Polaris Earnings Overview
In their recent earnings call Polaris management reported strong annual sales despite relatively low fourth quarter growth. Overall sales increased to $6.78 billion for the full year, an increase of 12% from last year. All segments grew with the ORV/Snow segment increasing by 7%. For the fourth quarter sales increased 7% to $1.74 billion despite North American powersports retail sales increasing by only 2%. There was strength in Ranger/General side-by-sides, full-size ATVs and Indian Motorcycles unit sales. In addition, PG&A sales outside of the TAP business performed very well, up 22%. The company continues to be hampered somewhat by tariffs, a $90 million cost in FY2019. However, the management has been able to receive some exemptions and managed to pass some of the cost on to suppliers.
Polaris Earnings Call
The following are highlights related to small, task-oriented vehicles from the recent Polaris earnings call for fiscal year 2019 fourth quarter.
- ORV segment (UTVs & ATVs) sales increased by 13%
- ORV retail increased mid-single digits %
- Side-by-sides retail up low single digits percent
- ATV retail up mid-single digits
- Management reports that the ramp up of 2020 side-by-side retail sales were slightly below expectations and dealer inventory increased as a result
- They named a top executive from their ORV business head-up their electrification strategy
- Company-wide average selling price (ASP) jumped by 8% on the strength of ORV and motorcycles
- ORV ASP increased 10% with more unit sales and more side-by-side sales
- The company boosted prices 3% to 3.5% on many models earlier in the year
- Recently they reduced prices substantially on select RZR models
- Global Adjacent Markets decreased 1% to $120 million with vehicle sales declining but PG&A increasing
Full Year Sales Guidance
- Full year sales are expected to improve 2% to 4%
- ORV/Snow segment is expected to increase low single digits percent with ORV up low single digits percent
- The Global Adjacent Markets segment is expected to increase high single digits percent as all product lines should show growth
- Side-by-side shipments to dealers should decline in the first quarter as management tries to reduce dealer inventory that increased slightly the last two quarters.
Learn more: Seekingalpha.com (Earnings call transcript)
One of the most interesting pieces of information coming out of the earnings call was the appointment of a Senior Vice President for electrification strategy. Management noted that the powersports industry tends to lag the auto industry by 5 – 10 years. They think there is currently an inflection point in the market with regards to electrification. In addition, they talked about making investments and see a need to become more competitive in their core powersports business as it relates to electrification.
While Ranger sales continued to drive growth, RZR sales were not as impressive. This is likely where the higher dealer inventory levels originated. The price reduction of some of their RZR S models is likely a reflection of increased competition in the market segment. Kawasaki and Honda are the last two entrants into the high performance segment which has now become quite crowded. In addition, Polaris lowered RZR XP Turbo prices. This reduction may be to remain competitive as well as an effort to create pricing differentiation between the XP Turbo and their higher priced Pro XP models.
Marc Cesare, Smallvehicleresource.com