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Tuesday, 10 January 2017

Polaris Industries

Polaris to cease Victory production after 18 years

In a not entirely unexpected decision, Polaris Industries has announced it is to “wind down” its production of Victory branded motorcycles with immediate effect.
The company says it will “assist dealers in liquidating existing inventories while continuing to supply parts for a period of 10 years, along with providing service and warranty coverage to Victory dealers and owners.”

Scott Wine, Polaris CEO, says: “Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand”

The less than overwhelmingly positive response to the Victory ‘Octane’, essentially a parts bin Indian Scout, and Polaris’ failure to convincingly exploit the brand’s potential for ownership of a cross-over model segment, has been in stark contrast to the success that Polaris has had with its Indian program since acquiring the brand from Stephen Julius (Stellican, Kings Mountain, North Carolina) in 2011.

“Our focus is on profitable growth”

The very small display of Victory models on the Polaris booth at INTERMOT in October 2016, followed by their complete absence from the booth just four weeks later at the EICMA ‘Milan Show’, pretty much telegraphed the decision, despite denials from Polaris Europe when AMD Magazine asked about their absence from the show.
Sales of Victory motorcycle models are said to have peaked in 2012 and to have been in decline ever since, as Polaris’ focus transferred to its Indian acquisition and, more latterly, the opportunity it believes its Slingshot line represents.
Polaris say that in 2015 Victory represented only 3 percent of total company sales and that on average Victory dealers have only been selling some 20 or so units a year, with less than a quarter of Polaris’ 400  dealers in North America “actively selling Victory Motorcycles today”; some 150 Polaris outlets have been combined Victory/Indian motorcycle dealers.
Indian distribution is anticipated by 1.5 times over the next 3 to 5 years; there are presently some 250 Indian Motorcycle dealerships globally. Polaris say they have lost money on their Victory program in three out of the last five years (2011 - 2015).
“This was an incredibly difficult decision for me, my team and the Polaris Board of Directors,” said Polaris Industries Chairman and CEO Scott Wine. “Over the past 18 years, we have invested not only resources, but our hearts and souls, into forging the Victory Motorcycles brand, and we are exceptionally proud of what our team has accomplished. Since inception, our teams have designed and produced nearly 60 Victory models that have been honored with 25 of the industry’s top awards. The experience, knowledge, infrastructure and capability we’ve built in those 18 years gave us the confidence to acquire and develop the Indian Motorcycle brand, so I would like to express my gratitude to everyone associated with Victory Motorcycles and celebrate your many contributions.”

It was hoped that the Victory ‘Octane’ would provide a foundation from which new market positioning could be built for the Victory brand. Polaris say they have lost money on Victory in three out of the past five years

Polaris say that several factors influenced the decision. The company accepts that Victory has struggled to establish the market share needed to succeed and be profitable. The competitive pressures of a challenging motorcycle market have increased the headwinds for the brand. Given the significant additional investments required for Victory to launch new global platforms that meet changing consumer preferences, and considering the strong performance and growth potential of Indian Motorcycle, the decision to more narrowly focus Polaris’ energy and investments became quite clear.
“This decision will improve the profitability of Polaris and our global motorcycle business, and will materially improve our competitive stance in the industry,” said Scott Wine. “Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand, enhancing our focus on accelerating the success of those brands. Ultimately this decision will propel the industry-leading product innovation that is core to our strategy while fostering long-term growth and increased shareholder value.”
Any one-time costs associated with supporting Victory dealers in selling their remaining inventory, the disposal of factory inventory, tooling and other physical assets, and the cancellation of various supplier arrangements, will be recorded in the 2017 income statement in respective sales, gross profit and operation expense. These costs will be excluded from Polaris’ provided 2017 sales and earnings guidance on a non-GAAP basis.