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Friday, 1 November 2019

Polaris

Polaris Q3: Total Sales +7% ($1,772m); Indian Retail Unit Sales Down "Mid-Teens Percent"

Polaris motorcycles segment sales, including PG&A, totaled $150 million in Q3, down -3% compared to the third quarter of 2018. Both Indian and Slingshot reported sales decline during the quarter. Gross third quarter profit for Polaris' motorcycle segment was $12 million compared to $20 million in the third quarter of 2018. The decrease in gross profit was primarily due to tariff costs and negative mix.



North American consumer retail sales for Polaris Indian motorcycles decreased mid-teens percent during the third quarter of 2019 primarily due to the weak mid to heavy-weight two-wheel motorcycle industry that was down high-single digits percent and retail pressure from heavy competitive promotional spending.
North American consumer retail sales for Polaris' motorcycle segment, including both Indian Motorcycles and Slingshot, decreased low-double digits percent during the third quarter of 2019, while the North American motorcycle industry's retail sales for mid to heavy-weight motorcycles, including three-wheel vehicles, was down low-single digits percent in the third quarter of 2019.
Polaris narrowed its full year 2019 earnings guidance by maintaining the upper end of the net income range and increasing the lower end of the range and now expects earnings to be in the $6.20 to $6.30 per diluted share range. Full year 2019 adjusted sales growth guidance is expected to be up approximately 12% over the prior year.
Scott Wine, Chairman and Chief Executive Officer of Polaris Industries Inc., said: "Through the strength of our brand portfolio and solid execution from our team, Polaris delivered +7 percent revenue growth and modest margin expansion amid mounting macroeconomic ambiguity.
"We augmented our industry-leading Off-Road Vehicle line-up with the introduction of our Model Year '20 products and continued to improve dealer satisfaction and engagement. We also launched our evolved Polaris brand and Think Outside tagline. This more modern compass appeals to broader demographics - as seen in Polaris Adventures bringing 90 percent new customers to the brand or the uptick in millennial purchases of the RZR and RANGER.
"Indeed, our RANGER/GENERAL and RZR brands continue to perform well, driving growth in side-by-sides despite an increasingly competitive market. We converted this growth into increased profitability, as our strategic supply chain investments, which are driving organization-wide value enhancement, began realizing cost savings in the quarter. Our commitment to being a customer-centric, highly efficient growth company remains steadfast, and coupled with industry-leading innovation, it will further solidify our position as the global leader in Powersports."



Off-Road Vehicles ("ORV") and Snowmobiles segment sales, including PG&A, totaled $1,152 million for the third quarter of 2019, up +11 percent over $1,036 million for the third quarter of 2018, driven by growth in side-by-side sales and timing of snowmobile shipments. PG&A sales for ORV and Snowmobiles combined increased +10 percent in the third quarter of 2019 compared to the third quarter last year. Gross profit increased +11 percent to $324 million in the third quarter of 2019, compared to $291 million in the third quarter of 2018. Gross profit percentage increased four basis points during the 2019 third quarter.
ORV wholegood sales for the third quarter of 2019 increased eight percent, primarily driven by increased price and mix. Polaris North American ORV retail sales were flat for the quarter, with side-by-side vehicles up low-single digits percent and ATV vehicles down mid-single digits percent. The North American ORV industry was up mid-single digits percent compared to the third quarter last year.
Snowmobile wholegood sales in the third quarter of 2019 were $106 million, up 53 percent compared to $69 million in the third quarter last year. Snowmobile sales were favorably impacted by the timing of shipments for the company's pre-season snowmobile orders.
Global Adjacent Markets segment sales, including PG&A, increased 18 percent to $114 million in the 2019 third quarter compared to $96 million in the 2018 third quarter primarily due to strong commercial, government and defense sales, and growth in Polaris Adventures. Gross profit increased 29 percent to $31 million or 27.3 percent of sales in the third quarter of 2019, compared to $24 million or 25.1 percent of sales in the third quarter of 2018, due to increased volume and favorable product mix.
Aftermarket segment sales of $236 million in the 2019 third quarter increased three percent compared to $230 million in the 2018 third quarter. TAP sales of $193 million in the third quarter of 2019 increased two percent compared to $189 million in the third quarter of 2018. The company's other aftermarket brands increased sales by five percent. Gross profit decreased to $62 million in the third quarter of 2019, compared to $66 million in the third quarter of 2018 primarily due to higher tariff costs.
Boats segment sales decreased 11 percent to $119 million in the 2019 third quarter compared to $134 million in the 2018 third quarter primarily due to a slowing marine industry. Gross profit increased 10 percent to $22 million or 18.8 percent of sales in the third quarter of 2019, compared to $20 million or 15.1 percent of sales in the third quarter of 2018 due to favorable product mix.
The company reported third quarter 2019 net income of $88 million, or 1.42 per diluted share, compared with net income of $96 million, or 1.50 per diluted share, for the 2018 third quarter. Adjusted net income for the quarter ended September 30, 2019 was $104 million, or $1.68 per diluted share compared to $118 million, or $1.86 per diluted share in the 2018 third quarter.
International sales to customers outside of North America, including PG&A, totaled $187 million for the third quarter of 2019, up eight percent from the same period in 2018. The increase in sales is attributable to growth in ORV, motorcycles and Global Adjacent markets.
Taking into account its year-to-date performance, the company is narrowing its earnings guidance range for the full year 2019 by increasing the lower end to $6.20 per diluted share and maintaining the upper end of the range at $6.30 per diluted share. Sales are expected to increase approximately 12 percent for the full year 2019 compared to the prior year.