Nov. 2, 2009 – Polaris sees bright spots in tough 3Q

In a stretch that saw their sales decrease by a double-digit percentage, Polaris Industries officials did note some positives from their recently concluded third quarter.
First off, retail sales slowly improved over the quarter and dealer and factory inventory levels decreased notably from a year ago. The company’s net income also did not fall as much as the company’s sales in terms of percentages.
Even with those pieces of good news, Polaris Industries CEO Scott Wine noted the company remains realistic about the retail market’s current difficult environment.
“Retail demand remains weak across all regions and markets, although we continue to see trends moving in the right direction, especially for our industry-leading side-by-side products,” Wine said in the company’s quarterly earnings report.
Polaris’ third-quarter sales fell to $436.2 million, a drop of 25 percent compared to a year ago. Its net income of $31.2 million dropped only 17 percent from the year-ago quarter.
Every company segment saw decreases from last year, including Polaris’ largest market, the off-road sectors of ATV and UTV. Polaris’ off-road revenue fell 30 percent compared to a year-ago to $261 million. However, the company did report improvements in dealer inventory. ATV dealer inventory levels in North America at the end of the quarter were 32 percent lower than the year-ago quarter. The company said this represents the 12th straight year-over-year quarter decline in core ATV dealer inventory levels.
Polaris also reported improving dealer inventory levels with Victory, its on-road motorcycle brand. Victory, however, has seen its retail sales slip below the industry as a whole. Still, dealer inventory levels are 22 percent lower at the end the third quarter than they were a year ago.
Polaris is reporting improvement in the percentage of its customers receiving lending approvals for new units. Polaris’ retail credit financing is done through GE, HSBC and Sheffield Financial.
Polaris officials, in their recent quarterly earnings report, noted the company’s consumers were approved 52 percent of the time for retail credit in the recent quarter. That percentage is 4 points higher than the last quarter and 8 points higher than the first quarter.
Despite the difficult retail environment, Polaris officials said dealer closures haven’t varied much from their historic levels. Polaris said it had nine U.S. dealers close in the third quarter compared to 12 in the second quarter and 13 in the first quarter. The company believes its total 2009 dealer reduction will be below 5 percent of its total dealer network.
In other third-quarter news, Polaris reported:

  • Sales for its snowmobiles were off 13 percent in the third quarter at $82,000;
  • PG&A sales declined 11 percent compared to the year-ago quarter, with 70 percent of its PG&A business coming from its off-road segment;
  • It has started shipping its new on-road product, the Breeze, the company’s first electric-powered, low-emission vehicle. Company officials said orders have exceeded expectations;
  • International sales were off 24 percent, 4 percent of which resulted from unfavorable currency exchanges.
    Polaris Industries Chief Financial Officer Mike Malone noted, “we think there’s significant growth that we can get with the strength of our team and our operation in Europe and that in the near term should help our top-line sales growth very well.” psb

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