Polaris Industries' sales for its second quarter ended June 30 totaled $345.9 million, a decrease of 24 percent from second quarter 2008 sales of $455.7 million. The company expects sales for the full year 2009 to be 20 percent to 25 percent lower than sales of $1.948 billion posted in 2008.
Polaris leadership says it expects year-end sales of motorcycles to be down 40 to 50 percent compared to last year; off-road vehicle sales to be down 21 to 25 percent; parts, garments & accessories (PG&A) to be down 13 to 17 percent; and snowmobile sales to be down 15 to 20 percent.
"Our outlook for the North American economy remains weak," says Scott Wine, CEO, Polaris Industries. "Our expectations for 2009 remain unchanged and we expect our core markets to remain very challenging."
Sales of Victory motorcycles to dealers decreased 55 percent during the second quarter of 2009 when compared to the same period in 2008. Polaris says the decrease reflects the planned reduction in shipments of Victory motorcycles to dealers in North America during the quarter in response to dealers' efforts to further reduce their inventory levels as well as the weakening motorcycle industry retail sales environment.
Although dealer inventory levels are 24 percent lower at the end of the second quarter 2009 than at the end of the second quarter 2008, further reductions are needed given the weak motorcycle industry retail sales environment, the OEM says.
"We have made and will continue to make adjustments to assist our Victory dealers through these difficult economic times," Wine says. "Shipments have been significantly reduced through the first half of the year, and although dealer inventories of Victory motorcycles are down 24 percent year to date as compared to last year, they remain higher than the current market conditions warrant. Therefore, we have made further adjustments in our production plans and throughout our Victory organization to focus more on the front end of the business and are allocating additional resources to assist our dealers in further lowering their inventory levels."
Sales of ATVs and side-by-side vehicles to dealers during the second quarter 2009 decreased 25 percent from the second quarter 2008. Polaris says the decrease reflects the continued weakness in the consumer retail environment, as dealers continued to reduce core ATV orders in an effort to reduce inventory levels. As a result, ATV dealer inventory levels in North America finished 18 percent lower at the end of the second quarter 2009 than at the end of the second quarter 2008.
Although side-by-side retail sales were also lower during the second quarter 2009 compared to the second quarter 2008, resulting in lower shipments of the vehicles, the decline was less than the core ATV retail declines. The OEM says dealer inventories for side-by-side vehicles are higher than a year ago, but lower than at the end of the first quarter 2009.
PG&A sales decreased 13 percent during the second quarter 2009 compared to the same period of last year, driven primarily by the lower retail sales of Polaris vehicles during the second quarter 2009.
Snowmobile sales totaled $7.4 million for the 2009 second quarter compared to $6.0 million for the second quarter of 2008. The second quarter is historically a seasonally low quarter for snowmobile shipments, as deliveries to dealers ramp up in the second half of the calendar year.
Polaris leadership says it is watching dealer health closely so the OEM can respond as appropriate.
"Maintaining the strength of our dealers is a top priority," Wine says, adding: "We continue to drive down dealer inventory, with a 10 percent reduction from the previous quarter and an eight percent reduction from the second quarter of 2008. But inventory reduction is not the only area where we are working closely with our dealers. We are reducing the overall floorplan receivables and have even accelerated hold-back payments in the quarter to help with their cash-flow.
"Access to wholesale financing remains solid, and losses across our network remain low, both in receivables and in actual dealer count. We have seen dealer repossessions drop from the spike we saw in the fourth quarter of last year, and still expect the overall decrease in dealers in 2009 to be approximately 5 percent, which is in line with our historical annual turnover."
The objective to Polaris' recently introduced Maximum Velocity Program (MVP) is for dealers to continue to grow market share while operating with lower levels of inventory.
"We are going to expand the MVP program significantly on a geographic and dealer criteria basis beginning with this upcoming order period," says Bennett Morgan, COO. "Also, for those dealers not yet eligible for MVP, we are making significant improvements to help drive out inventory waste and reduce dealer order risks using our improved speed in manufacturing flexibility."
RETAIL CREDIT FINANCING
Polaris says availability of retail credit financing sources remains at "acceptable" levels given the continued uncertain credit markets. Polaris has relationships with HSBC Bank, GE Money Bank and Sheffield Financial to provide retail revolving and installment financing credit to consumers.
During the second quarter 2009, 48 percent of consumer retail credit loan applications from Polaris customers were approved by HSBC, GE or Sheffield, improved from the first quarter 2009 approval rate of 44 percent. Additionally, 33 percent of Polaris' retail customers in the United States financed their Polaris product purchases through HSBC, GE or Sheffield, which is slightly better than the first quarter 2009 penetration rate.
"Both the penetration rate and the approval rate are somewhat lower than historical levels, and somewhat weaker than desirable due to the credit tightening by our retail credit providers," says Mike Malone, CFO. "It is obviously having some dampening impact on our retail sales levels."
Polaris' annual dealer show is scheduled to take place the week of July 19 in St. Paul, Minn.