Polaris Industries Inc. (NYSE: PII) today announced lower full-year 2015 sales and earnings guidance. The Company now expects full-year 2015 sales to grow approximately four to five percent compared to 2014, due to a weaker than expected North American Off-Road Vehicles (“ORV”) and Snowmobile retail environment. This revision is a reduction from previously issued guidance of up 10 to 11 percent. Full-year 2015 earnings per share are now expected to be up approximately one to two percent compared to full year 2014, down from previous guidance of up 11 to 12 percent. Consistent with our previous guidance, the updated earnings per share guidance includes the expectation that the U.S. Congress will extend the 2015 research and development tax credit in December.
Since the Company updated its full year guidance in October, North American ORV industry sales have been softer than anticipated, which has negatively impacted Polaris’ North American ORV retail, as well as the corresponding parts, garments, and accessories sales. Additionally, due to unusually warm weather patterns in the U.S. Snowbelt, the overall North American snowmobile industry is down mid-teens percent season-to-date through November, pressuring Polaris’ snowmobile retail sales in the 2015 fourth quarter despite strong market share gains. In light of these challenges, and Polaris’ commitment to end 2015 with North American dealer inventory levels up mid-single digits percent, the Company is reducing fourth-quarter ORV shipments significantly, primarily the Company’s higher margin side-by-side vehicles. Consequently, North American ORV dealer inventory is expected to be below 2014 levels at year-end, while snowmobile dealer inventory is expected to be higher than last year as those vehicles were shipped prior to the retail selling season. The ORV shipment and dealer inventory reduction is reflected in the revised guidance.
“In our third quarter earnings call, I talked about slower near-term growth for the powersports industry and what it signified for our performance. We expected the fourth quarter to present a challenging retail environment for ORVs and Snowmobiles, but consumer traffic and retail sales have slowed beyond previous expectations. We are tackling this problem head-on, in part by reducing our planned shipments to improve dealer inventory levels as we head into 2016. These factors drove the decision to lower our full-year 2015 guidance. Taking this action now, while disappointing, is appropriate given the circumstances,” commented Scott Wine, Polaris’ Chairman and Chief Executive Officer. “We anticipate 2016 results will improve modestly over 2015, with leaner dealer inventory, and a judicious balance between operating expense management and strategic investments, offsetting continued macroeconomic headwinds and ongoing currency and competitive pressures. Longer-term, our 2020 strategic objectives of greater than $8.0 billion in sales and exceeding a ten percent net income margin remain unchanged and we believe achievable. Driven by innovative products and acceleration of our lean initiatives, we expect to continue to expand our industry-leading position in powersports along with on-going diversification into adjacent businesses and markets. We will provide further guidance regarding our 2016 outlook during our fourth quarter earnings call in January.”