polaris slides in second quarter

Victory motorcycle sales grew 26% in Polaris' second quarter. That's really the only good news that was reported in the latest earnings report from the Minnesota motorsports manufacturer.

Net income fell 22% from $29.1 million in the second quarter of 2005 to $22.7 million in this year's second quarter. Sales also fell 13% from $442.3 million to $384.3 million this year.

Polaris CEO Tom Tiller pointed to a continuing push to reduce dealer inventory and a challenging economic environment as reasons for the loss. ATV and snowmobile shipments were down and Tiller put some of the blame on rising interest rates and high gasoline prices. Tiller also expects further reductions as Polaris tries to manage high dealer inventories.

Year-to-date sales were also down 10% when compared to last year at this time. Total sales from continuing operations were $800.6 million last year at the end of six months and are $717.8 million this year.

Snowmobile sales did not inspire confidence as they dropped from $51.9 million to a scant $5.3 million. That 90% free-fall in sales was due to a huge drop in new orders from dealers for '07 product. There was also a change in the timing of quarterly shipments to dealers this year.

Inventory levels were simply too high at the dealer level to substantiate the ordering of new snowmobile models. As usual, below average snowfalls across the Midwest and East as well as warranty issues on 2005/2006 products were cited as major contributors to the lack of sales. Year-to-date snowmobile sales are $7.8 million compared to $59.1 million at this time last year.