Polaris Inc. released first quarter 2021 results with reported sales of $1,951 million, up 39% from reported sales of $1,405 million for the first quarter of 2020. The company reported first quarter 2021 net income of $134 million, or $2.11 per diluted share, compared with a net loss of $5 million, or $(0.09) per diluted share, for the 2020 first quarter. Adjusted net income for the quarter ended March 31, 2021 was $146 million, or $2.30 per diluted share compared to $14 million, or $0.22 per diluted share in the 2020 first quarter.
Retail demand and industry tailwinds continued to be strong during the quarter driving higher company performance as both new and existing customer growth accelerated across all segments and regions of the company.
Gross profit increased 64% to $481 million for the first quarter of 2021 from $293 million in the first quarter of 2020. Reported gross profit margin was 24.6% of sales for the first quarter of 2021, up 378 basis points compared to 20.8% of sales for the first quarter of 2020. The improvement in gross profit was driven primarily by higher volumes and lower promotional costs during the quarter, partially offset by higher logistical costs and plant inefficiencies related to the supply-chain constraints. Adjusted gross profit for the first quarter 2021 was $483 million, or 24.7% of adjusted sales compared to the first quarter of 2020 adjusted gross profit of $298 million, or 21.2% of sales. Adjusted gross profit for the first quarter of 2021 and 2020 excludes the negative impact of $2 million and $5 million of restructuring and realignment costs, respectively.
Operating expenses increased two percent for the first quarter of 2021 to $313 million from $307 million in the same period in 2020. Operating expenses were higher due to an increase in administrative expenses.
Income from financial services was $16 million for the first quarter of 2021, down 18% compared with $20 million for the first quarter of 2020. The decrease was primarily the result of a decrease in wholesale financing income during the quarter due to lower dealer inventory levels.
Interest expense was $12 million for the first quarter of 2021 compared to $16 million for the same period last year primarily due to lower debt levels.
Other (income) expense, net, was $3 million of income in the first quarter of 2021 compared to $1 million of expense in the first quarter of 2020. Other (income) expense is the result of currency exchange rate movements and the corresponding effects on currency transactions related to the company’s international subsidiaries.
The provision for income taxes for the first quarter of 2021 was $41 million, or 23.4% of pretax income, compared with a tax benefit of $6 million, or 53.8% of pretax loss, for the first quarter of 2020. The decrease in the effective income tax rate is primarily due to the impact of favorable excess tax benefits related to share-based compensation on pretax income in the first quarter of 2021 as compared to the tax benefit from the pretax loss and the release of tax reserves due to the expiration of certain statutes of limitations in the first quarter of 2020.
CEO Commentary
“The strength of our brands and the agility and dedication of the global Polaris team were on full display yet again this quarter, building on our incredible momentum from 2020 and delivering results that exceeded our expectations. Despite pandemic-related supply chain constraints, logistical challenges, and North American weather-related disruptions, sales across our business grew double-digits as we leveraged our capabilities and scale as the industry leader in powersports to deliver for our customers and dealers. Industry-leading innovation remains core to who we are, which was evident by the introduction of over 40 new or limited edition models during the quarter, including 22 new snowmobiles and a new turbo charged engine, 15 new and limited edition ORV models and three all-new Indian Chief motorcycles celebrating 100 years of one of the most historic and influential motorcycles of all time. We also announced plans to launch an all-new full-size electric RANGER by year-end, which further positions us to be the leader in powersports electrification. We will continue to swiftly navigate the challenges that may present themselves in the coming quarters, while positioning Polaris for long-term growth and value-creation for all our stakeholders.”
— Mike Speetzen, interim chief executive officer of Polaris Inc.
Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $1,232 million for the first quarter of 2021, up 50% compared to $824 million for the first quarter of 2020 driven by broad based strength across ATVs, side-by-sides and Snowmobile sales. PG&A sales for ORV and Snowmobiles combined increased 51% in the first quarter of 2021 compared to the first quarter last year. Gross profit increased 62% to $327 million in the first quarter of 2021, compared to $202 million in the first quarter of 2020. Gross profit percentage increased 208 basis points during the 2021 first quarter compared to the prior year due to strong retail demand driving lower promotional and floor-plan finance spending, partially offset by supply chain constraints.
ORV wholegoodsales for the first quarter of 2021 increased 39%. Polaris North American ORV retail sales increased approximately 80% for the quarter with side-by-side vehicles up high sixty percent and ATV vehicles up about 100%. The North American ORV industry was up about sixty percent compared to the first quarter last year.
Snowmobile wholegood sales in the first quarter of 2021 were $75 million compared to $6 million in the first quarter last year. Polaris snowmobile retail sales were up low-twenty percent during the first quarter of 2021 and up mid-twenty percent for the twelve-month season ending March 2021. North American industry retail was up mid-single digits percent for the first quarter and up mid-teens percent for the season ending March 2021.
Motorcycles segment sales, including PG&A, totaled $166 million, up 31% compared to the first quarter of 2020, driven primarily from increased sales of Slingshot, Indian Motorcycles, and related PG&A. Gross profit for the first quarter of 2021 was $8 million compared to a $1 million loss in the first quarter of 2020. The increase in gross profit margin was driven by volume and lower promotional costs offset somewhat by increased costs from supply chain constraints and negative product mix.
North American consumer retail sales for Indian Motorcycles increased low sixty percent during the first quarter of 2021 in a mid-to-heavy-weight two-wheel motorcycle industry that was up mid thirty percent. North American consumer retail sales for Polaris’ motorcycle segment, including both Indian Motorcycle and Slingshot, increased low-seventies percent during the first quarter of 2021. North American consumer retail sales for the motorcycle industry including both two-wheel and three-wheel increased high thirties percent during the first quarter of 2021.
Global Adjacent Markets segment sales, including PG&A, increased 27% to $125 million in the 2021 first quarter compared to $98 million in the 2020 first quarter driven by increases in demand in North America and EMEA. Gross profit increased 22% to $33 million or 26.3% of sales in the first quarter of 2021, compared to $27 million or 27.4% of sales in the first quarter of 2020. Gross profit percentage decreased during the quarter primarily due to negative product mix offset somewhat by higher pricing.
Aftermarket segment sales of $230 million in the 2021 first quarter increased 14% compared to $202 million in the 2020 first quarter. Transamerican Auto Parts (TAP) sales of $193 million in the first quarter of 2021 increased nine percent compared to $177 million in the first quarter of 2020. The company’s other aftermarket brands sales were up 45% compared to the first quarter of 2020. Gross profit increased 32% to $61 million or 26.7% of sales in the first quarter of 2021, compared to $46 million or 22.9% of sales in the first quarter of 2020. Gross profit percentage improved during the quarter due to higher volume, improved product mix and higher pricing.
Boats segment sales increased 29% to $199 million in the 2021 first quarter compared to $155 million in the 2020 first quarter, driven by sales growth in all three brands, Bennington, Godfrey and Hurricane. Gross profit increased 56% to $46 million or 23.4% of sales in the first quarter of 2021, compared to $30 million or 19.2% of sales in the first quarter of 2020 due to increased volume and positive product mix partially offset by increased supply chain constraint costs.
Supplemental Data:
Parts, Garments, and Accessories (“PG&A”)sales increased 49% for the 2021 first quarter with all categories and business segments growing sales during the quarter.
International sales to customers outside of North America, including PG&A, totaled $288 million for the first quarter of 2021, up 59% from the same period in 2020. All regions realized significant sales increases year over year.
2021 Business Outlook
Given the 2021 first quarter results, and the expected continued strong retail demand, the company is increasing its full year sales and earnings guidance and now expects adjusted net income to be in the range of $9.00 to $9.25 per diluted share, compared with adjusted net income of $7.74 per diluted share for 2020 with full year 2021 sales now in the range of $8,300 to $8,500 million, up 18 to 21%.
Link: Polaris
