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NO. 8

It's a numbers game

A slowdown in merchandise sales because of Dale Earnhardt Jr.'s switch of teams and sponsors is attributed to hurting the bottom line of Motorsports Authentics. However, a surge is expected once his new affiliations are announced.

August 30, 2007|Michael A. Hiltzik | Times Staff Writer

Talk about a franchise player.

When Dale Earnhardt Jr. announced that he was quitting his family motorsports company, Dale Earnhardt Inc., to drive next year for Hendrick Motorsports, the tremors were felt not only on NASCAR tracks across the country but in the merchandising business too.

And nowhere as much as in the cash registers of Motorsports Authentics, the licensing company that operates most retail trailers parked trackside at NASCAR events, each emblazoned with the name and image of a top driver.

Earnhardt's team switch put such a crimp in orders of apparel carrying his No. 8 car number and his red Budweiser sponsor livery that it almost single-handedly swung Motorsports Authentics financial results for 2007 from a projected profit to an expected loss. During a conference call with investment analysts July 10, executives at International Speedway Corp., which co-owns Authenticsattributed as much as half the shortfall -- up to $10 million -- to the slowdown in orders for Earnhardt's goods.

For The Record
Los Angeles Times Thursday, September 13, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 25 words Type of Material: Correction
NASCAR: An article in Section S on Aug. 30 about Dale Earnhardt Jr. listed three drivers for Hendrick Motorsports but omitted the fourth, Casey Mears.

The effect of Earnhardt's decision on orders in the $2-billion NASCAR merchandise market suggests just how driven that market is by personalities and tradition.

"There's no question he's the biggest seller of merchandise in the sport," says Mark Dyer, a former licensing executive at NASCAR who became chairman and chief executive of Motorsports Authentics in June. Industry estimates are that Earnhardt accounts for more than 30% of all driver merchandise sales. "When you have such an unusual situation as him announcing he's leaving his team, his number, and his sponsor so early in the season, it has a ripple effect through the whole distribution system."

Earnhardt is one of an elite group of NASCAR drivers who control their licensing rights, rather than funneling them through their team owners. His JR Motorsports licensing company has an exclusive deal through the end of this year with Motorsports Authentics for racing-related goods, but it also markets Earnhardt in separate deals with such sponsors as Adidas.

What's remarkable is that Earnhardt's popularity, like that of the Boston Red Sox and Chicago Cubs, is independent of his performance in competition. He has never won a championship -- indeed, he's on the verge of missing this year's Chase for the Nextel Cup, the mini-tournament for the all-around championship involving the top 12 drivers by points on NASCAR's top Nextel Cup circuit. He is in 13th place, 158 points behind Kurt Busch.

Fan loyalty in NASCAR runs deep, and the source of Earnhardt's following is unquestionably the fan base of his father, Dale Earnhardt Sr., who died in a crash at the 2001 Daytona 500, NASCAR's signature race. Earnhardt won the Daytona 500 in 2004, but since that year he has won on the Nextel Cup circuit only twice.

That doesn't faze his fans. "He's Dale Earnhardt Jr.," said Jason Vowels, 36, of Waveland, Ind., after buying nearly $300 worth of die-cast car models, T-shirts and a hat emblazoned with Earnhardt's likeness at the driver's souvenir trailer in the infield of Indianapolis Motor Speedway during July's Allstate 500 at the Brickyard. Much of the merchandise was selling for 50% off, although none of the shoppers interviewed said that accounted for the purchases.

"I'll be a fan wherever he goes," said Vowel. "I'll buy the new stuff too," he added, referring to the new lines of merchandise that will be tied to Earnhardt's new car, number and lead sponsor. (His No. 8 will stay with his former team, Dale Earnhardt Inc., now controlled by his stepmother. Nor will Budweiser be following him to his new team.)

Merchandise and memorabilia dealers say that Earnhardt's trinkets and apparel have remained so popular since his announcement that they haven't been able to keep up with demand. Some say they are mystified by the claim of Motorsports Authentics that orders have slowed.

"If any dealers are saying they're losing sales, we'll buy the stuff off them," said Jeff Barnes of City of Industry-based High Banks Racing, a leading Southern California merchandise dealer. He said he had no trouble selling out his supply of Earnhardt's die-cast cars, including an Elvis Presley theme that will adorn Earnhardt's car at Richmond (Va.) International Speedway on Sept. 8.

Motorsports Authentics, for its part, says that the slowdown mentioned in July applies to orders from the company's biggest retailers, including Wal-Mart and Target, especially for apparel.

"When the announcement was made, mass retailers shut off new ordering to sort through their inventory," Dyer said in an interview. Target and Wal-Mart declined to comment on the Earnhardt issue, although Wal-Mart said that all licensed NASCAR merchandise "continues to remain popular."

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