Polaris Industries reported adjusted sales of $1,158.9 for Q1 2017, an 18% increase from q1 2016. Management reported gains in the Off-Road Vehicle (ORV) business, large gains from Global Adjacent Markets and increased revenue from the recent TAP acquisition. In the ORV business Ranger and General product lines improved while the RZR line was down as expected. The side-by-side market continues to be highly competitive with elevated promotional costs. Management reported market share gains for Polaris ATVs. In the Global Adjacent Markets Aixam Mega was strong as well as the government defense business which helped increase revenue by 24%.
The following are highlights from the earnings call related to STOV markets. Figures are in comparison to Q1 2016 unless noted.
- ORV retail sales were down 5% for the quarter.
- ORV promotions were key as well as a targeted marketing campaign which showed results in March.
- RFM inventory management system will be expanded for side-by-sides later this year.
- Management reports an improved process for quickly tracking and identifying vehicle issues that will improve product safety and recall response.
- Management did not change full year guidance for the ORV business and expects promotional costs to remain elevated and on par with 2016 levels.
- ORV promotions are being matched by competitors.
- Taylor-Dunn added to the significant increase in Global Adjacent Markets revenue.
- Management expects RFM and a revamped marketing organization to create a more customer focused organization and improve sales.
- ORV retail sales for the year are expected to be down slightly.
- The ORV industry is expected to be flat to down for the year and was down mid-single digits in Q1 2017.
- Continued poor performance in the oil and gas regions and the agriculture market are hurting sales.
- The Multix launch was underwhelming, and a rapidly changing regulatory framework related to safety requirements and emission standards may provide significant obstacles.
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