Aug. 10, 2009 – Polaris sees on-road, off-road sales decline

Polaris Industries reported decreased sales in nearly all of its retail segments in the challenging second quarter.
The company’s off-road and on-road divisions both experienced double-digit percentage revenue losses compared to the year-ago period. Despite this, Polaris did report improving inventory levels, both for its factory and its dealer network, as well as market share gains in its ATV and side-by-side markets.
“Almost every region of the country is down significantly,” Polaris Industries CEO Scott Wine said of the U.S. powersports retail sales environment.
Polaris’ decreases included a 25 percent reduction in its ATV and UTV sales while its Victory motorcycle business was off even more at 55 percent. Victory’s retail sales were in line with its heavyweight cruiser market, which in the United States was off in the mid-30 percent range. Polaris’ wholesale revenue was off even more as it sought to improve its dealers’ inventories. Wine said Victory dealer inventory was down 24 percent but that “the weak market requires even more reductions.”
Polaris also reported decreased international sales, which were off 30 percent compared to the year-ago period due in part to an unfavorable currency exchange, as well as a decline in its parts and accessory sales. The latter were off
13 percent for its second quarter, which ended June 30, and are down slightly more for Polaris first six months.
Polaris’ snowmobile revenue increased by
23 percent in its second quarter but the company expects its full-year sled sales to be down
15-20 percent compared to the prior year.
Polaris also does not expect its overall revenue, which was off 22 percent after its first six months, to improve greatly in the second half, forecasting a year-end sales loss of 20-25 percent.
“Overall we have moderate expectations for retail improvement in the second half, which will primarily be driven by exciting new model year 2010 products and easier comparables in the fourth quarter,” Wine said.
Polaris noted the continued effect tighter retail credit standards have had on its retail business. Mike Malone, Polaris’ chief financial officer, says 48 percent of consumers’ retail loan applications were approved by one of the company’s three retail credit providers, HSBC, GE or Sheffield Financial. That approval rate is 4 percentage points higher than the first quarter.
“Both the penetration rate and the approval rate are somewhat lower than historical levels and somewhat weaker than desirable due to the credit tightening by our retail credit providers,” Malone said. “It’s obviously having some dampening impact on our retail sale levels.”
Polaris did report an improving gross profit margin percentage. The company’s efforts at improving its speed to market with its engineering and R&D teams while also improving its supply chain lead times has led to the improved gross profit margin.
Bennett Morgan, Polaris’ president and chief operating officer, says the supply chain and speed to market initiatives have allowed the company to reduce factory and dealer inventory. Factory inventory is down 21 percent from a year ago. North American dealer inventories for ATVs is down 19 percent year-over-year and UTV inventory has decreased from a quarter ago.
— Neil?Pascale

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