May 12, 2008 – Growing away from the core market

Polaris Industries’ efforts to drive more of its quad business away from the traditional U.S. ATV market is paying off.
The Minnesota manufacturer recently reported a 22 percent increase in sales in its first quarter. A large chunk of that $388.7 million in total sales comes from Polaris’ ATV segment, which experienced a 19 percent increase over the previous year. That increase, however, is not attributed solely to the traditional U.S. ATV market, company officials say.
“Perhaps the single most misunderstood aspect of Polaris performance during the past couple of years has been our ability to successfully reduce our dependence on core U.S. ATVs,” said company President Bennett Morgan in a conference call with stock analysts. “Our ability to innovate and diversify to adjacent markets and products outside the core U.S. ATV business has been extremely successful.”
In fact, Polaris’ business in the core U.S. ATV business fell 19 percent in its first quarter compared to the year-ago period, Morgan says. But the company’s side-by-side retail sales and shipments to dealers are “both up well over 50 percent” compared to the 2007 first quarter, he said.
“While we continue to increase supply and have made progress in some markets, we still have yet to catch up with consumer demand with the RZR.”
Polaris also has made strides in its international sales, with its overseas revenue growing 28 percent compared to the previous year. Morgan says Ranger and ATV sales drove that growth, doing well in both Northern and Southern Europe. He also noted Polaris began increasing its shipments of the RZR to Europe, but its current efforts are “nowhere near” the demand that currently exists.
Because of its international and side-by-side growth areas, Polaris officials expect their total 2008 ATV sales to rise 4-7 percent vs. the previous year. However, its core U.S. ATV retail sales figure to decline in the mid-teens in terms of percentage, Morgan says, noting the second half of the year could bring some improvement compared to early 2008.
Still, the core U.S. ATV market sales will continue to decrease in terms of a percentage of Polaris’ overall quad sales.
“We are far less dependent on core U.S. ATV (sales) and are in a much better position to succeed vs. many of our peers,” he said, noting that he expects this “diversification to become even more pronounced as we move to the future.”

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