[dropcap]A[/dropcap]ccording to our survey of powersports dealers, November was a month of relatively sluggish demand trends across North America. Specifically, the strong sales trends that dealers experienced during the spring and summer months of 2015 was a thing of the past, as our information indicated that it was a struggle for dealers to post positive growth in November. This was especially true of the side-by-side category where, according to our survey, growth lagged that of the traditional ATV market.
Moreover, we would point out that this trend was particularly evident in areas such as western Canada and Texas, where consumers are dealing with the impact that falling energy prices have had on those regions’ economies.
Looking ahead, the outlook from dealers suggests that the next three months will experience growth – albeit at a moderating rate from what we have seen in the past. While dealers were generally happy with the promotions that OEMs were providing, they expressed angst about (1) the level of inventory in the channel, (2) the intensely promotional retail environment (driven in part by excess inventory) and (3) lack of snow that has pressured the snowmobile business that many dealers in the Snowbelt have.
Despite the fact that Mother Nature is not being very accommodative for snowmobile sales, we believe that Polaris’ recent decision to cut ROV shipments and reduce dealer inventory should address the first two concerns that many of its dealers have and help them return to more profitable growth – even in an environment of moderate growth.
The next 60 days should provide some insight in to how 2016 could shake out as we should start to see the impact of Polaris’ efforts to reduce dealer inventory while gaining further clarity on El Niño’s final impact of the snowmobile market.
Seth Woolf, a research analyst with Northcoast Research Partners, covers the powersports sector within his consumer sector coverage list. Northcoast Research Partners is an institutional equity research firm located in Cleveland, Ohio.
