Q2 Polaris worldwide sales up 8 percent
Polaris Inc. today released second quarter 2022 results, which ended June 30, 2022. The Company reported worldwide sales of $2,063 million, up eight percent versus the second quarter of 2021.
North America sales of $1,748 million represented 85 percent of total company sales and increased nine percent from $1,600 million in 2021. International sales of $315 million represented 15 percent of total company sales and increased one percent. Sales in the second quarter of 2022 were largely impacted by strong mix and pricing offset by volume declines related to continued supply chain challenges reducing shipments and low dealer inventory levels.
As reported, second quarter net income from continuing operations attributable to Polaris of $142 million decreased nine percent and diluted earnings per share from continuing operations (EPS) of $2.34 decreased five percent compared to the second quarter in 2021. Adjusted net income from continuing operations attributable to Polaris for the quarter was $147 million, down 11 percent and adjusted EPS of $2.42 was down seven percent, in each case as compared to the second quarter of 2021.
Gross profit margin contracted 303 basis points to 23.0 percent. Adjusted gross profit margin of 23.0 percent contracted 312 basis points driven primarily by increased costs including raw materials, freight and inefficiencies associated with supply chain challenges, partially offset by strong pricing.
Operating expenses were $292 million in the second quarter of 2022 compared to $300 million in the second quarter of 2021 due to lower sales and marketing as we prudently navigate through supply chain challenges. Operating expenses, as a percentage of sales, of 14.1 percent were down in the second quarter 2022 compared to the second quarter of 2021.
“Our results during the second quarter reflect our team’s commitment to our customers through industry-leading innovation and exceptional execution, despite the ongoing supply chain constraints impacting the global economy,” Mike Speetzen, Chief Executive Officer of Polaris said. “While we are closely watching a number of demand indicators to understand the resilience of the consumer in this environment, we continue to see a healthy consumer and stable demand. In the quarter, some easing of logistics complexities, commodity costs, and certain supply chain bottlenecks helped to support sequential margin improvement and increased shipment volume. While this trend is expected to continue in the back half of the year, we remain diligent and prepared to respond if headwinds materialize. Our focused strategy of being the leading player in powersports, coupled with the significant opportunity to get back to optimal dealer inventory levels, gives us confidence in our ability to drive continued performance for Polaris and value creation for our shareholders.”
Second quarter reported diluted earnings per share from continuing operations was $2.34, down five percent versus last year. Adjusted diluted earnings per share from continuing operations was $2.42, down seven percent versus last year.
Primary drivers in the quarter were improved operational performance, strong pricing and stable demand supported by a healthy consumer while still seeing supply chain challenges constraining dealer inventory, as well as continued inflationary pressures. Retail Sales for the quarter were down 23 percent versus last year, primarily driven by supply chain challenges; North America ORV retail was up 13 percent sequentially.
Off-roadsales were driven by increased pricing on new and pre-sold orders, partially offset by volume despite modest sequential improvement in component availability. Parts, Garments and Accessories (PG&A) sales, which now includes relevant powersports aftermarket sales, decreased three percent. Gross profit margin performance was primarily driven by negative mix and higher input costs, partially offset by increased pricing and continued low promotional costs. Polaris North America ORV unit retail sales were down mid-twenties percent. Estimated North America industry ORV unit retail sales were down mid-teens percent.
On-roadsales were impacted by lower shipments driven by supply chain challenges, despite modest sequential improvement in component availability and shipments, strong demand, and pricing. PG&A sales, which now includes relevant powersports aftermarket sales, increased 24 percent. Gross profit margin performance was driven primarily by higher input costs and supply chain constraints, partially offset by favorable product mix and lower promotions costs. North America unit retail sales for Indian Motorcycle were down low-forties percent. North America unit retail sales for the comparable motorcycle industry were down mid-twenties percent.
Marinesales results were driven by favorable mix, positive pricing and unit volume. Gross profit margin performance was driven by better product mix offsetting higher input costs and supply chain constraints.
The Company has updated its 2022 guidance expectations to reflect the divestiture of TAP early in the third quarter. The Company now expects 2022 sales to increase 13 percent to 16 percent versus prior guidance of 12 percent to 15 percent. The Company now expects adjusted diluted EPS from continuing operations attributed to Polaris Inc. common shareholders to be in the range of $10.10 to $10.30 for the full year 2022, an increase of 11 percent to 14 percent from 2021.
