Polaris Industries reported record third quarter results on Thursday, with sales growth of 21 percent to $879.9 million and a net income increase of 39 percent to $94.3 million compared to the year-ago quarter. The performance set third quarter sales and earnings records, and the company reported that North American retail sales increased more than 10 percent compared to the year-ago quarter, its 10th consecutive quarter of double-digit retail growth.
Polaris officials said all product lines experienced double digit percentage sales increases during the 2012 third quarter, with North American retail unit sales climbing on strong side-by-side and Victory Motorcycle sales.
“We began the third quarter with significant momentum, and thanks to broad based consumer demand and market share gains for our Ranger and RZR side-by-side vehicles, we positioned the company for a strong finish to the year,” CEO Scott Wine said. “This Polaris team again demonstrated the power of our combined focus on product innovation and execution by driving a greater than 10 percent increase in Polaris North American unit retail sales in the third quarter. The growth in retail sales along with increased market share drove double-digit sales growth in each of our product lines during the quarter.
“The innovation goes beyond just products — our Retail Flow Management pull process for motorcycles and enhanced MVP process for ORV has dramatically improved product availability and delivery for our dealers. Our ongoing operational excellence initiatives helped to ensure this growth was even more profitable, as the manufacturing realignment, along with numerous cost management programs, led to significant gross profit and net income margin improvements over the prior year period. These strong earnings enabled us to continue strategically spending in support of future growth across our portfolio.
“Looking forward, we are very encouraged by the strong dealer and consumer reception to our new industry leading model year 2013 products. Our evolving and expanding product lineup reflects our continued focus on innovation as well as our sustained commitment to profitable growth. With three outstanding quarters behind us and the demonstrated ability of our team to identify and execute on new growth opportunities, 2012 is shaping up to be another record year for Polaris. Though we remain vigilant regarding economic developments and their impact on our customers, we are confident in our strategic direction and implementation and are raising our full year 2012 sales and earnings projections.”
President and COO Bennett Morgan reported that Polaris gained market share in every business segment and further expanded its industry-leading aggregate market share position in North American powersports.
Morgan also said that dealer inventory rose 23 percent in Q3 vs. the year-ago quarter, “but by nearly every metric we track, the quality of our dealer inventory is excellent and improving.”
Off-Road Vehicle sales increased 18 percent from the third quarter 2011 to $573.0 million. This increase reflects continued North American market share gains for both ATVs and side-by-side vehicles, including the Ranger XP 900 utility vehicle.
Polaris North American ORV unit retail sales were up low double digits percent from the third quarter last year, with consumer purchases of side-by-side vehicles climbing more than 15 percent and ATV retail sales up mid-single digits percent. Polaris estimates North American industry ORV retail sales in the third quarter 2012 rose mid-single digits percent from the third quarter of 2011. While the company’s international businesses continued to gain market share, sales of ORVs outside of North America decreased 19 percent in the third quarter, primarily due to weak demand in Europe, officials said.
“The Polaris ORV business had another record quarter with third quarter revenue up 18 percent driven primarily by side-by-side growth,” Morgan said. “Year-to-date revenue was up 22 percent. Polaris continues to make growth happen in ORVs. Third quarter North American ATV retail sales for Polaris increased mid-single digits while the industry decreased slightly. This marks the 16th consecutive quarter that Polaris has gained market share in ATVs and we achieved an all-time high quarterly market share percentage.”
Polaris estimates that the side-by-side business grew low double-digits in Q3.
“Our newest model year ’13 products have been extremely well received by both dealers and consumers,” Morgan said. “Ranger 900XP, the Ranger 800 EDI mid-size and Scrambler 850s are all currently oversold to dealers while the early Ranger 900XP shipments are retailing to customers as quickly as any product that we’ve ever launched.”
Snowmobile sales increased 21 percent to $114.9 million for the 2012 third quarter as compared to $95.1 million for the third quarter of 2011. This increase is due to the company’s decision to escalate early season snowmobile shipments so as to better coincide with the start of the consumer retail snowmobile selling period, officials said. Sales of snowmobiles outside of North America, principally the Scandinavian region and Russia, increased 20 percent in the third quarter of 2012 compared to a year ago.
“Early season-to-date industry retail sales decreased about 20 percent vs. 2011 due to poor snow last season, which resulted in lower snow check retail sales as we had expected,” said Morgan, who noted that only about 10 percent of the season’s retail has occurred. “Polaris has outperformed the industry and gained market share season-to-date with retail sales down just 10 percent and our non-snow check retail sales right on plan.”
Sales of the On-Road Vehicles division, comprised primarily of Victory motorcycles, but also including Indian motorcycles and GEM and Goupil electric vehicles, increased 78 percent over the same period last year to $63.4 million.
Consumer demand for Victory motorcycles was strong in each of the company’s global markets, and Polaris continued to gain market share and expand distribution, officials said.
Third quarter North American industry heavyweight cruiser and touring motorcycle retail sales were down single digits percent from 2011, while over the same period, Victory North American consumer unit retail sales increased over 25 percent. Sales of On-Road Vehicles to customers outside of North America increased over 150 percent during the 2012 third quarter.
“North American third quarter Victory retail sales accelerated, climbing over 25 percent, driven by growth in all segments — cruisers, baggers and touring,” Morgan said. “Year-to-date Victory retail is now up over 20 percent and we continue to earn additional market share.”
Morgan said “the North American heavyweight 1400cc industry slowed in the third quarter, with retail sales down single digits, which we attribute more to competitive timing than industry weakness as year-to-date the heavyweight industry has grown in the low single digits.”
Regarding the company’s Indian line of motorcycles, Morgan reported that “we are making outstanding progress on the product, brand and launch plan for Indian’s future.”
Parts, Garments and Accessories sales increased 14 percent during the third quarter 2012 compared to the same period last year. All product lines and product categories experienced increased sales, driven by the addition of over 250 new model year 2013 accessories and higher PG&A related sales to owners of the company’s large installed base of vehicles, officials said.
Sales of PG&A to customers outside of North America increased 21 percent during the 2012 third quarter compared to the same period last year.
“Our PG&A business delivered record sales in the third quarter and continues to accelerate,” Morgan said. “We achieved growth in every geographic region, business unit and product category. We’ve had outstanding dealer response to the new apparel and integrated cab innovations for the Ranger XP900 introduced at the dealer meeting and our momentum is excellent across the entire PG&A business.”
International sales totaled $100.9 million for the 2012 third quarter, up three percent over the same period in 2011. The increase in third quarter sales resulted from a 13 percent combined increase in sales to customers in the Asia/Pacific and Latin American regions, along with higher sales of Victory motorcycles and the incremental sales from the Goupil acquisition. This was largely offset by lower ORV sales, primarily in Europe, due to sluggish economic conditions and a three percent unfavorable currency impact, officials said.
Morgan added that “ORV and motorcycle industry retail markets remain week in Europe, both down about 10 percent for the third quarter and the year. Polaris gained significant market share with ORV retail sales down just slightly and motorcycle retail up over 50 percent. Russian sales growth was big for both ORV and snowmobiles, while Indian and Brazil delivered nice year-over-year growth as we build our network, brand and capability within these key growth markets.”