Last week Arctic Cat reported their financial results for the second quarter of fiscal year 2016, which ended on September 30, 2015. Arctic Cat reported quarterly revenue of $211.2 million and net earnings of $11.2 million compared to $262.5 and $15.4 for the prior year quarter. Management noted currency headwinds, especially in Canada, a competitive market and softer than expected retail sales in the ATV/UTV market. Therefore, the company’s management lowered their fiscal 2016 full year guidance. The following are some the highlights from the earnings call related to the side-by-side/utility vehicle market.
- Sales of ATVs and ROV side-by-sides increased 1.7% to $70.8 million from $69.6 million in the year ago quarter driven by Wildcat side-by-sides.
- A key marketing initiative was started with a five year product development and marketing agreement with racer Robby Gordon and Todd Romano, and their SPEED RMG brand. The initiative specifically targets technology development for the Wildcat side-by-sides to produce new products and accessories.
- For full year fiscal 2016 management expects ATV/side-by-sides sales to increase mid-single digits percent.
- For the quarter, the industry retail sales were flat to up low single-digits for ATVs and side-by-sides and Arctic Cat was similar overall but with more strength in side-by-sides.
- Year-to-date Arctic Cat was up low double digits for side-by-sides retail sales.
- Management is terminating under-performing dealerships while adding dealers in open territories.
Learn more: Seekingalpha.com (Earnings call transcript)
Comment: Both Polaris and Arctic Cat have reported slower than expected growth in the side-by-side market, as well as, increasing competitiveness. While the market is still expected to grow, the rate of growth may be more mid-single digit percent rather than double digits or even high single digits.