SBJ/April 14 - 20, 2008/This Weeks News

Cuts help Motorsports Authentics start fast

After posting losses of $114 million last year, Motorsports Authentics came out of the gates in 2008 with a first-quarter profit of $3.6 million, the company’s first profitable quarter since it was formed in 2005.

The merchandising giant, jointly owned by rival track operators International Speedway Corp. and Speedway Motorsports Inc., benefited substantially from Dale Earnhardt Jr.’s move to a new team and sponsor, which created a healthy market for his new Amp Energy and National Guard merchandise, MA officials said.

Earnhardt accounted for about half of all NASCAR-related sales in some of MA’s distribution channels.

Dale Earnhardt Jr., with a
new team and sponsor,
helped boost MA’s sales.

Without citing specific numbers, MA President and CEO Mark Dyer said total sales were up slightly over the first quarter of 2007, when the company posted losses of $6.5 million. Dyer said the bottom-line turnaround was due in large part to MA’s significant cost-cutting, which included layoffs and reducing the number of trackside trailers that sell merchandise at NASCAR events.

“It’s only one quarter out of four, but we certainly think it’s a sign that we’ve been able to stabilize the company and get it where it will perform financially,” Dyer said. “Call us cautiously optimistic about the rest of the year.”

During ISC’s first-quarter earnings call last week, COO John Saunders did not alter projections for a break-even 2008.

“This is an important turnaround year for the company,” Saunders said. “We’re very pleased by the progress.”

While the numbers look good, some in the industry refused to uncork the champagne. Conditions were ripe for a profitable quarter because of Earnhardt’s switch and other driver changes, including Kyle Busch’s move to the No. 18 M&M’s Toyota.

MA also created programs tied to the 10th anniversary of Dale Earnhardt Sr.’s Daytona 500 win, including a No. 3 diecast in the car-of-tomorrow body style.

The bigger question, though, is whether the turnaround is sustainable.

“The lift is natural because of the changes,” said Joe Mattes, vice president of licensing at JR Motorsports. “I still think there are challenges. My concern right now is the first quarter of 2009. What’s going to happen when Junior doesn’t make a change?”

Dyer said fundamental changes to MA’s operations have helped put the company in a more stable position. Four new distribution centers in Winston-Salem, N.C., Hickory, Ky., Reading, Pa., and Bangor, Maine, have made MA more responsive to the product needs of mom-and-pop collectible shops.

MA also has reduced its count of trackside merchandise trailers from 51 to 27. Dyer said the 27 trailers at Daytona this year sold more than the 51 trailers in 2007. Of the returning trailers, their sales were up 30 percent compared to 2007.

Dyer also cited an increase in sales for some of MA’s best retail partners, including Wal-Mart, Target and QVC.

“As bad as last year was, it’s been a great swing back in the other direction,” Dyer said. “It’s nice to celebrate some modest success, but we know we can’t get too wound up in it.”

ISC’s Saunders also noted that attendance for Daytona’s Gatorade Duel, Nationwide Series and Craftsman Truck Series races was up 5 percent. The Daytona 500 saw the earliest sellout of its grandstand seats, more than a month before the mid-February event.

Advance tickets sales for 2008, however, are trending down, he said. To combat tough economic times, Saunders said ISC is creating more flexible payment plans for its consumers while keeping ticket prices level with last year.

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