Polaris earnings down 80% as consumers delay big purchases

Consumer caution and backed up inventory hit Polaris hard in the third quarter, resulting in an 80% drop in profits.

Company leaders said Tuesday that consumers continue to put off buying larger discretionary items, hitting the largest powersports manufacturer.

CEO Mike Speetzen said while the Federal Reserve’s interest rate cut in September (a greater-than-expected half a percentage point) helps, there will have to be more action to convince a majority of consumers to buy items that most likely need to be financed.

Speetzen told analysts Tuesday he believes the remainder of 2024 will be challenging and the conditions will continue into 2025.

The Medina-based maker of all-terrain and utility vehicles, motorcycles, snowmobiles and pontoon boats said Tuesday it earned $27.7 million, or 49 cents a share. Sales were down 23% to $1.7 billion.

Shares of Polaris ended the day at $72.21, down nearly 10%.

The company also lost market share as dealers more deeply discount older models from competitors that have been on the lot for a year or two, executives said. Dealers have been willing to take losses on those older models so they no longer have to pay interest on aging inventory.

That level of inventory backup surprised Polaris officials, but they said they are not going to follow suit in most cases. While the company will need to protect market share in some instances, Speetzen said it doesn’t make sense to match the discounts when the Polaris vehicles on the lots are newer.

“We are not going to get caught up in short-term discounting,” Speetzen said on the call.

Instead, Polaris is focusing on operational efficiency and managing dealer inventory, said Speetzen, who told analysts he will meet with the Polaris dealer council next week.

“Job number one is protecting dealers,” Speetzen said, and helping them control the inventory. That’s the way to remain the manufacturer of choice among dealers as conditions improve.

“A healthy dealer network is one of the critical components to our long-term success, which is why we have anchored our current production and shipment plans to our goal of lowering dealer inventory by 15 to 20 percent by the end of the year,” Speetzen said in a news release.

In the meantime, though, the situation will drag financial results.

Polaris has reduced its guidance for the remainder of 2024. It now expects fourth quarter sales to be down 20% compared with the same period a year ago. Previous outlook had sales down 17% to 20%.

The company now expects adjusted earnings per share to be down 65%, compared with previous guidance of down 56% to 62%.