Polaris Experiences Decrease in Retail Demand for ATVs & Jetskis
Polaris, a company renowned for selling ATVs, UTVs, jet skis, and snowmobiles, witnessed a drop in its shares in premarket trading following a disappointing third-quarter earnings report. The company also reduced its full-year earnings per share and sales forecast, attributing this to a decrease in demand for outdoor vehicles due to high-interest rates.
Company's Response to Challenging Retail Demand
In a press release, Polaris CEO Mike Speetzen stated, "As consumer confidence and retail demand remain challenging, we have maintained our focus on managing dealer inventory and delivering better operational efficiency."
The company reported sales of $1.72 billion, a 23% YoY decrease, falling short of the Bloomberg estimate of $1.77 billion. Sales were slightly down in off-road vehicles, motorcycles, and pontoons.
Third-Quarter Earnings Snapshot
Here's a brief overview of the third-quarter earnings as provided by Bloomberg:
- Sales: $1.72 billion, -23% y/y, estimate $1.77 billion (Bloomberg Consensus)
- Off-Road sales: $1.40 billion, -24% y/y, estimate $1.41 billion
- On-Road sales: $236.5 million, -13% y/y, estimate $241.6 million
- Marine sales: $85.9 million, -36% y/y, estimate $133.7 million
- Gross profit margin: 20.6% vs. 22.6% y/y, estimate 21%
- Cash and cash equivalents: $291.3 million, -1.4% y/y, estimate $337.8 million
- Adjusted EPS from continuing operations: 73c, estimate 89c
Impact of High Interest Rates on Polaris' Sales
The era of low-cost money during Covid and the migration of people from cities to resort towns or rural America resulted in a surge in demand for outdoor vehicles. However, as the Federal Reserve tightened monetary policy, leading to soaring interest rates, affordability for these outdoor toys for adults worsened, thereby reducing demand.
Due to a challenging market, where high interest rates have curtailed consumer spending on jetskis, RZRs, and snowmobiles, Polaris had to lower its full-year earnings per share and sales guidance:
- Adjusted EPS: -65%, previously -56% to -62%
- Sales: -20%, previously -17% to -20%
Updated 2024 Business Outlook
Polaris further elaborated on its decision to lower its 2024 business outlook:
The company now anticipates a 20 percent decrease in its 2024 sales outlook compared to 2023, as opposed to its previous outlook of a 17 to 20 percent decrease. It also expects the adjusted diluted EPS attributed to Polaris Inc. common shareholders to be down approximately 65 percent relative to 2023, as against the prior outlook of a 56 to 62 percent decrease.
In the markets, Polaris shares in New York have fallen by 7%. On an annual basis, shares have dropped by 15% (as of Monday's close). Shares are currently at levels last seen just before the Covid crash.
Other companies to watch include MasterCraft Boat, MarineMax, Camping World, Brunswick, and Malibu Boats.
Consumer Slowdown Continues to Worsen
Polaris is a reflection of consumer health. It's clear that high interest rates and increased inflation have reduced demand for ATVs, UTVs, and jet skis. The overarching theme is that the consumer slowdown continues to worsen.
Bottom Line
The decrease in demand for outdoor vehicles like ATVs and jetskis is a telling sign of the current state of consumer health. High interest rates and inflation have undoubtedly played a significant role in this downturn. As the situation continues to evolve, it raises the question: will this trend continue, or will we see a resurgence in demand? We'd love to hear your thoughts on this matter. Please feel free to share this article with your friends. Also, don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
Polaris Experiences Decrease in Retail Demand for ATVs & Jetskis
Polaris, a company renowned for selling ATVs, UTVs, jet skis, and snowmobiles, witnessed a drop in its shares in premarket trading following a disappointing third-quarter earnings report. The company also reduced its full-year earnings per share and sales forecast, attributing this to a decrease in demand for outdoor vehicles due to high-interest rates.
