Polaris Industries Inc. has reported a record second-quarter ended June 30, 2015, with an increase of 4 percent from the prior year. The second-quarter results included additional manufacturing costs and inefficiencies, as Polaris worked to scale-up production and add capacity to the paint system at the company’s motorcycle facility in Spirit Lake, Iowa. Sales for the second quarter 2015 totaled a record $1.12 billion, an increase of 11 percent over last year’s second-quarter sales of $1.01 billion.
“In addition to reporting record second-quarter sales and earnings, there are numerous positive undertones to our results this quarter. Motorcycle demand, notably including Slingshot, remains exceptionally high. Our Asia Pacific/Latin America business continues to grow and we are encouraged by the favorable response to the Multix launch in India last month. Between ongoing improvements in our inventory management systems and North American retail sales growing 11 percent, dealer inventory growth moderately decelerated in the second quarter,” stated Scott Wine, Polaris’ Chairman and CEO. “However, earnings were dampened by significant cost pressures, and delayed shipments, related to continued difficulties with our new motorcycle paint system in Spirit Lake, Iowa. We pulled out all the stops to increase throughput in an effort to meet the growing demand for our Indian, Victory and Slingshot customers, accepting the substantial costs commensurate with that push. Although production still cannot keep pace with demand, we are confident in our plans to further increase our motorcycle throughput in the second half of the year, and as such, are maintaining and narrowing full year guidance for sales and earnings per share.”
Wine continued, “Innovation remains a cornerstone of Polaris’ success, and at our dealer show next week we will introduce our model year 2016 powersports lineup that will further extend our market leadership. In spite of the short-term headwinds we are facing, both external and of our own making, I am confident this strong and talented Polaris team can continue to deliver industry-leading returns for our shareholders.”
2015 Business Outlook
Full year 2015 sales are now expected to grow in the range of 10 to 12 percent when compared to 2014, narrowed slightly from previously issued sales guidance.
Off-Road Vehicle (“ORV”) sales increased 2 percent to $688.8 million in the second quarter of 2015 compared to the second quarter of 2014. This increase reflects a combination of ongoing strong customer demand in North America for ORVs, offset by a planned deceleration of shipment growth to improve dealer inventory mix. Polaris North American ORV unit retail sales increased mid-single digits percent from the second quarter last year, with consumer purchases of side-by-side vehicles increasing high-single digits percent and ATV’s increasing mid-single digits percent. Consumer awareness of the Sportsman ACE category also continued to build during the quarter. The company estimates North American industry ORV retail sales in the second quarter of 2015 increased mid-single-digits percent year-over-year, resulting in a modest market share gain for Polaris. Polaris North American ORV dealer inventories during the second quarter of 2015 increased mid-teens percent year-over-year and, as anticipated, the rate of increase improved sequentially from the first quarter of 2015.
Snowmobile sales increased 215 percent to $19.3 million for the second quarter of 2015 compared to $6.1 million for the second quarter of 2014. Snowmobile sales in the company’s second quarter are historically low as they reflect the off-season for snowmobile retail sales and shipments. The increase in shipments during the second quarter of 2015 is related to the timing of snowmobile production and a higher mix of Polaris’s new premium snowmobiles with the Axys chassis being shipped to dealers ahead of the upcoming snowmobile retail selling season.
Motorcycle sales increased 57 percent to $162.1 million for the second quarter of 2015 compared to same period last year due to continued strong demand for Indian motorcycles and the new Slingshot roadster. Victory, Indian Motorcycle and Slingshot North American retail sales increased more than 80 percent during the second quarter of 2015 driven by Indian Motorcycle and Slingshot retail sales, while North American industry midsize and heavyweight motorcycle retail sales were flat with the second quarter of 2014. Demand for the Indian Scout, Roadmaster and the new Indian Dark Horse drove a more than 100 percent increase in retail sales for Indian Motorcycle during the quarter. Victory retail sales in the second quarter of 2015 were lower than the prior year largely due to poor product availability of the new Victory Magnum and Magnum X-1, a result of the paint capacity constraints in the Spirit Lake facility. Slingshot retail sales continued to perform well ahead of expectations as consumer appeal for the new 3-wheeled roadster remained high. Polaris has increased production to meet the ongoing strong consumer demand for Slingshot.
Parts, Garments, and Accessories (“PG&A”) sales increased 17 percent to $187.5 million during the second quarter of 2015 as compared to the same period last year. All product lines experienced double digits percent sales growth during the quarter.
International sales to customers outside of North America totaled $162.9 million for the second quarter of 2015, down 4 percent from the same period in 2014 driven by weak currencies. The EMEA regions’ sales declined 12 percent in the 2015 second quarter, partially offset by a 32 percent increase in Latin American sales and a 15 percent increase in sales in the Asia/Pacific region. International sales by component in the second quarter compared to last year were as follows: ORV sales were down 13 percent; motorcycles sales were up 41 percent; Global Adjacent Markets declined 16 percent; and PG&A sales increased four percent. Snowmobile sales to customers outside of North America were insignificant in the second quarter of 2015.