Red flag at Six Flags

Posted Aug 10th 2008 9:10AM by Joseph Lazzaro
Filed under: Management, Consumer Experience, Competitive Strategy

Investors/readers have probably already heard all of the bad jokes regarding Six Flags.

"Things are so bad at Six Flags, it's now called Three Flags."
"The only thing rising at Six Flags is the rollercoaster."
"A contest offered a vacation prize. First Prize: a day at Six Flags. Second Prize: two days at Six Flags."

O.K., that last one was borrowed from arguably the greatest comedian of all time, Groucho Marx, but you get the point: times are tough for Six Flags (NYSE: SIX).

Six Flags has more than $2.4 billion in debt, hasn't posted a profit in years, and has a big hurdle next summer: a $288 million payment to preferred shareholders, The Wall Street Journal reported (subscription required). Six Flags' stock closed Friday down 10 cents to $1.02.

Attendance, down 3% in Q2, is expected to "decline by at least that percentage, or come in even lower" for the year stock analyst C. Leonard Bauer told BloggingStocks, adding that it's not an elaborate mystery concerning why Six Flags is becoming less of a destination of significance.

A mission shift at the wrong time

"They're caught in the middle of a brand repositioning at a time of decreasing disposable income for most families. It's not a combo for success," Bauer said. Bauer added that he does not have a rating on nor own shares in any amusement park or entertainment company. The Reuters F2008/F2009 EPS consensus estimates for SIX are -$0.99/-$0.73.

Bauer said Six Flags has not transitioned quick enough from being "a date night, teenager-oriented, thrills amusement park" to "one that attracts more of a family crowd." Competitors bested it in the younger demographic, but it hasn't installed enough family-oriented rides and activities or implemented an effective marketing plan, for its new role, he said. As a result, it lost many teenage parkgoers, but hasn't made up for it in family attendance. This year's doubling of gasoline prices -- which substantially cut disposable income -- magnified Six's woes.

Bauer's prescription for Six Flags? At least a 20-25% cut in peak admission prices, with larger discounts for families, and closing the worst two to four of its 20 amusement parks, if attendance does not improve.

Tags: amusement parks, C. Leonard Bauer, disposable income, Groucho Marx, inthenews, leisure, SIX, Six Flags