Ashworth, Inc.

2791 Loker Avenue West
Carlsbad, California 92008
U.S.A.
(760) 438-6610
(800) 627-4274
Fax: (760) 438-6657
Web site: http://www.ashworthinc.com

Public Company
Incorporated: 1987 as Charter Golf, Inc.
Employees: 574
Sales: $89.1 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: ASHW
SICs: 2321 Men’s & Boy’s Shirts; 2325 Men’s & Boy’s Trousers & Slacks; 2329 Men’s & Boy’s Clothing

Ashworth, Inc. is a leading producer of golf apparel and sportswear. An innovative company, Ashworth revolutionized the golf apparel industry in both fashion and function. The company changed golf style from polyester and hard collars to cotton and twill. Originally producing only men’s fashions, Ashworth has grown to design comfortable styles for women and young men. Its variety of products is distributed worldwide at country clubs, pro shops, and upscale department and specialty stores.

Starting Out As Charter Golf, Inc. in 1987

Ashworth was created through the partnership of Gerald Montiel, the entrepreneur, and John Ashworth, the golf fanatic. In 1984, after selling a small chain of craft stores that he had started, Montiel decided to open a chain of sporting goods stores. While at a golf tournament in Albuquerque, New Mexico, he met Ashworth, who was caddying for a friend on the pro tour. Just getting the sporting goods chain off the ground, Montiel offered Ashworth a job as a golf apparel and equipment buyer for his new stores. Within two years, with Montiel’s wife having divorced him and the two partners now sharing a condo in Denver, the sporting goods chain was liquidated and the two began planning their next business, a chain of golf driving ranges.

The idea to produce golf clothes came up while they were driving down the California coast looking for possible range locations. Ashworth thought that golf needed something better than the current styles of polyester pants and hard collars. The company was started even though neither one of them knew anything about the clothing business. Montiel began raising money to get the company on its feet, while Ashworth began developing the designs.

Working out of a dingy office in Los Angeles’s garment district and starting to lose money, Montiel decided to take the company public. Despite not having generated any revenue or product yet, Montiel was able to sell the idea to Grady and Hatch, a New York-based underwriter. They had agreed to sell 42 percent of Charter Golf for $ 1.2 million, but had to cancel the deal because of the October 1987 stock market crash. Undaunted by the setback, Montiel started to sell the shares himself. Selling 20 percent of Charter at 75 cents per share, he was able to raise $685,000 by March 1988. With Montiel raising capital, Ashworth went to work and convinced a local manufacturer to provide 200 all-cotton sample shirts, which Ashworth sold to golf shop buyers he knew in southern California.

By the end of its first year Charter Golf had sold $374,000 worth of its Ashworth line of shirts, pants, and shorts, but had lost $324,000. Knowing good publicity was required for the company to be successful, the partners needed to find a big name to promote the line. Ashworth turned to a friend on the PGA Tour and consequently signed golfer Fred Couples to an endorsement deal, paying him in Charter Golf stock rather than cash.

Charter Golf Begins to Grow in 1989

As the comfort and style of their clothing began to catch on, Charter Golfs sales for fiscal 1989 were $2.14 million compared to the previous year’s $374,000. Needing more room for distribution, Charter Golf relocated from its Oceanside facility to a new 14,000-square-foot headquarters in Carlsbad, California. With another PGA Tour Player, John Cook, added to its list of endorsers, the company continued to grow, increasing its market to 2,300 pro shops and resorts.

Charter Golf reached the NASDAQ board in 1990 under the symbol CGOL. The company marked its first profitable quarter, reporting earnings of $32,000 on sales of $972,000. The increased sales prompted Ashworth to be named the fastest-growing line of golf shirts in America by Golf Pro Merchandiser magazine. Also in 1990, Scott Verplank and Mark Wiebe joined Couples and Cook as company endorsers. Expecting more growth in 1991, Charter Golf moved into a new 35,000-square-foot facility in Carlsbad.

Charter Golf had created its success by following one simple motto: Keep it simple, and two years ahead of everyone else. They managed to appeal to the younger generation of golfers by making comfortable golf clothes. By early 1991, accounts had to grown to 3,000, with products sold in 41 percent of resorts around the country. That total was dramatically up from 16 percent the year before.

By late 1991, the company had grown to 3,500 accounts, with about 2,800 of those being golf course pro shops. Now looking to foreign markets, deals were signed to distribute Ashworth apparel in European and Japanese markets. The company entered into a multi-year agreement with Nissho Iwai, a major Japanese trading company, to market products in Japan. They expected these new markets to represent eight to ten percent of total sales volume by the next year.

Charter Golf’s success was even shared by the professionals who endorsed their product. Fred Couples had the PGA Tour’s lowest stroke average in 1991 and was named the PGA player of the year by Golf World magazine. He had another great year in 1992, winning the Masters and being named PGA player of the year for the second year running. Dave Stockton, the captain of the U.S. Ryder Cup team, also began wearing Ashworth, becoming the first player on the Senior Tour to wear the brand.

In 1992, a survey by Golf Pro Merchandiser again named Charter Golf’s Ashworth line as the fastest-growing line in the country and number one in customer preference. Buoyed by its success, Charter Golf had another public offering in February 1992, selling 1.5 million shares at a price of $7.25 per share. With new capital and increasing orders, the company opened a new 42,000-square-foot distribution center next to its corporate headquarters. The new facility had four times more storage space than the previous one and could support sales volumes of $125 million.

Frequently customizing its Ashworth line to put the country club or course logo on the apparel, Charter Golf was now selling to about 3,200 of the nations 11,500 pro shops and resorts, with the average shop bringing in $8,351 in merchandise in 1992. They continued to expand in Europe and Japan as well, selling to more than 15 countries. Foreign accounts made up seven percent of 1992 sales, while the new women’s line accounted for 12 percent of total sales.

Introducing New Product Lines in 1993

Now selling products all over the world, Charter announced in 1993 that it would introduce a new clothing line. The new line differed from the Ashworth line in that it was to be sold in department and specialty stores, rather than the traditional golf pro shops. The new line, sold under the fictional name Harry Logan, had its own designs and had a sales force separate from the Ashworth line. The company hired CBS sports announcer Jim Nantz as the spokesman for the new line. Adding more products to the mix, the company also entered into the hat business, trying to catch a piece of the $100 million annual sales.

Charter Golf Becomes Ashworth, Inc.

In 1994, Charter Golf officially adopted the name of its premier clothing line and became known as Ashworth, Inc. While the name changed, the sales figures did not. Its continued strength in the golf industry had Ashworth repeatedly ranked as one of the top 50 fastest-growing companies by several national magazines. The number of golf shops carrying the line increased to 4,100, with average sales per shop jumping to $9,607.

Strengthened by the company’s success and his own achievements, Fred Couples entered into a lifetime contract to represent the company. The contract gave him a combination of cash and stock options, making him the company’s largest stockholder. Ashworth also announced that Couples would endorse the company’s new line of shoes, scheduled for release in 1995. Other Ashworth golfers had successful years in 1994 as well. Ernie Els won the U.S. Open and was ranked number three on the Sony World Golf Rankings, while Dave Stockton continued winning on the PGA Senior Tour.

Company Perspectives:

Ashworth revolutionized golf apparel 10 years ago and has been acknowledged as “the” leader in golf apparel. The Ashworth brand is built on a solid foundation that cannot easily be replicated by the competition.

Over the past ten years, the Company has taken the steps necessary to ensure that the Ashworth label represents the soul of the greatest game on the planet. We have accomplished this through our innovative designs, product quality, controlled distribution and strong representation on the PGA Tour. By continuing to create novel product and by providing the highest customer service to our accounts Ashworth will continue to keep the lead into the 21st century.

Growing Pains in 1995

Despite numerous growing pains in 1995, the company still managed to have its eighth straight year of growth. Ash worth’s products were being sold in over 30 countries around the world, with the international division representing 24 percent of total business. The Harry Logan line, which was now in over 500 specialty and department stores, saw sales increase to $4.41 million. In addition, Ashworth opened ten factory stores to sell prior season and irregular merchandise.

The company did have some troubles in 1995. Ashworth announced in May 1995 that it was going to discontinue its womens and childrens lines. Citing that the womens and childrens lines were poor uses of the company’s expenses and resources, Ashworth returned its focus to its line of mens products. Also, the company ran into some problems as it tried to upgrade its computer and information systems. The process took longer than expected and caused delays in shipping as the company was running on one system while starting the other. At the end of 1995, Rick Werschkul left his position as president and CEO of the company leaving Chairman and cofounder Gerald Montiel to take over his duties for the company.

Despite the troubles in 1995, Ashworth was again ranked the fastest-growing, number one brand of golfwear in America. Ashworth had expanded its product mix to now include apparel (shirts, pants, sweaters, shorts, vests), accessories (watches, socks, boxers), shoes, weather gear, and hats.

Changes Begin at Ashworth in 1996

In December 1996, Randy Herrel, Sr., became president and CEO after a successful stint in the same position at Quicksilver, the country’s largest surf wear manufacturer. Herrel brought a no-nonsense attitude with him to Ashworth. During his six years at Quicksilver, sales had risen from $90 million to $190 million and earnings per share from a nickel to $1.65. He knew Ashworth needed considerable retooling, but he also saw cause for hope, and parallels between his old company and his new one. While Ashworth’s operations, customer service, and management required repair, the company was still an industry leader.

Ashworth announced in 1996 that it would launch a new golf label for 1997 and would be making all levels of merchandise available for pro shop and department store accounts. Each of its three types of merchandise were clearly defined by style and geared for certain demographics. The new line, Golfman, targeted 16- to 25-year-olds, and included T-shirts, shorts, graphic prints, and some denim. The Ashworth core line continued to target golfers age 25 to 45, with solid, printed, and jacquard knit tops and twill bottoms. The Harry Logan line moved to focus on 45- to 65-year-olds, evolving into a more formal collection of sportswear, sport coats, fine-gauge knits, merino wool, and cashmere pieces.

As a way to improve sales even further in pro shops and department stores, Ashworth developed the concept of the Golfman Shop. The Golfman Shop was a merchandising system that integrated the Ashworth product line into one self-contained marketing unit. Set up in the retail stores, the Shop readily adapted to changing inventory levels and new product development, while displaying a variety of Ashworth merchandise.

Ashworth also opened its own store in June 1997. The Ashworth Studio, located in at South Coast Plaza in Costa Mesa, California, offered a full line of golf apparel, weather-gear, and hats, plus home and office furniture, luggage, and bathing accessories.

At the end of 1997, the Darrel Survey, a consumer survey conducted with golfers across America, named Ashworth the number one brand in golf. With a 10.4 percent market share, Ashworth became the first brand to surpass a 10 percent market share in golf since 1985. The survey showed that the company maintained the most popular brand with golfers under 30 years old, as well as showed that its product was worn by 25 percent of the best golfers (0-5 handicap) in the United States.

Goal Set for 1998

The company continued to look for ways to improve in 1998 and especially wanted to expand the core business into existing retail operations, both by improving designs and being more aggressive with the Golfman Shop program. Ashworth also wanted to gain new distribution into pro shop accounts and upscale department stores, expanding on its already existing 4,500 accounts. Finally, the company wanted to continue to be a product-driven and innovative company, strengthening the Ashworth image for fashion and function.

To expand its core business, Ashworth relaunched its women’s line for spring 1998. The company had not manufactured a women’s line since 1993, when it discontinued the line because of poor sales. This time the company set up a design staff and customer service staff to focus on its women’s division. Projected volumes for the women’s line were at least $5 million, with pro shops accounting for up to 90 percent of sales.

Ashworth also launched its AGCo label in 1998. The label, targeted at the young golfer, was sold in pro shops and resorts, but was expected to earn higher sales from department and specialty stores. The line consisted of knits, wovens, pants, shorts, fleece items, jackets, wind shirts, sweaters, and hats. Prices for the new AGCo line were set to be competitive with other manufacturers.

The company looked to strategic alliances with golf properties to increase its distribution. Ashworth developed three-year strategic alliances with two major golf property management firms, Club Corporation of America (CCA) and Troon Golf. Working to add other management firms, they anticipated the company would have three-year alliances with over 300 of the premier volume-producing properties in the United States. The Golfman Shop program would be used in each case to secure at least 20 percent of the properties’ floor space. The company added 20 Golfman shops in early 1998, bringing the total to 220.

Ashworth also continued to be an innovative company. Using the latest developments in fiber and garment technology, Ashworth established itself as the first golf apparel company to create an entire line of technical clothing. Its Weather Systems line featured knit-solar protection fabric, moisture-removing performance knits, and new lightweight, waterproof, breathable clothing.

The Future of Ashworth

Co-founder Gerald Montiel announced he would retire from Ashworth on December 31, 1998. He planned to remain a stockholder in the company and looked forward to watching the company continue to grow. With 550 Golf man Shops in place and product placements increasing, the company presumably would have no problem keeping Montiel happy.

Principal Subsidiaries

Ashworth Canada; Ashworth UK, Ltd.; Ashworth, Inc., et Cie (Luxembourg); Ashworth International, Inc. (U.S. Virgin Islands); Ashworth Store (I-X), Inc.

Further Reading

“Ashworth Takes Another Swing at Women’s,” Women’s Wear Daily, August 13, 1998, p. 7.

“Ashworth Pulls Plug on Women’s, Kids’ Lines,” Golf Pro, June 1995, p. 8.

“Corporate Profiles 1993: Charter Golf Inc.,” San Diego Daily Transcript, January 11, 1993, p. 3.

“Corporate Profiles 1995: Ashworth Performance Sets Record, But Expenses Rising,” San Diego Daily Transcript, January 23, 1994, p. 7.

Cropper, Carol, “A Stock-for-Name Deal,” Forbes, October 11, 1993, pp. 118-20.

“The Golfman Cometh,” Golf Pro, October 1996, p. 9.

“Gunning for Young Guns,” Golf Pro, March 1998, p. 6.

Kragen, Pam, “Carlsbad, Calif.-Based Ashworth Looks to Links for Success,” North County Times, March 10, 1997.

Kramer, Scott, “Ashworth Answers,” Golf Pro, February 1996, pp. 39-41.

McClain, Timothy, “Ashworth’s Golf Apparel Remains Hot As Expenses Eat into Company Bottom Line,” San Diego Daily Transcript, December 22, 1994, p. 7.

______, “No Recession at Charter Golf As Sales Hit Record,” San Diego Daily Transcript, December 13, 1991, p. 1.

Neumeier, Shelley, “Charter Golf,” Fortune, April 20, 1998, p. 125.

—Robert Alan Passage