Issue link: https://read.dmtmag.com/i/752766
FINANCIAL ORV wholegood sales down 25 percent Polaris Industries Inc. (NYSE:PII) reported third quarter net income of $32.3 million, or $0.50 per diluted share, for the quarter ended Sept. 30, 2016, compared to $155.2 million, or $2.30 per diluted share reported in the third quarter of 2015. Sales for the third quarter of 2016 totaled $1,185.1 million, down 19 percent from last year's third quarter sales of $1,456.0 million. "Our third quarter results, while discourag- ing, were in line with our revised guidance and reflect our ongoing execution of the RZR recalls and significant quality and safety improvement initiatives. During the past three months, we have accelerated our efforts to get our loyal owners back to riding safely and are now over 50 percent complete with the RZR 900/1000 recalls and slightly below 50 percent on the more recent RZR Turbo recall notice. In addi- tion to these recall challenges, we continued to face a weak overall powersports industry, but were encouraged by continued retail strength for Indian and our overall motorcycle business, and the return to growth for side-by-sides in September," commented Scott Wine, Polaris' chairman and CEO. "We remain committed to improving our fundamentals and executing our long-term strategy to be the 'Best in Powersports, Plus'. Our recent announcement to acquire Trans- american Auto Parts, a $740 million, vertically integrated multi-channel leader in the $10-plus billion Jeep and truck aftermarket accessory space, is consistent with our strategy and excit- ing due to its growth potential. This transaction provides us an immediate leadership position in a growing market, while allowing us to accelerate growth and profitability for Polaris," continued Wine. "We are making the necessary investments, both internally and externally, to realize the true potential of our organiza- tion. Along with improvements in product safety and quality, we are using Huntsville and our go to market Retail Flow Management (RFM) process to establish lean as a competi- tive advantage, we are bringing technology to the forefront of our industry with Ride Com- mand, and we are working to transform the customer experience, from purchase to service, to enhance profitability. This commitment to improving our execution and our overall performance will drive a steadier cadence of growth and profitability in the future." Off-Road Vehicle (ORV) and Snowmobile segment sales, including its respective PG&A sales, decreased 23 percent from the third quarter of 2015 to $923.4 million. Gross profit decreased 40 percent to $231.3 million, or 25.1 percent of sales, in the third quarter of 2016, compared to $388.5 million, or 32.6 percent of sales, in the third quarter of 2015 due to higher warranty costs related to recent recall activity primarily for the company's RZR vehicles. ORV wholegood sales decreased 25 percent to $619.0 million reflecting the company's decision to delay model year 2017 shipments, including the high margin RZR Turbo vehicles, in order to revalidate its new model lineup and protect dealer inventory levels. Compared to the 2015 third quarter, Polaris North American ORV unit retail sales were down high-single digits percent, consisting of consumer pur- chases for side-by-side vehicles down high- single digits percent and ATV retail sales down low-double digits percent. The North Ameri- can ORV industry was down low-single digits percent compared to the third quarter last year. ORV dealer inventory was down 16 percent in the 2016 third quarter compared to the same period last year. Snowmobile wholegood sales decreased 35 percent to $119.9 million due to timing of shipments, year-over-year, as the company manufactured and shipped its snowmobiles earlier in 2015. Motorcycle segment sales, including its respective PG&A sales, decreased 3 percent in the 2016 third quarter to $183.2 million. 8 • November 28, 2016 • Powersports Business www.PowersportsBusiness.com Polaris reports decreased sales in Q3 STOCK MARKET WATCH Stock Price Percent Company Ticker 11/7/16 Change Spy Inc. XSPY $0.08 23.1% Harley-Davidson, Inc. HOG $56.67 13.7% Intl. Speedway Corp. Cl. A ISCA $33.08 6.9% Arctic Cat, Inc. ACAT $15.45 5.6% Polaris Industries, Inc. PII $79.93 5.5% Honda Motor Corp. ADR HMC $28.18 -4.2% Cooper Tire & Rubber CTB $34.23 -5.8% Brunswick Corp. BC $44.01 -8.4% Assurant, Inc. AIZ $80.10 -12.0% MarineMax, Inc. HZO $15.95 -23.5% POWERSPORTS BUSINESS WINNERS AND LOSERS See Polaris, Page 10 MARKET WATCH Change 11/7/16 from 10/14 % Change Powersports Business Index 228.402 0.50 0.22% Dow Jones Index 157.807 0.04 0.03% S&P 500 Index 144.152 -1.02 -0.70% Source: Wells Fargo Securities LLC 0 50 100 150 200 250 300 3/11/16 4/8/16 4/29/16 5/20/16 6/17/16 7/22/16 8/12/16 9/9/16 10/14/16 11/7/16 PSB INDEXED VALUE DOW JONES INDEXED S&P 500 INDEXED STOCK MARKET ACTIVITY DEALER FINANCIAL SNAPSHOT JANUARY-SEPTEMBER 2016 CDK Global Recreation dealers were up 0.4 per- cent overall from January to September. The West saw the largest decrease, down 2.3 percent overall. The Northeast was down the most in parts, with a 7.5 percent decrease. The Northwest and South were both down 2.9 percent in parts, and each increased in every other category. The Midwest saw the largest increase overall with 2.3 percent growth. PARTS SALES Parts saw 626 dealers increase and 901 decrease. SERVICE SALES 834 dealers were up, while 650 were down in service sales. MAJOR UNIT SALES Major unit sales saw 699 dealers up, and 689 dealers down. NORTHWEST -2.9% Parts Department 1.8% Service Department 1.9% Major Units 1.2% Overall MIDWEST -3.3% Parts Department 3.2% Service Department 2.3% Major Units 2.3% Overall NORTHEAST -7.5% Parts Department 4% Service Department 0.2% Major Units -0.5% Overall SOUTH -2.9% Parts Department 6.6% Service Department 1.2% Major Units 1.4% Overall WEST -3.4% Parts Department 2.4% Service Department -2.9% Major Units -2.3% Overall UNITED STATES -3.9% Parts Department 4.1% Service Department 0.6% Major Units 0.4% Overall FOR MORE ON THE SAME STORE SALES DATA For more information on this report and other industry data, contact: cdkrecreation.com/dataservices