Indian Motorcycle Up "Low-Thirties" Percent in Q4; Polaris Sales +4% for 2020 Full Year
Polaris has reported fourth quarter adjusted sales increased by +24% to $2,156m, with full year sales +4% to $7,028m. North American retail sales increased +28% for the quarter compared to 2019, led by strength in Off Road Vehicles (ORV), Motorcycles and Snow. "Boats retail sales were also strong during the quarter."
Motorcycles segment sales, including PG&A, totaled $147m, up +23% compared to the fourth quarter of 2019, driven primarily from increased sales of Slingshot and PG&A. Gross profit for the segment in the fourth quarter of 2020 was $1m compared to a $5m loss in the fourth quarter of 2019. "The increase in gross profit margin was driven by improved quality driving lower warranty costs, along with a decrease in promotional costs offset somewhat, by negative product mix as more mid-sized vehicles were sold during the quarter and increased costs from supply chain constraints.
"North American consumer retail sales for Indian Motorcycle increased low-thirties percent during the fourth quarter of 2020 in a weak mid to heavy-weight two-wheel motorcycle industry that was down mid-single digits percent. North American consumer retail sales for Polaris' motorcycle segment, including both Indian Motorcycle and Slingshot, increased high-thirties percent during the fourth quarter of 2020, while the North American motorcycle industry retail sales for mid to heavyweight motorcycles including three-wheel vehicles, was down low-single digits percent in the fourth quarter of 2020.
"weak mid to heavyweight two-wheel motorcycle industry"
Interim Chief Executive Officer of Polaris Inc. Mike Speetzen is quoted as saying that "the Polaris team once again demonstrated its strength and agility to deliver a strong finish to an exceptionally unusual year. While 2020 brought many unforeseen challenges, we emerged from the abrupt shutdown of the global economy early in the year to leverage the surge in demand across the Powersports industry and outdoor recreation, growing full year adjusted sales and earnings +4% and +22%, respectively.
"Our highly innovative product line-up of ORVs, snowmobiles and boats brought in new customers and powersports enthusiasts to Polaris. Over the year, we introduced over 120 new products across our portfolio and over 900 new accessories in our PG&A business and Aftermarket segment combined.
"While supply chain challenges remain front and center for Polaris and most of the industry as we enter 2021, the operational track record of our team gives me great confidence in our ability to navigate those constraints, rebuild dealer inventories, and continue to bring to market the highest quality, most innovative products and services in the powersports industry."
Adjusted gross profit margin was 25.6%, up 95 basis points versus last year primarily due to positive product mix and lower promotional costs, offset somewhat, by costs related to supplier constraints. Full year operating cash flow finished at a record $1.019bn.
Polaris announced full year 2021 sales and adjusted earnings guidance with full year adjusted earnings in the range of $8.45 to $8.75 per diluted share, and full year sales up in the range of $7,950m to $8,150m, an increase of 13% to 16%.
Fourth quarter reported net income was $3.15 per share; adjusted net income for the same period was $3.34 per share. Full year 2020 reported net income was $1.99 per diluted share; adjusted net income for the same period was $7.74 per diluted share, exceeding the high-end of previously issued guidance.
"Retail demand and industry tailwinds remained strong during the quarter benefiting Company performance as both new and existing customers continued taking advantage of off-road vehicles, snowmobiles, motorcycles and boats to enjoy the outdoors while maintaining social distancing etiquette."
Gross profit increased 30% to $550m for the fourth quarter of 2020 from $423m in the fourth quarter of 2019. Reported gross profit margin was 25.5% of sales for the fourth quarter of 2020, up 112 basis points compared to 24.4% of sales for the fourth quarter of 2019. The improvement in gross profits was primarily driven by positive product mix and lower promotional costs incurred during the quarter, offset somewhat by costs related to supplier constraints. Adjusted gross profit for the fourth quarter 2020 was $552m, or 25.6 percent of adjusted sales compared to the fourth quarter of 2019 adjusted gross profit of $428m, or 24.7 percent of sales. Adjusted gross profit for the fourth quarter of 2020 and 2019 excludes the negative impact of $2m and $5m of restructuring and realignment costs, respectively.
Operating expenses decreased one percent for the fourth quarter of 2020 to $304m from $308m in the same period in 2019. Operating expenses were lower due to decreased compensation expense related to the CEO departure, in addition to lower non-essential expenses driven by the Company's ongoing cautionary approach to spending given the pandemic-generated economic uncertainty.
"Q4 Polaris profit increased 30 percent"
Off-Road Vehicles and Snowmobiles segment sales, including PG&A, totaled $1,468m for the fourth quarter of 2020, up 29% compared to $1,140m for the fourth quarter of 2019 driven by broad based strength across ATV and side-by-side sales. PG&A sales for ORV and Snowmobiles combined increased 35% in the fourth quarter of 2020 compared to the fourth quarter last year.
ORV wholegood sales for the fourth quarter of 2020 increased 33%. Polaris North American ORV retail sales increased low-thirties percent for the quarter with side-by-side vehicles up high-thirties percent and ATV vehicles up high-teens percent. The North American ORV industry was up high-twenties percent compared to the fourth quarter last year.
Snowmobile wholegood sales in the fourth quarter of 2020 were $183m, up four percent compared to $176m in the fourth quarter last year. Polaris snowmobile retail sales were up low-twenties percent during the fourth quarter of 2020 compared to the prior year while North American industry retail was up mid-teens percent for the fourth quarter compared to the prior year.
Global Adjacent Markets segment sales, including PG&A, increased 18% to $142m in the 2020 fourth quarter compared to $120m in the 2019 fourth quarter driven by increases in demand in North America and EMEA.
Aftermarket segment sales of $238m in the 2020 fourth quarter increased eight percent compared to $221m in the 2019 fourth quarter. Transamerican Auto Parts (TAP) sales of $186m in the fourth quarter of 2020 increased one percent compared to $185m in the fourth quarter of 2019. The Company's other aftermarket brands' sales were up 45% compared to the fourth quarter of 2019. Gross profit increased 33% to $65m or 27.4% of sales in the fourth quarter of 2020, compared to $49m or 22.3% of sales in the fourth quarter of 2019.
Boats segment sales increased 20% to $162m in the 2020 fourth quarter compared to $135m in the 2019 fourth quarter, driven by strength from all three brands, Bennington, Godfrey and Hurricane.
Parts, Garments, and Accessories ("PG&A") sales increased 31% for the 2020 fourth quarter with all categories and business segments growing sales during the quarter.
International sales to customers outside of North America, including PG&A, totaled $266m for the fourth quarter of 2020, up 24% from the same period in 2019.
The Company announced its sales and adjusted earnings guidance for the full year 2021. Sales are expected to increase to the range of $7,950m to $8,150m, an increase of 13% to 16% over 2020 adjusted sales of $7,025m and adjusted net income is expected to be in the range of $8.45 to $8.75 per diluted share for the full year 2021 compared to adjusted net income of $7.74 per diluted share for 2020. The full year 2021 earnings guidance includes an increase in tariff costs of approximately $40m for the full year 2021 as exemptions and refunds received in 2020 are not contemplated to continue into 2021.
