Shares of Action Performance, the Phoenix-based auto racing merchandiser, crashed 21% to $9.35 on Tuesday after it swung to a loss and suspended the quarterly dividend. “The market for die-cast collectibles is soft and a lot of it is Action’s own fault,” says Dennis McAlpine, a principal at the independent research boutique McAlpine Associates. “It flooded the market to keep sales going. Action saturated it with new versions of the same things. Instead of one Jeff Gordon #24 car with one paint scheme, it put out four or five paint schemes to get the collectors to buy them all, and it outlasted the collectors’ ability to buy.” In addition to the metal replicas of NASCAR cars, Action markets t-shirts, hats and other racing memorabilia. It blamed the disappointing results on lower sales of die-cast collectibles to mass merchandisers and, to a lesser extent, lower apparel sales to wholesalers. Domestic sales of die-cast cars fell 21% to $23.8 million, with the biggest area of weakness in the mass merchandise space, where sales plunged 43% to $7.8 million. Apparel sales slid 7% to $30.5 million, driven by a decline in sales of Jeff Hamilton [jackets, etc] merchandise.
Action recently announced plans to cut out distributors, keeping their cut for itself. It’s also trying to restore its product’s appeal by limiting supply, in the hope that the resulting scarcity will restore prices. Sources indicate Action will retain a key merchandising contract with racing star #8-Dale Earnhardt, Jr. The deal, which expires at the end of the year, accounts for 26% of the company’s revenues.(Smartmoney)(5-18-2005)
