Giant Motorsports Posts Record Earnings for 2nd Quarter

Giant Motorsports, Inc., parent company of Andrews Cycles in Salem, Ohio, and Chicago Cycle Center in Skokie, Ill., is looking to a "big box retail strategy" to help it through a down economic cycle.

As detailed in a second quarter filing with the Securities and Exchange Commission (SEC), that strategy includes a central administration office for all the company's dealerships and floor plan financing from six manufacturers.

The company strives to have no more than 10 percent of its bikes from prior years, and makes use of manufacturer cash-back incentives to move those bikes and generate showroom traffic.

"This is accomplished by making all of our purchasing decisions based on sales information for the prior year and then utilizing aggressive sales and marketing techniques during the early part of a model year in order to assure the timely sale of our products," according to the filing.

The document also declares the company's interest in buying up independent dealers "in markets with strong buyer demographics that, due to undermanagement or undercapitalization, are unable to realize their market share potential and can benefit substantially from our systems and operating strategy."

Giant is not immune to the economic pressures that other dealers are feeling. The report notes that interest rate hikes last year put the brakes on sales, and stable rates more recently are helping sales rebound.

The company cited the nationwide mortgage meltdown as a engine of tighter credit and customers with less to spend, but reported that changes in operations increased operating revenue.

Total revenue for the three months ended June 30 was $35,307,000, off $4,063,000, or 10.3 percent, from the $39,307,000 in the comparable 2006 quarter.

But the company says it reduced costs and increased gross margin for the same period to produce income from operations of $2,427,000 in this year's second quarter versus $2,018,000 for the same period in 2006. The selling, general and administrative expenses for the three months ended June 30, 2007 were $3,780,000, a decrease of $201,366 (5.1 percent) from $3,982,000 for the same period in 2006.

"We had income from operations for the three months ended June 30, 2007 of $2,427,000, as compared to $2,018,000 for the same period in 2006, which reflects an increase in income of $408,957 (20.3 percent)," says Giant Motorsports, COO Greg Haehn. "This increase in income from operations has been achieved through better sales execution and a keen focus on expenses."

The company expects to release year-to-date comparisons soon.