Polaris

Polaris Q2 Sales +8%, Retail Sales -23%

If you are someone who accepts the premise that making more from less is the holy grail of good business practise, then Polaris Industries had an awesome second quarter (the period to June 30, 2022).
Usually, a near collapse of Retail Sales of -23% year on year would send investors and management running for cover, but provided gross profit margin is stable (-3.03% is good, proportionately) then to have still achieved a +8% increase in Sales Revenue for the quarter (to $2,063m) has got to be good management and good use of capital resources.

The company says that the 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," with the -23% decline in Retail Sales primarily driven by those ongoing supply chain challenges - but they note that "North America ORV retail was up 13% sequentially."
North America sales of $1,748m represented 85% of total company sales and increased nine percent from $1,600m in 2021. International sales of $315m represented 15% of total company sales, an increase of 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."
On-Road segment sales were impacted by the already stated lower shipments (driven by supply chain challenges) despite modest sequential improvement in component availability and shipments, strong demand, and pricing.
On-Road segment PG&A sales (which now includes relevant powersports aftermarket sales) increased 24%. Segment 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 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.

'trend is expected to continue'

 

Off-Road segment sales were driven by increased pricing on new and pre-sold orders, partially offset by volume despite modest sequential improvement in component availability. Off-Road PG&A sales, which now includes relevant powersports aftermarket sales, decreased three percent.
Segment 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.
Marine segment sales results were driven by favorable mix, positive pricing and unit volume. Segment gross profit margin performance was driven by better product mix offsetting higher input costs and supply chain constraints.

Mike Speetzen pic, captioned: CEO Mike Speetzen: "In the quarter we saw some easing of logistics complexities, commodity costs, and certain supply chain bottlenecks helped to support sequential margin improvement and increased shipment volume."

CEO Mike Speetzen was quoted as saying that "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."

Polaris Q2 sales were +8% on reduced unit volume.

 

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 in the range 13 to 16% versus prior guidance of 12 to 15%.
Corporate gross profit margin was 23% (-3.03% YOY); at $281.5m total operating expenses in peak season were down by -3% (largely due to lower sales and marketing spend). Diluted EPS (Earnings Per Share) were $2.34, which is down by -5% YOY - generally not a good signal to be sending to Wall Street, but Polaris shares have been performing well in the weeks prior to the earnings release, bucking trend, and initial investor reaction remained positive.