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Polaris 2018 Q4 Results Up 14%

Polaris Industries Inc. reported that adjusted fourth quarter 2018 sales of $1,627 million, a 14 percent increase from $1,431 million for the fourth quarter of 2017.

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Polaris Industries Inc. reported that adjusted fourth quarter 2018 sales of $1,627 million, a 14 percent increase from $1,431 million for the fourth quarter of 2017.

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“Our strong performance during 2018 demonstrated the dedication and flexibility of our global team, as they drove improved financial and operating results for the year while adapting and executing our strategy to account for tariffs and other external pressures,” said Scott Wine, chairman and CEO of Polaris Industries, Inc.

In the off-road vehicle (ORV) and snowmobile segment including PG&A, sales totaled $1,060 million for the fourth quarter of 2018, up seven percent over $994 million for the fourth quarter of 2017 driven by growth in snowmobile sales reflecting a successful SnowCheck pre-order program in 2018. PG&A sales for ORV and snowmobiles combined increased six percent in the 2018 fourth quarter compared to the fourth quarter 2017. Gross profit increased one percent to $282 million in the fourth quarter of 2018, compared to $279 million in the fourth quarter of 2017. Gross profit percentage declined during the quarter as increased pricing was more than offset by tariffs, higher logistics and commodity costs and negative product mix.

ORV whole good sales for the fourth quarter of 2018 decreased two percent largely due to a tough comparison versus the prior year period when shipments were accelerated to address shortages and demand requirements in the second half of 2017.

Polaris North American ORV retail sales increased low-single digits percent for the quarter with side-by-side vehicles up mid-single digits percent, offset somewhat by ATV vehicles down mid-single digits percent. Side-by-sides gained market share during the quarter, while ATV share was flat. The North American ORV industry was down low-single digits percent compared to the fourth quarter last year.

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Snowmobile whole good sales in the fourth quarter of 2018 was $195 million, up 49 percent compared to $131 million in the fourth quarter last year. Snowmobile sales were positively impacted in the fourth quarter due to timing of shipments of pre-season SnowCheck orders, the highest in 17 years, driven by the strength of the new 850 Patriot engine, which was available only in a pre-ordered snowmobile.

Motorcycle segment sales, including PG&A, totaled $87 million, down 15 percent compared to the fourth quarter of 2017. Indian sales increased slightly, but were more than offset by the decline in Slingshot sales. Gross profit for the fourth quarter of 2018 was $2 million compared to $5 million in the fourth quarter of 2017. Adjusted for the Victory wind-down costs for both 2018 and 2017 fourth quarters, motorcycle gross profit was $2 million in the 2018 fourth quarter compared to $8 million for the 2017 fourth quarter.

The decrease in gross profit was the result of negative product mix, along with tariff costs and higher logistics and commodity costs.

North American consumer retail sales for the Polaris motorcycle segment, including both Indian Motorcycle and Slingshot, decreased high-teens during the 2018 fourth quarter. Indian Motorcycle retail sales decreased low double-digits. Slingshot’s retail sales were down substantially during the quarter. Motorcycle industry retail sales, 900cc and above, were down low-double digits percent in the 2018 fourth quarter. Indian Motorcycle gained market share for the 2018 fourth quarter on a year-over-year basis.

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The aftermarket segment sales decreased three percent to $212 million in the 2018 fourth quarter compared to $218 million in the 2017 fourth quarter driven primarily by a decrease in Transamerican Auto Parts (TAP) sales during the fourth quarter. TAP sales in the fourth quarter of 2018 were $183 million, which was down five percent compared to the fourth quarter of 2017. TAP sales declined due to ongoing soft wholesale sales along with lower e-commence demand. Gross profit decreased to $52 million in the fourth quarter of 2018, compared to $61 million in the fourth quarter of 2017 due to the lower sales volume.

The boats segment sales, which consist of the Boat Holdings acquisition that closed July 2, 2018, were $145 million in the 2018 fourth quarter, slightly exceeding company expectations. Gross profit was $26 million or 17.9 percent of sales in the fourth quarter of 2018.

Other highlights from Polaris’ year end report include:

  • Fourth quarter reported net income was $1.47 per diluted share, up 200 percent over the prior year; adjusted net income for the same period was $1.83 per diluted share, up 19 percent over the prior year.
  • Full year 2018 reported net income was $5.24 per diluted share up 95 percent; adjusted net income for the same period was $6.56 per diluted share, up 29 percent, which was near the high-end of previously issued guidance. Reported and adjusted sales for the full year of 2018 increased 12 percent to $6,079 million and $6,083 million, respectively.
  • North American retail sales increased 6 percent for the quarter compared to last year; ORV N.A. retail sales were up low single-digits driven by side-by-side vehicles sales.
  • Dealer inventory was up 1 percent year-over-year for the fourth quarter 2018, in line with expectations.
  • Polaris announced full year 2019 adjusted sales and earnings guidance with full year adjusted sales growth in the range of 11 percent to 13 percent over the prior year and full year adjusted earnings in the range of $6 to $6.25 per diluted share, which includes the combined negative impact from external factors including the annualized impact of current tariffs, adverse foreign exchange impact and higher interest rates of approximately $1.50 per share.

“Growth and market share gains in off road vehicles, and the acquisition of boat holdings, further expanded our position as the global leader in powersports, and established Polaris as a leader in the attractive, profitable and growing pontoon market,” Wine said. “We are encouraged by our growth prospects for 2019 and beyond, but keenly aware of, and prepared for, the challenges and uncertainties presented by global trade and economic complications. We our doubling down on our commitment to be a customer-centric, highly efficient growth company, directing our investments and actions towards organic growth and productivity. Our devotion to safety and quality is never-ending, and provides the solid foundation for our future of innovation and profitable growth. We expect to demonstrate that in the year ahead with further market share gains in both ORV and motorcycles, as we continue to advance our leadership position in powersports.”

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