Polaris Industries reported first quarter 2018 sales of $1,297 million, up +12 percent from $1,154 million for the first quarter of 2017, with first quarter 2018 net income of $56 million ($0.85 per diluted share) compared with a net loss of $3 million ($0.05 per diluted share) for the 2017 first quarter.
“We delivered record first quarter Off-Road Vehicle retail sales to begin the year, driven by innovation and improved dealer engagement. This translated into strong revenue and earnings growth for the quarter,” commented Scott Wine, Chairman and Chief Executive Officer of Polaris Industries.
“Through the tireless efforts of our team and the efficacy of various quality and productivity initiatives, we overcame commodity and freight inflation and product mix pressures in the first quarter to maintain our gross margin year-over-year, while leveraging operating expenses even as we continue to invest heavily in research and development.”
Polaris increased its full year 2018 sales guidance to up 4% to 6% and narrowed its full year earnings expectations by raising the lower end of its earnings per share range, and now expects adjusted net income to be in the range of $6.05 to $6.20 per diluted share, which includes the absorption of an additional approximately $15 million of commodity, freight and tariff costs anticipated in 2018.
“We are fully prepared to build upon this early success and deliver solid growth for the full year. Our production flow improved steadily throughout the quarter and inventory, snow notwithstanding, is in great shape. With the recent introduction of the all new RANGER XP 1000 and the 72-inch RZR XP Turbo S, and a robust innovation pipeline, we are exceptionally well positioned to bring more customers into Polaris dealers. While we must overcome significant commodity, freight and tariff headwinds throughout the remainder of the year, I am confident Polaris is taking the necessary steps towards becoming a customer-centric, highly efficient growth company,” Wine concluded.
North American retail sales increased 3% for the quarter; ORV N.A. retail sales were up mid-single digits %, with side-by-side vehicles up high-single digits %. Gained market share in RANGER, RZR and Sportsman ORV brands during the quarter along with share gains in both Indian and Slingshot motorcycle brands. Total first quarter 2018 dealer inventory was up 6% year-over-year; ORV dealer inventory was flat.
Motorcycle segment sales, including PG&A, totaled $132 million, an increase of nine percent compared to $120 million reported in the first quarter of 2017. Indian Motorcycles wholegood sales increased in the low-double digits percent range in the first quarter of 2018, while Slingshot sales were down low-double digits percent. Gross profit for the first quarter of 2018 was a positive $17 million compared to a loss of $20 million in the first quarter of 2017. Adjusted for the Victory wind- down costs recorded in both the 2018 and 2017 first quarters, motorcycle gross profit was $17 million, or 13 percent of sales in the 2018 first quarter compared to $19 million, or 15 percent of sales for the 2017 first quarter, down on a dollar and percent of sales basis due to higher warranty expense for Slingshot.
North American consumer retail demand for the Polaris motorcycle segment, including Indian Motorcycle and Slingshot, increased low-single digit percent during the 2018 first quarter. Indian Motorcycle retail sales increased low-single digits percent. Slingshot’s retail sales were down mid-single digits percent during the quarter. Motorcycle industry retail sales, 900cc and above, were down mid-teens percent in the 2018 first quarter. Both Indian Motorcycle and Slingshot gained market share for the 2018 first quarter on a year-over-year basis, in spite of unusually cold and wet weather in March and an overall weak N.A. industry motorcycle market in the first quarter.
International sales to customers outside of North America, including PG&A, totaled $211 million for the first quarter of 2018, up 27 percent from the same period in 2017. Foreign exchange movements represented 11 percent of the sales increase for the quarter. The remaining increase was driven by strong sales in the company’s EMEA business.
Gross profit increased 33 percent to $323 million for the first quarter of 2018 from $242 million in the first quarter of 2017. Reported gross profit margin was 25 percent of sales for the first quarter of 2018 compared to 21 percent of sales for the first quarter of 2017.
During the quarter, Polaris recorded charges of $20 million, including the impairment of the company’s equity investment in the Eicher-Polaris joint venture in India.