Polaris Stock Crashes: "Increasingly Cautious Consumer" As High Interest Rates Crush Demand

[christopher]

"Increasingly Cautious Consumer": Polaris Shares Crash As High Interest Rates Crush Demand For ATVs & Jetskis​

TUESDAY, JUL 23, 2024 - 08:45 AM
A toxic trifecta of high interest rates, elevated inflation, and increasingly cautious dealers and consumers led Polaris to report dismal second-quarter results. The earnings miss and reduced full-year forecast for sales and profit indicate the once-thriving outdoor adventure market for ATVs, UTVs, jet skis, and snowmobiles is now in a deep freeze.


Polaris reported $1.96 billion in sales for the second quarter, missing the Bloomberg estimate of $2.17 billion. Sales for off-road, on-road, and marine all missed estimates, indicating that consumers are dialing back purchases of outdoor vehicles because of high interest rates.

Here's a snapshot of second-quarter earnings (courtesy of Bloomberg):

• Sales $1.96 billion, -12% y/y, estimate $2.17 billion (Bloomberg Consensus)
• Off Road sales $1.53 billion, -6% y/y, estimate $1.64 billion
• On Road sales $293.3 million, -19% y/y, estimate $334.8 million
• Marine sales $134.1 million, -40% y/y, estimate $203.9 million
• Gross profit margin 21.6% vs. 22.8% y/y, estimate 23.1%
• Cash and cash equivalents $322.7 million, -5.2% y/y, estimate $267.7 million
• Adjusted EPS from continuing operations $1.38, estimate $2.23

"The second quarter proved challenging as our industry continued to contend with elevated interest rates, inflation, and an increasingly cautious dealer and consumer," Chief Executive Mike Speetzen wrote in a statement.

Polaris now expects full-year sales to decline 17% to 20%, compared with previous guidance of down 5% to 7%. It expects adjusted EPS to slide 56% to 62%, compared with prior guidance of down 10% to 15%.

Polaris now forecast full-year sales to decline by 17% to 20%, a significant drop from the previous guidance of a 5% to 7% decrease. The company also expects adjusted EPS to plummet by 56% to 62%, compared to the prior forecast of a 10% to 15% decline.

Speetzen said, "We have lowered our full-year guidance to reflect the decision to cut shipments and our expectations that current industry challenges remain in place for the remainder of the year."

In premarket trading, shares are down 14%, the largest intraday decline since early Coivd when government-enforced shutdowns closed the economy.


Also, watch MasterCraft Boat, MarineMax, Camping World, Brunswick, and Malibu Boats.

Polaris is a proxy of consumer health.
Certainly, high interest rates and elevated inflation have crimped demand for ATVs, UTVs, and jet skis. The broad theme here is that a consumer slowdown continues to worsen.

"Increasingly Cautious Consumer": Polaris Shares Crash As High Interest Rates Crush Demand For ATVs & Jetskis | ZeroHedge

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[christopher]

The obvious question for all of us is...

WHAT IMPACT WILL THIS HAVE ON SLED PRODUCTION and SLED SALES this coming season??????

What we do know for sure is that the 1st quarter report, which included SNOWMOBILE SALES was DOWN ..

For the first quarter, the Company reported worldwide sales of $1,736 million, down 20 percent versus the first quarter of 2023.

North America sales of $1,444 million represented 83 percent of total Company sales and decreased 22 percent from $1,842 million in 2023.

International sales of $292 million represented 17 percent of total Company sales and decreased 13 percent versus the first quarter of 2023.

Total Company sales in the first quarter of 2024 were negatively impacted by lower volume and net pricing driven by higher promotional activity partially offset by favorable product mix. As reported, first quarter net income attributable to Polaris of $4 million decreased 97 percent and diluted earnings per share ("EPS") of $0.07 decreased 96 percent compared to the first quarter of 2023.

Adjusted net income attributable Investor Contact: J.C. Weigelt 763-542-0525 | Media Contact: Jess Rogers 763-513-3445 Page 1

First Quarter 2024 Earnings Results to Polaris for the quarter was $13 million, down 89 percent, and adjusted EPS was $0.23, down 89 percent, in each case as compared to the first quarter of 2023. Gross profit margin decreased 250 basis points to 19.0 percent for the first quarter, as compared to the first quarter of 2023. Adjusted gross profit margin of 19.0 percent decreased 248 basis points primarily driven by higher promotional activity and higher warranty expense partially offset by favorable operational costs, as compared to the first quarter of 2023. Operating expenses were $313 million in the first quarter of 2024 compared to $325 million in the first quarter of 2023 due to lower selling and marketing expenses. Operating expenses, as a percentage of sales, of 18.0 percent were up 314 basis points in the first quarter of 2024 compared to the first quarter of 2023.

 

[03RMK800]

Pretty simple. People are finally realizing that there is a limit to their fun coupons, and that money has to go to more basic goods sometimes. Manufacturers now need to recognize that the high prices demanded have hit the end of the consumer's economic elasticity. (Both in consumer necessities and in non-essential and luxury goods). At some point, Prices come down. Some Mfrs may not be standing at the end of the cycle. Remember Scorpion, Snojet and the dozens and dozens that fell by the wayside every few years? And, for the remaining companies, they all have been on the ropes at some time or another. Most drastic example: Cat was out for a couple years but was resurrected in 1984. We will see what happens in so many classes of goods.

 

[christopher]

Pretty simple. People are finally realizing that there is a limit to their fun coupons, and that money has to go to more basic goods sometimes. Manufacturers now need to recognize that the high prices demanded have hit the end of the consumer's economic elasticity. (Both in consumer necessities and in non-essential and luxury goods). At some point, Prices come down.

Completely Agree.

 

[MTsled3]

In related news: https://powersportsbusiness.com/new...nneto-departs-polaris-named-ceo-malibu-boats/

 

[christopher]

In related news: https://powersportsbusiness.com/new...nneto-departs-polaris-named-ceo-malibu-boats/

So he was in charge of the motorcycle division wasn't he?
You see any possible impact on Sledding??

 

[NHRoadking]

That article left out some important facts, endless recalls and actual and perceived lack of quality.

You gotta think that has impacted sales a lot.

 

[MTsled3]

So he was in charge of the motorcycle division wasn't he?
You see any possible impact on Sledding??

He was president of off-road. May not impact sledding directly but just thought it was interesting as it coincided with what you posted.

One thing to note is that although sales are down, that's compared to the last couple years when sales (in dollars - not necessarily units sold) were above average in most powersports categories due to covid. These metrics the media use always make things seem doom and gloom, but in reality there are some years above average, and some years below average. That's literally how average work.

I do see a problem in the powersports industries as a whole though. The prices they're asking for new vehicles is not sustainable in the near future. These manufacturers all took advantage of a period of high demand and low supply and jacked prices up, but now that demand is falling fast, machines are sitting, with their inflated price tags, collecting dust in dealer lots, waiting for heavy rebates to get rid of them. There are TONS of brand new sleds, atvs, dirt bikes sitting at dealers right now.

 

[jcjc1]

That article left out some important facts, endless recalls and actual and perceived lack of quality.

You gotta think that has impacted sales a lot.

i was thinking the same. not enough days on the snow as it is to then have them reduced even further by quality issues.

 

[christopher]

I do see a problem in the powersports industries as a whole though. The prices they're asking for new vehicles is not sustainable in the near future. These manufacturers all took advantage of a period of high demand and low supply and jacked prices up, but now that demand is falling fast, machines are sitting, with their inflated price tags, collecting dust in dealer lots, waiting for heavy rebates to get rid of them. There are TONS of brand new sleds, atvs, dirt bikes sitting at dealers right now.

this is the same issue the auto industry has.
Once they RAISE THE PRICE on a specific vehicle they are LOATHE to ever lower that price again as it instantly eats away at used values.
This was the issue with Tesla LOWERING their MSRP, it destroyed all of the current user base as every vehicle instantly depreciated.

Instead they play these stupid games of rebates and incentives and financing.
When the real issue IS THE BASE PRICE is just TOO DANG HIGH for the current economy.

 

[MTsled3]

this is the same issue the auto industry has.
Once they RAISE THE PRICE on a specific vehicle they are LOATHE to ever lower that price again as it instantly eats away at used values.
This was the issue with Tesla LOWERING their MSRP, it destroyed all of the current user base as every vehicle instantly depreciated.

Instead they play these stupid games of rebates and incentives and financing.
When the real issue IS THE BASE PRICE is just TOO DANG HIGH for the current economy.

Exactly. Manufacturers played the short-term game without thinking of long-term consequences

 

[boondocker97]

A couple things come to mind.

Poor snow years always cause a downturn in sled sales. And last year was terrible in a lot of places. Worst I can remember since I started riding the mtns.

All the recalls do shake the perceived quality and sales. However, they also impact the bottom line through extra engineering, manufacturing, and costs paid to dealers to fix those issues.

While things do cost more, the real issue is our money is worth less than it ever has been worth in the past.

 

[christopher]

While things do cost more, the real issue is our money is worth less than it ever has been worth in the past.