Polaris Q3 - "Results Lower Than Expectations"
Polaris Inc. (NYSE: PII) third quarter 2023 results report worldwide sales of $2,249m, down 4% versus the third quarter of 2022. North America sales of $1,986m represented 88% of total company sales and decreased 4% from $2,069m in 2022.
International sales of $263m represented 12% of total company sales and decreased 3% versus the third quarter of 2022. Total company sales in the third quarter of 2023 were negatively impacted by lower shipment volumes and higher finance interest.
On Road segment sales were primarily driven by lower volumes, with PG&A sales down 6%. Gross On Road segment profit margin performance was driven by favorable product mix.
North America unit retail sales for Indian Motorcycle were down low-teens percent. Estimated North America unit retail sales for the comparable motorcycle industry were down mid-teens percent.
Mike Speetzen, Chief Executive Officer of Polaris Inc., is quoted as saying: "Our third quarter results were slightly lower than our expectations, as elevated manufacturing costs and an increasingly cautious consumer environment put added pressure on our results.
"While overall sales declined, North American retail was up 5% in the quarter, and we took share across each segment of our business, which included achieving the No. 1 share position for midsize motorcycles in North America.
"Considering recent trends of retail softness and margin pressure, we have revised our full-year guidance, and the team remains focused executing our plans to close out the year. With new products that continue to resonate with dealers and consumers, we have strengthened our position as innovative leaders in the industry while remaining laser focused on efficient operations."
Primary sales drivers were lower ship volumes and higher finance interest. Powersports retail sales for the quarter were up 5% versus last year, driven by double digit growth in utility ORV, more than offsetting softness in Polaris' recreational ORV and On Road segments, but the company says it has seen market share gains in Off Road, On Road and Marine.
Third quarter reported diluted earnings per share from continuing operations was $2.62, down 17% versus last year; adjusted diluted earnings per share from continuing operations was $2.71, down 17% versus last year. Third quarter net income from continuing operations attributable to Polaris of $152m decreased 20% and diluted earnings per share from continuing operations ("EPS") of $2.62 decreased 17% compared to the third quarter of 2022. Adjusted net income from continuing operations attributable to Polaris for the quarter was $157m, down 20%.
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| Mike Speetzen, Chief Executive Officer of Polaris Inc: "While overall sales declined, North American retail was up 5% in the quarter, and we took share across each segment of our business." |
Gross profit margin decreased 127 basis points to 22.6% for the third quarter. Adjusted gross profit margin of 22.6% decreased 127 basis points, primarily driven by foreign exchange headwinds, higher finance interest and unfavorable mix.
Operating expenses were $328m in the third quarter of 2023 compared to $317m in the third quarter of 2022 due to higher selling and marketing expenses. Operating expenses, as a percentage of sales, of 14.6% were up 105 basis points in the third quarter of 2023 compared to the third quarter of 2022.
Off Road segment sales were driven by higher snowmobile volume partially offset by higher finance interest. Parts, Garments and Accessories (PG&A) sales increased 15%. Gross segment profit margin performance was driven by unfavorable product mix.
Polaris North America ORV unit retail sales were up 5%. Estimated North America industry ORV unit retail sales were up low-single digits percent.
Marine segment sales results were driven by lower volumes. Gross profit margin performance was largely driven by a decrease in sales volumes resulting in decreased leverage of manufacturing costs, partially offset by higher net pricing.
The company updated its 2023 sales outlook to up 3% to 5% versus its previous outlook of up 3% to up 6% versus 2022. The company now expects adjusted diluted EPS from continuing operations attributed to Polaris Inc. common shareholders to be down 8% to down 4% versus 2022, versus the prior outlook of down 2% to up 3%.