February 7, 2011-A record finish for Polaris Industries

OEM sees retail sale increases throughout its vehicle categories
Stronger than expected North American retail sales led to a record finish for Polaris Industries.
The Minnesota manufacturer reported sales and market share gains in each of its vehicle categories in its fourth quarter, leading to all-time highs in revenue and net income.
“The strong fourth quarter propelled the company to full-year 2010 results that were almost unthinkable a year ago,” Polaris CEO Scott Wine said in the company’s earnings conference call. “While we were close on our predictions for the overall economy and the powersports industry, we significantly underestimated the market share gains and corresponding retail sales increase that was the primary source” of their results.
Side-by-side sales largely fueled the better-than-expected quarter, but Polaris overall saw its North American retail sales grow by 15 percent.
The fourth-quarter success resulted in Polaris reporting a record net income for its full year of $147 million. Total 2010 sales also hit a record high at $1.9 billion. That even outpaced what Polaris managed to sell in 2008 — by some $43 million — when overall industry new unit sales were roughly double what they were in 2010.
Wine conveyed a sense of surprise at the fourth-quarter and year-end figures. “Revenue and earnings growth surpassed even our highest stretch goals,” he said.
Certainly helping Polaris’ retail sales was what appears to be a much more stable retail-lending environment. Michael Malone, vice president and chief financial officer for Polaris, said the company saw a retail lending approval rate of 62 percent for the recent quarter, an 8 percentage point increase over a year ago. Polaris’ retail lending sources include Sheffield, GE Money and HSBC.
“We believe the retail credit market for powersports product has stabilized and is starting to improve modestly,” Malone said.
By category, here’s how Polaris did in its record fourth quarter:

  • Polaris’ ATV retail sales were flat vs. a year ago but its side-by-side sales rose more than 20 percent. Wholesale, Polaris’ revenue rose 40 percent for its off-road division. For dealer inventories, ATVs are down 33 percent while company officials characterized UTV inventory as “tight.”
  • Victory’s North American retail sales grew 15 percent in the quarter over a year ago. Dealer inventories are now down 30 percent compared to a year ago. Company officials said Victory has made modest market share gains in the cruiser segment and stronger gains in the touring segment.
  • Snowmobile sales rose because of shipment timing and stronger retail demand. Quarterly wholesale sales rose 28 percent and for the full year, 5 percent.
    Wine noted the company does not expect the industry’s sales to grow this year, but believes Polaris’ revenue will continue to outpace the industry. Polaris forecast sale increases in 2011 of 8-11 percent after this year’s 27 percent increase.
    Company officials also noted the company’s new manufacturing facility in Monterrey, Mexico, is expected to be completed in the first half of this year and has already begun hiring staff. PSB

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