For years, Arctic Cat was absent at the ATV industry’s biggest annual events: California’s Sand Sports Super Show in September and the November SEMA aftermarket accessories show in Las Vegas.
Not this year.
The company hit the showroom floor and racetracks in Costa Mesa, Calif., last month with its entire new line of 2016 models. Next month, it will show off new accessories developed with NASCAR and off-road racer Robby Gordon.
“It is a huge deal,” Arctic Cat Inc. CEO Chris Metz said. “We are going to be throwing our flag down saying, ‘Hey, we’re here!’ We are showing all of our products to hundreds of thousands of enthusiasts who go there” for the first time.
Former Black & Decker executive and turnaround specialist Metz hopped in the driver’s seat about 10 months ago at Arctic Cat, an underdog that has struggled for years to stay on track in the fast-paced ATV and snowmobile arena.
Armed with marketing chutzpah, Metz is determined to execute his latest turnaround as artfully as a pro racer’s 180-degree turn. He envisions 50 percent growth and $1.15 billion in sales by 2020.
Never mind that last year saw management upheaval and a costly product recall or that sagging profits are still hurting the company.
“I know all the bad news of the past, and I am not hiding from that. The only way to address it is head-on,” Metz said during a recent interview at the company’s headquarters in Plymouth.
“I said give us a year to clean this up and transform the business. We want to create an experiential company, and we are trying to let people know it,” he said. “It’s a fun, fun category that we are competing in.”
The first steps to transformation included shedding old ATV inventory, hiring a new chief financial officer and new marketing officer. It’s also meant hedging against painful currency swings and injecting some much-needed pizazz into the 55-year-old manufacturer by expanding factories and launching new products.
In 10 months, Metz, a Maryland native, hit the airways with new TV ads, launched a flurry of 2016 ATVs and accessories and made changes for dealers that had those independents cheering.
Metz’s “plan [is] admittedly aggressive but achievable,” said Wells Fargo & Co. equity analyst Tim Conder. “We expect the cleanup process to extend through year-end, positioning ahead of model year 2017, which is expected in August 2016 when more differentiated innovation is expected.”
He added that the dumping of older ATVs “is encouraging and has yielded improved channel mix, but excess remains. Plus, [there’s] new model year 2016 competitive product from Polaris, Can-Am, Honda and Yamaha.”
None of that fazes Metz, 50, who came to Arctic Cat armed with a pedigree resume and a knack for bringing stability to wobbly firms.
Hanging in for the long term
After 13 years at Black & Decker, Metz spent 10 years as the turnaround pro and managing partner at Sun Capital Partners Inc., a private equity firm that owns big consumer brands such as ice cream chain Friendly’s, the Limited and Dutch department store chain Vroom & Dreesmann.
“I spent 10 years turning around dozens and dozens and dozens of companies. But what I really missed was making companies great,” Metz said.
“In private equity, you turn companies around and then you sell them. It’s like sending your kids off to boarding school when they are in ninth grade. It’s too early,” he said. “What I wanted to do was to build something great … and I enjoy turning stuff around that has been mismanaged for years. Arctic Cat fit all of those things.”
Arctic Cat profits have sagged for many quarters. Its stock price is around $22 a share, the same as a decade ago and down from 2013’s price of $60.
Upon joining Arctic Cat in December, Metz sent bold messages to employees and to Wall Street. His team hauled a 1,000-pound ATV and a 500-pound snowmobile up 10 flights and plunked them front and center in the headquarters lobby. He hired Minneapolis ad agency Periscope to launch aggressive TV ads and overhaul its image.
Arctic Cat then announced a $27 million expansion of factories in Thief River Falls and St. Cloud. Last month, Metz said he was moving the headquarters from the nondescript office building in Plymouth to the funky historic Western Container building in Minneapolis’ vibrant North Loop neighborhood.
“It’s one of the coolest hippest locations and is highly visible,” Metz said. That visibility and name recognition is “what our employees who are living in the communities want. They want to be proud of their company.”
The headquarters news landed just weeks after the partnership was struck with Gordon. Now Gordon is helping launch a new series of official races starring Arctic Cat’s Wildcat sports vehicles and its dealers and customers plus celebrities.
Dealers are noticing those and other changes. Metz changed Arctic Cat’s dress code so company reps walking into dealerships and trade shows could finally dress down like their customers. For the first time, Arctic Cat representatives attended the August dealer show in Orlando in golf shirts and jeans.
“It really brought the atmosphere back to our level. As an industry, we’re just not suit-and-tie people,” said Kimberly Waldriff, co-owner of Lighthouse Motorsports in Rosemount. The company also introduced a rebate program that let dealers sell old model ATVs back to Arctic Cat.
The rebates “let us clean up our showroom floor and get some fresh products in here,” Waldriff said. “The new CEO is making changes that benefit dealers, and that’s different. It made me more excited about the future of the company.”
Dealers also loved that Arctic Cat ditched its formal annual dealer dinner for a fun tailgating party with the whole new 2016 line. Metz said more changes are coming.
Bringing the plan together
Exposure at big national shows should boost Arctic Cat’s name recognition, especially in the South and Southwest, where “we are not well represented,” Metz said. If successful, the trade shows, races and racing partnerships will fill gaps and boost sales.
But first, Arctic Cat must overcome two roadblocks — excess old inventory at dealerships and the high U.S. dollar that is deflating the tires of the firm’s international sales. “Those are the two big ones that keep me up at night,” Metz said.
Yet as his management style suggests, he’s swiftly attacking the challenges. The company recently adopted a currency hedging strategy to manage that risk. And the new dealer rebates have helped clear out 4,000 older ATVs from dealer showrooms. The goal? 5,000 to 7,000.
“We are almost there,” Metz said. “I don’t know that I have ever worked harder, but I do know that I’ve never had more fun.”