Polaris reports sales drop in Q3
Polaris Inc. has released its third-quarter 2024 results. The company reported worldwide sales of $1,722 million, down 23 percent from the third quarter of 2023. North American sales of $1,473 million represented 85 percent of total company sales and decreased 26 percent from $1,986 million in 2023.
As consumer confidence and retail demand remain challenging, Polaris says it is focusing on managing dealer inventory and delivering better operational efficiency. “A healthy dealer network is one of the critical components to our long-term success, which is why we have anchored our current production and shipment plans to our goal of lowering dealer inventory by 15 to 20 percent by the end of the year, and I am encouraged by the progress being made,” comments Mike Speetzen, CEO of Polaris Inc, who notes that it expects a challenging retail environment throughout the rest of 2024 and into next year.
Speetzen says that despite the headwinds and challenging environment, they’ve made headway in driving cost out of manufacturing and operations. “I believe the actions we are taking today will enable us to emerge stronger and deliver on our long-term growth targets, meaningful margin expansion, and value to shareholders.”
As reported, Q3 net income for the Medina-Minnesota-based brand was $28 million, a decrease of a whopping 82 percent compared to the third quarter of 2023. The company says they are working with its dealers to reduce network inventory levels, but it’s a complicated process that can’t happen overnight.
In July, Polaris announced they were lowering production and shipments to protect its dealer network. As a result, Q3 sales dropped 23%. This included additional shipment cuts during the quarter in response to a lower-than-anticipated retail environment.
“While these actions negatively impacted our short-term results, they were necessary to support our strong partnership with dealers and hold firm to our commitment to reduce dealer inventory,” Speetzen adds.
Third-quarter retail was down 7%, which was slightly below the company’s expectations, which it says is driven by persistent inflation, elevated interest rates, and financially stressed consumers.
“While it was encouraging to see the Fed take action with a 50-basis-point rate cut in September, we’re not seeing any immediate impact on retail, and we do not believe one cut will stimulate demand in this environment,” says Speetzen.
Consumers have been cautious with spending, especially for larger purchases, and it will likely take more interest rate cuts and time to improve the financial position before spending returns on pre-pandemic levels.
Speetzen says that within the Off Road segment, utility was down low-single digits, with RANGER slightly outperforming ATVs. “While recreation was down for the eighth straight quarter, growth in crossover was a bright spot at over 25%, led by the Polaris XPEDITION. Feedback from our Dealer Meeting in August was positive, with dealers appreciating our candor around the industry and our commitment to lower inventory.”
Dealers also responded well to the pricing updates, according to management, and the new RZR Pro lineup.
In the On Road segment, Polaris says retail in Q3 was driven by softness in heavyweight motorcycles, given recent competitive launches and an overall weak industry. “Despite that, we continue to hold our number one share position in the mid-size segment, we expect On Road retail to remain soft for the remainder of the year,” Speetzen adds.
In Marine, pontoon retail was down by high teens, with better performance from Bennington. Speetzen says he was encouraged by orders coming out of the Summer Dealer Meeting across all of its brands.
Segment highlights
Off Road segment results were primarily driven by these factors:
- Sales were driven by lower volume, mix, and net pricing driven by higher promotional spending.
- PG&A sales decreased 18 percent.
- Gross profit margin performance was driven by lower volumes, negative mix, lower net pricing driven by higher promotional activity and unfavorable plant absorption, partially offset by operational improvements.
- Polaris North America ORV unit retail sales were down three percent. Estimated North America industry ORV unit retail sales were down low-single digits percent.
On Road segment results were primarily driven by these factors:
- Sales were driven by lower volumes.
- PG&A sales decreased by seven percent.
- Gross profit margin performance was driven by a negative product mix, partially offset by operational improvements.
- According to the company, North American unit retail sales for Indian Motorcycle were down by a low double-digit percentage. Estimated North American unit retail sales for the comparable motorcycle industry were down by high single digits.
Marine segment results were primarily driven by these factors:
- Sales results were driven by lower volumes.
- A decrease in sales volumes and a negative mix impacted gross profit margin performance.
2024 Outlook
Polaris updated its 2024 sales outlook to be down approximately 20 percent relative to 2023 versus its previous outlook of down 17 to 20 percent relative to 2023. The company now expects adjusted diluted EPS attributed to Polaris Inc. common shareholders to be down approximately 65 percent relative to 2023 versus the prior outlook of down 56 to 62 percent.