing confidence in the business outlook and cash flow generation.
During the fourth quarter, we repurchased approximately 2.3 million shares of our common stock for $127 million, bringing our full year repurchases to approximately 6.5 million shares for a total of $332 million. As mentioned on February 15th, our Board of Directors increased the share repurchase authorization by an additional $300 million, bringing the total authorization to $1 billion since the share repurchase program was established in 2018 as a result, as of February 23rd, 2024, the remaining share repurchase authorization was $359 million, and the number of shares outstanding was $63.5 million.
Turning to our full year 2024 outlook on Slide 10. Full year revenue is projected to be between $2.45 billion and $2.5 billion, up 4.3% at the midpoint on a constant currency basis compared to 2023, with growth across all reportable segments, as well as growth, both domestically and internationally, our full year adjusted EBITDA is expected to be between $385 and $405 million at the midpoint. Our adjusted EBITDA growth would be 5% with an EBITDA margin of approximately 16% as we continue to invest in the business to drive sustainable long-term growth.
Many initiatives underway that will continue into 2024, including expanding our distribution and customization capabilities, increasing our fitting network for both balls and clubs and technology investments to support B to B D. two c. and enterprise systems as a result, full year SG&A growth will be a bit higher than our sales growth projections.
And as we have mentioned, we have been diversifying our supply chain and footwear as we shift incremental production into Vietnam. As a result of these initiatives, we expect to incur transformation and restructuring charges in 2024. We will provide more information on these charges on our first quarter call due to the investments and operating expenses in support of the strategic initiatives highlighted the quarterly cadence of our financial results in 2024 will differ from historical patterns.
With respect to the first half of 2024, we expect net sales to be up low single digits compared to first half 2023, with growth coming from Titleist golf balls, golf clubs and golf gear and first half EBITDA to be about flat to first half of 2023 due to increased operating expenses and to a lesser degree the unfavorable impact of changes in foreign currency exchange rates.
We are also forecasting a modest impact in freight costs in the first half due to the situation in the Red Sea from a quarterly standpoint for the first half of 2024. As is typically the case, we expect net sales to be more weighted to the second quarter, while EBITDA will be even further weighted to Q2 as the first quarter will be burdened by continuing (technical difficulty)Phase three and begin the year with a positive outlook for 2024. Given the state of the industry, our consumer and our leading product portfolio, all while remaining focused on executing our strategic priorities.
With that, I will now turn the call over to Sondra for Q&A.

Question and Answer Session

Thank Sam Daisy. Could we now open up the lines for questions? Of course?

Operator

(Operator Instructions) Megan Alexander, Morgan Stanley.

Megan Alexander

Okay. Hi. Good morning. Thanks so much. I wanted to start on the sales outlook. I think I heard you're expecting growth in all segments. Maybe can you give some color on what you're assuming for core equipment growth within that 3% to 5% guide. And then related to that, you've talked about some changes you've made specifically on your ball products, then the guide in terms of price first unit as well?

David Maher

Yes. Megan, I'm going to start with your second question about the ball product line. So, just to walk it back odd years, we launch probably ones and even years, we generally launch the remainder of the product line, as is the case this year. And for the most part, they're not equal weighted and probably one launch will typically be larger than what we would see an even year. We did say (technical difficulty)we have in our golf ball business.
So you'll see you'll see new models in TruFuel and these have already been introduced and launched in the market and velocity and new AVX Tour Soft so that we've got an exciting lineup of new golf balls made the comment that they're off largely Sun Belt launch in the first part of the quarter. But by March April, we'll have our global launch underway.
And then and then in turn in terms of guidance, for for the year? I would say Sean was fairly prescriptive in terms of first half and quarters. But as it relates to segments, I'll just I'll reiterate we do we do anticipate growth across segments. The one, the one difference would be within a year where you'll see the additive component of club glove, which was not part of our results last year, but again, we're confident at this stage to be leading and guiding towards low single across the board for for each of the segments, again, outlier, being the gear business.

Megan Alexander

Okay. Great. That's helpful. And then maybe just taking a step back bigger picture. I know the business historically grew at, call it a 1% to 2% annual category prior to COVID. You're now guiding sales 3% to 5% this year, and we may arguably be in the first kind of normal year post COVID supplies seemingly in a good spot. So, I guess, how do you think about whether the industry and business has structurally changed? And does this give you confidence that maybe this 3% to 5% is the new normal run rate Turning to business?

David Maher

Yes, certainly you look at where golf is today versus where it was before COVID. You know, the baseline would be number of golfers, right? We've seen that number increase six years in a row. So that's certainly a positive. And I'm not going to yet prognosticate on what kind of what is going to happen in 2024. But we feel really good about the energy and momentum around participation in round numbers that looks like 950 or so million rounds in 2023 as compared to call it, 800 million rounds in 2019, so that that 150 million round number additional was true in '21 and '22 and '23 votes.
So there's been a real step-up in our industry. And you're right, I would say, I would say supply chains have normalized probably in the back half of 2023 and certainly our guide reflects our enthusiasm and confidence around a dedicated golfer, right? We operate in a bit of a subset of the total golf marketplace, but they're responsible for a whole lot of purchasing activity on our confidence in the structural health of the marketplace. Our retailers are in really good shape. Golf courses are investing in their products to be more relevant and appealing to tomorrow's golfer and then certainly our own internal momentum with our with our products and brands.
So in terms of how we're thinking long term, we certainly are assessing the impacts of what has been a step-up in our industry. And I think by virtue of our of our guide for 2024, we feel a bit more positive about the outlook today than we may have five plus years ago.

Sean Sullivan

And Meghan, maybe I'd just add to that again to punctuate in the club business, for example, I talked about the investments we're making in the fitting network. So I think as we expand the fit fitting network, we think the club business has our probably outsized growth relative potentially to the market as we invest in that area for dedicated golfers.
David talked about obviously clubs love and integrating that into our distribution network. And certainly as we look at 24, the hope is that the footwear market will normalize as we get into the back half of the year. So I think all of those are the puts against our outlook, at least for 2024.

Megan Alexander

Great. Thank you so much.

Thanks, Maeghan. Operator, next question, of course.

Operator

Randy Konik, Jefferies.

Randy Konik

Great. Thanks, David. I've asked this question before, but then when you have your conversations across many on our golf course operators, you speak to M&A, give us some perspective on what those conversations are like in terms of how they feel about their business, the outlook, et cetera, how are they?(technical difficulty)

David Maher

We're certainly we connect with hundreds, if not thousands of golf professionals there. Let's face it. They're looking at they're looking at the impacts of rounds up in the US 20, some odd percent, and they've seen an increase in their play mid-week weekends were always fairly robust. They've seen new participants there. The number of lessons has increased. The number of juniors, the number of women has increased. So from where they sit they're busy and they're optimistic about the state of the game and the energy and momentum behind the game.
One reality will always face is weather, and that's an unavoidable influence on the golf business, but even even through some tough weather starts last year to see the U.S. market finished up 20, some odd million rounds up 4% off the prior year and even ahead of '21 was really impressive. So there's a general level of enthusiasm towards just an increase in participation. We've said this it puts a lot of pressure on the supply side of game and that many, many private clubs are full and there a long wait list and that's a reality.
The game is contending with on the flip side, some 75% of play and golf, is it public facilities, they're doing real well. Again, their challenge and their frustration maybe is moments where demand exceeds supply. So so they would all say, hey, those are nice problems to have, but those are some of the realities they're dealing with. But generally speaking, again, I point to the to the PGA show there's a general level of optimism about state of the game, as you would expect coming off of a year like we had in 2023.

Randy Konik

Super-helpful, my I guess, my last question would be I think it's also asked about this in the past, the concept of fittings and customization and how the industry is moving more and more towards that kind of model and maybe give us some perspective of where we are, where we've come from and how that's kind of changed in terms of you changed your, let's say, ASP.s conversion, working capital improvements potentially in the business the way you're running your business, but then the whole industry is being run.
It just seems like a bigger opportunity for you and others. And there's only a few others are giving us a oligopoly or consolidating the industry that it's just a better run industry now with a lot more stability in pricing and margin. So maybe kind of comment on what you think they're on those thoughts.

David Maher

Yes. So high-level, Randy, I'm going to agree with all your points, but I'll dig in on a couple of observations and how they play out across the industry. So we've been we've been dedicated to custom fitting for 30 some odd years, and we continue to build out and refine our fitting efforts. And as Shawn said, and we continue to invest more and more and fitting, it just becomes a clear a place for us to invest money because it results in all the benefits you described. But most importantly, we know it's the best way for golfers to experience and ultimately select golf clubs.
Years ago, fitting was isolated to outdoors. Now fitting is happening almost everywhere with the advent of launch technologies and indoor simulators. There's a whole lot of education happening on the fitting side. So upfitting continues to grow its most evolved and advanced in the US and Europe. I've said this in the past, it's got a long way to go in Japan and Korea, but we're moving we're moving forward. And one of the benefits that I think fitting lends itself to is is just the reality that comes at end of product life cycles. You have less product less stock product in the market.
Therefore, you're discounting less stock product. And as an example, right now, you've seen you're seeing a lot of new driver launches from our competitors in the first quarter. And typically when that happens, you'll see a good amount of sell-off of prior generation. And while that's happening, it's not happening to the degree we've seen in prior years and again, I think that's a positive ancillary benefit of because so much of the business nowadays is happening through custom fitting.
So it's been a great transformation. You've also got new channels emerging, right? You've got indoor fitters, teachers emerging because fitting has become so prevalent across the industry. But again, as it as it relates to working capital as it relates to margins as it relates to the overall golfer experience, all positives. And I think it's a it's a trend I made the point we're 30 years down the road here, and we keep building it out. And I would imagine that trend will continue and it's compelling us to keep investing in custom fitting, which, again, if nothing else gives you confidence, it gives you a sense for our confidence about the opportunity moving forward.

Randy Konik

Very helpful. Thanks.

David Maher

Thanks, Randy.

Operator, next question, please.

Operator

[Mike tool] from Truist Securities. Mike, please go ahead. Your line is open.

Hey, good morning, everyone. And maybe any just as it pertains to guidance and more specifically gross margin, as we typically think about a non-pro V. one year in even years. Gross margin is typically down year over year. But if I'm doing my math correctly, based on your guidance, I think it would imply gross margin of flat to maybe up slightly. So maybe I guess, is that correct? And then maybe walk us through some of the puts and takes around gross margin as you think about it in the year ahead.

David Maher

Sure, Michael, happy to I think that we're not guiding specifically to margin. I don't think your assumptions, though are far off. I think the biggest biggest item probably I would call out is freight. We've seen freight normalize, so that will be less of a tailwind, I guess than it was in '23 versus '22 so we think that normalizes, we think that we get some more normalization in the supply chain. I think I've talked about raw materials and we have pretty good visibility in terms of what our costs are by-products. So it's really it's really a freight conversation. And again, I don't think your assumption is it's too far off.

Okay, great. That's helpful. And then maybe if we just look at the range of guidance and I know the rate in the range really isn't too wide, but maybe help us understand what are the assumptions at the top end of that guidance, what are the your assumptions at the bottom end of that guide?

David Maher

Yes, I think I think Michael, certainly will it's an appropriate guide for our business, certainly this time of year, right? We're late February. And so much of the golf season is in front of us with the majority of rounds and fittings happening really in Q2 and Q3. There is a wide variety of puts and takes. I would say, unlike past years, there's more supply chain certainty this year than we've experienced in the last couple of years.
Sean mentioned the footwear category. We expect to stabilize here in the mid part of the year. So there's more marketplace clarity and certainty. And the wildcard is always as it always is this time of year Q. two Q. three, whether participation, et cetera. We like the way we're trending. But I think I think you get a better you get a better insight and answer from us, maybe maybe on the on a subsequent call.

Okay, great. Thanks.

David Maher

Thanks, Mike.

Operator, next question, please.

Operator

Joe Altobello, Raymond James.

Joe Altobello

Thanks. Hey, guys. Good morning. Um, just first question a little bit of a housekeeping question here, but what's the contribution from club club that you're assuming in your guidance?

Sean Sullivan

Yes, Joe, I think we have said it's less than $20 million in sales. It's EBITDA accretive. But again, not material.

Joe Altobello

Okay. Perfect. And then in terms of the new golfers that you've seen enter the sport over the last, call it, six years on how they differ from typical golfers in respect to how often they trade up in terms of their clubs where they buy their clubs? Are they more inclined for fittings, et cetera?

David Maher

Yes, I think I think it's some. It's a question we have been asked often, and we're certainly trying to understand understand ourselves. I'll attach it to Randy's earlier question. As it relates to fittings, there's just a there's an inertia and energy around fittings that's hard to avoid. So where yesterday years, beginner golfer may not have been as inclined to get fit. That's not the case today. You look at you look at rounds, you look at participation that there's an avid golfer base out there and you know our story, we're focused on the Dedicated. They we said then and we say it now they make up 15 or so percent of the golfers.
They play 40% of the round and responsible for about 70% of the spend that we still think that's the case. But I would say as it relates to these new golfers, we sort of break them out into into two parts. The true new to the game offers and the latent golfers, those who played it at previous points, took some time off and now jump back into the game. So clearly, they come in with a bit more experience and a bit more understanding, maybe a step closer to becoming a dedicated player.
But when you look at overall and you look at channel activity, you look at overall sell-through. You see clearly this golfer has a preference for performance equipment and you see that in strong ASPs in balls and drivers and in every category, quite frankly, And further to that and they go hand-in-hand, they subscribe to the benefits of fitting. So we like what we see, it's a moving target, but we certainly like what we see in this in these in these changing times.

Joe Altobello

Very helpful, Dave. And maybe your lastly, your thoughts on the January rounds played. I know it's a small month, and I know there was some weather in there, but just curious what you thought what you're thinking that.

David Maher

So just for context, January's about 5% of the U.S. total, it's probably I don't know, 2% 3% of the global total come down, obviously. And I'll answer that question, Joe, on a three month. So you look at you look at November and this is U.S. up I think 8%, December, up 24% and January down 16% or 17%. And when I look at January really, I look at three markets. I look at I look at California, Arizona and Florida, California, Arizona were up.
They had some favorable weather comps, even though they had a lot of rain and Florida was down. So net-net, I think it's more than anything weather story and where you had decent weather, you're going to be fine and where you have where you have a cold and rain, you're going to take the hit. So I'm going to probably give mother Mother Nature a lot of credit for what we saw in January.

Joe Altobello

Okay, great. Thank you.

Thanks, Joe. Operator, next question, please.

Operator

George Kelly, Roth MKM.

George Kelly

Thanks for taking my questions and congrats on another strong quarter from first for you on the increased authorization, the $300 million buyback that you announced this morning, I'm curious, should we anticipate a similar kind of cadence to to your fiscal year '24 buybacks to what you did in '23? Or do you expect to slow it down? Like any kind of a color there would be helpful.

David Maher

Sure. Sure, George. So as I've talked about in the past, I think we're going to be guided by overall net leverage, right? So I've talked about less than two and a quarter times for the business, you can appreciate the seasonality and the guy that I really was trying to be prescriptive about what to expect in the first half of the year and so you can imagine there'll be some variability in leverage first half versus second half.
So I would use the leverage as one indicator of how the pace of share repurchases may or may not on proceed in 2024. But so again, it's the capital allocation strategy here. I think our past practice has been well articulated. We've got significant investments. We're making in the business for real long-term benefit. I'm obviously very pleased with the dividend increase. And yes, we'll continue to be opportunistic with the share repurchase at the end of the day, making sure we've got a strong balance sheet and the appropriate leverage profile. So that's how we think about it for '24.

George Kelly

Understood, thanks. And then second question in your prepared remarks, you talked about some CapEx plans and efforts in car customization in the fall and apparel businesses. And so I'm just curious how big are those businesses and what does the growth path look like. I'm just curious if you could give a little more context around the investments you're making and the opportunity you see in customization in the volatile cost of outside of the equipment business?

David Maher

Yes, George, I'll start and then Chano shall jump in. But in terms of those businesses, right, I did make the point that FootJoy as an example, while a tough year for footwear, FootJoy apparel was up double digits. So we like we like the growth we're getting out of at the FootJoy apparel business. I would add to that.
So much of what we do in the shoes line, particularly in the US in the UK is customized. So we're seeing we're seeing nice growth in that business, a lot of it, as you would expect, is on courseware. Customer logos are very important. So clearly, we're compelled to invest to increase our capacity. And I also made the point where it part of it's a function of moving from 3PL where we used to outsource to bring it in-house. We think it brings just better control, better quality at execution and more more cost effective.
So we like we like the space part two of that question is as it relates to golf balls, and that's a bun automation capability we've been working on for a few years as part of our long-term $120 million of capital campaign. We're really excited about it. It's a quality play. It's a throughput efficiency play it's inevitably going to be a cost effectiveness play. And just to contextualize our ball business, roughly one in four dozens are decorated in some way, either with a corporate logo or a club logo or a golfer personalization. So a big meaningful part of our ball business.

Sean Sullivan

And George, just to clarify, I guess what I was highlighting in the script was we're going to see about $85 million of CapEx. Obviously very much focused on the ball and club segments and franchises to continue to support the growth. I talked about some of the technology investments, but specifically distribution and customization was about taking ownership and control of the quality lead times and delivery of our product.
I think David talked about the specific segments and products that were within this Massachusetts distribution and customization facility, primarily FootJoy and gear. So that those were those were really the comments in my script that I was highlighting.

David Maher

George The final point I'll make is we're a lot bigger than we were three, four, five years ago. So our our historical distribution methods have been pressured. So this is as much a commentary on building a distribution network for the future, recognizing it that our past infrastructure was taxed to the point where we had to make some meaningful changes.

George Kelly

Okay. That was helpful. Thank you

Thanks, George. Operator, next question.

Operator

[Ken], KeyBanc Capital Markets.

Thanks for taking my questions. Maybe first, if you could give just an update on the competitive environment and channel health and footwear and maybe the unlock as you see it from FootJoy foot lab and then second, any color on the differences in the markets outside of the US, both from an industry and strength of sport perspective, that's kind of baked into the guide would be helpful as well. Thanks.

David Maher

Yes, you know, I'm so specific to footwear, I'll walk it back a bit. And we saw that we saw that inventory globally spike really in Q2 last year and then we saw it retreat in Q3 and Q4. We like where it's trending. We think we're in the back half of a correction, maybe 60%, 70% down field on the collection, but we're in a good place in it. If you see a situation like that and it corrects itself in less than a year, we feel pretty good about it.
So as we've guided, we think we think we work our way through it through Q2 and then return to sort of a more normal healthy cadence within within footwear and should return to more normalized growth. And you said it, part of it is a response to the aftereffects of COVID where there was a time when the marketplace had an insatiable appetite for footwear and then demand normalize the other part of it, as you saw a lot of new competitive entries into the marketplace. I am pleased I am pleased with in particular, our FootJoy share and premium positioning has held up during this time.
And I think that's commentary on a lot of the great products they brought to market, particularly on the premier franchise. And I think we continue to build upon that with SLX and traditions and some of our some of our newer footwear models. So again, I think I think we're in the back the back half of that production and after after two quarters of inventory reduction. And when I say that I'm speaking to global inventory at retail and the final point I'll make on that is we're pleased with our inventory in house. It's down quite a bit from a year ago. So we think we're healthy and nimble and agile. So we like where that positions us.
In terms of your second question, how we feel about markets around the world, I'll start with U.S. market was clearly the strongest in 2023, and we don't see that changing in 2024. There's just a there's a vibrancy in the US market that I think everybody is in tune with as we look around the Board, I'm not sure any one market jumps out, right? We're projecting growth in EMEA and Korea and rest of world. So there's not a market that stands out, I do like to call out Korea just because it's such a vibrant golf marketplace. And I've said before on the the average course in Korea, does about 70,000 rounds a year, which is which is extraordinary, just a strong demand, vibrant golf marketplace.
And then the only other comment I'd add is EMEA, and we've all been being cautious and careful about EMEA, certainly in 2023, whether it's inflation or energy costs or the war, I thought it held up pretty well last year and the outlier, if you will, would be the UK where golf remains vibrant and in particular, Gulf tourism is really at terrific levels. So that's that's a high level of our of our perspective as to key regions around the world.

Thank you.
Thanks, Noah.

David Maher

Okay. Thanks, everybody. As always, we certainly appreciate your time this morning and your interest in Acushnet. Hope you all have a great spring and we look forward to talking to you again on our next call.

Operator

Thank you, everyone, for joining today. You may now disconnect your lines and have a lovely day.