Polaris has announced its Fiscal Year 2021 Q2 earnings, no doubt to the delight of many, as the company is reporting an overall adjusted sales increase of 40%, and an adjusted gross profit margin of 26%.
However, North American retail sales decreased 28% for the quarter compared to uncharacteristically strong retail sales last year, driven largely by low product availability due to supply chain constraints limiting production. On a two-year basis, retail sales were up 14% over second quarter 2019 pre-COVID levels
Powersports Business previously reported similar 2021 Q1 earnings of a 39% adjusted sales increase and 24.7% gross profit margin in April.
‘’'Think Outside’ is resonating with new and current customers alike with continued strong demand and second quarter results that beat last year’s COVID-impacted quarter as anticipated. Even more notable, we delivered double digit sales and earnings increases compared to our pre-COVID results from the second quarter and first half of 2019. All of our segments performed extremely well, posting strong increases in both sales and profitability in the face of a challenging supply chain and increasing input cost environment,” said Polaris CEO Mike Speetzen in the announcement. “While supply chain-related headwinds and higher input costs will continue into the second half of the year, the Polaris team’s operational dexterity and nimble approach has been nothing short of spectacular. I remain confident in our ability to meet the product demands of our dealers and consumers and deliver value for our shareholders.”
Below are details from the official announcement:
Gross profit increased 66% to $551 million for the second quarter of 2021 from $333 million in the second quarter of 2020. Reported gross profit margin was 26% of sales for the second quarter of 2021. The improvement in gross profit was driven primarily by higher volumes, lower promotional costs, favorable pricing and improved product mix during the quarter, partially offset by higher input costs including logistical costs, component costs and plant inefficiencies related to the supply-chain constraints and higher commodity prices.
Adjusted gross profit for the second quarter 2021 was $553 million, or 26.1% of adjusted sales compared to the second quarter of 2020 adjusted gross profit of $348 million, or 23% of sales. Adjusted gross profit for the second quarter of 2021 and 2020 excludes the negative impact of $2 million and $15 million of restructuring and realignment costs, respectively.
Operating expenses decreased 46% for the second quarter of 2021 to $351 million from $654 million in the same period in 2020. Operating expenses decreased primarily due to the prior year non-cash impairment of goodwill and other intangible assets associated with the Company's Aftermarket segment, partially offset by an increase in total operating expenses to levels commensurate with the improvement in demand.
Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $1,314 million for the second quarter of 2021, up 38% compared to $953 million for the second quarter of 2020 driven by broad based strength across ATVs, side-by-sides and snowmobile sales. PG&A sales for ORV and Snowmobiles combined increased 31% in the second quarter of 2021 compared to the second quarter last year. Gross profit increased 45% to $365 million in the second quarter of 2021, compared to $252 million in the second quarter of 2020. Gross profit percentage increased 132 basis points during the 2021 second quarter compared to the prior year due to robust demand and historically low dealer inventories, which supported lower promotional and floor-plan finance spending, partially offset by higher input costs related to supply chain constraints. ORV wholegood sales for the second quarter of 2021 increased 38%. Polaris North American ORV retail sales decreased low-thirties percent for the quarter with side-by-side vehicles down low thirties percent and ATV vehicles down high-twenties percent. The North American ORV industry was down mid-thirties percent compared to the second quarter last year.
Snowmobile wholegood sales in the second quarter of 2021 were $32 million compared to $12 million in the second quarter last year. Snowmobile sales in the Company's second quarter are routinely low as it is the off-season for snowmobile shipments.
Motorcycles segment sales, including PG&A, totaled $212 million, up 50% compared to the second quarter of 2020, driven by increased sales of Slingshot, Indian Motorcycles, and related PG&A. Gross profit for the second quarter of 2021 was $24 million compared to $4 million in the second quarter of 2020. The increase in gross profit margin was driven by increased volume and lower promotional costs, partially offset by increased input costs from supply chain constraints. North American consumer retail sales for Indian Motorcycles increased high-twenties percent during the second quarter of 2021 in a mid-to-heavy-weight two-wheel motorcycle industry that was up mid-thirties percent. North American consumer retail sales for Polaris' motorcycle segment, including both Indian Motorcycle and Slingshot, increased low-twenties percent during the second quarter of 2021. North American consumer retail sales for the motorcycle industry, including both two-wheel and three-wheel, increased mid-thirties percent during the second quarter of 2021. Indian and Slingshot market share losses were driven by a lack of product availability during the quarter driven by supply-chain challenges.
Aftermarket segment sales of $240 million in the 2021-second quarter increased 15% compared to $208 million in the 2020-second quarter. Transamerican Auto Parts (TAP) sales of $206 million in the second quarter of 2021 increased 9% compared to $189 million in the second quarter of 2020. The Company's other aftermarket brands sales were up 80% compared to the second quarter of 2020. Gross profit increased 32% to $63 million or 26.2% of sales in the second quarter of 2021, compared to $48 million or 22.9% of sales in the second quarter of 2020. Gross profit percentage improved during the quarter due to higher volume and increased pricing. Boats segment sales increased 49% to $198 million in the 2021-second quarter compared to $132 million in the 2020 second quarter, driven by sales growth in all three brands, Bennington, Godfrey and Hurricane. Gross profit increased 155% to $47 million or 24.0% of sales in the second quarter of 2021, compared to $19 million or 14.1% of sales in the second quarter of 2020 due to increased volume and positive product mix partially offset by increased input costs related to supply chain constraints.