Deals on Polaris vehicles grow as dealerships face high inventories

Dealerships selling Polaris and other recreational vehicles started seeing a significant drop in sales during the last quarter of 2023, and it has continued so far this year.

“It’s been a challenging year so far,” said David Glassman, who owns Tousley Motorsports and Marine in White Bear Lake and sits on the Polaris dealer council. “That is when we started seeing a significant shift from the buying patterns that we got spoiled with during COVID.”

As people looked to find socially distant ways to spend time during the pandemic, they rediscovered outdoor recreation, significantly boosting sales for Medina-based Polaris, Eden Prairie-based Winnebago and other companies that sell recreational vehicles and boats.

But because they are high-priced items that do not need to be replaced every year, the companies have had a tough time — much like retailers as a whole — at matching the increased sales of 2020 to 2022.

Polaris, the largest player in the powersports industry, reported second quarter results last week that included a 12% drop in sales and 49% decrease in profits year over year.

Polaris’ next largest competitor, BRP Inc., the Canada-based maker of Ski-Doo snowmobiles and Sea-Doo personal watercraft, among other products, reported a 16.5% decrease in sales when it reported first quarter results last month.

Polaris acknowledged that the financial concerns are filtering down to dealerships, which have bloated inventories with the sales decrease. Polaris said it would cut shipments for the remainder of the year.

“We are committed to maintaining dealer inventory at healthy levels, which is why we adjusted shipments and supported inventory in the field with increased promotional activity,” said Mike Speetzen, chief executive of Polaris, on its second-quarter earnings call.

Dealers typically pay financing on the inventory they have on their floors once they have the products for more than 120 days, which creates additional expense for them. Polaris wants to help avoid that, and one way to do that is to allow more promotion and rebates.

Glassman’s Tousley Motorsports — which David Glassman’s father started in 1971 — sells products from Honda, Yamaha, BRP and Polaris, plus Manitou pontoon boats.

Like other dealerships, he saw sales peak during the pandemic.

“We’re seeing a transition from that, that high end, luxury model, to more of the affordable models,” Glassman said. “People are going to forgo some of those extra frills.”

Joanne Hsu, director of the Surveys of Consumers at the University of Michigan, which produces a widely followed consumer sentiment index, characterized consumer sentiment in July as “guarded.” While consumer sentiment did not change much in July from June, it is down 7.1% from the same month a year ago.

That’s something Glassman can attest to. In some ways, he said, dealerships started expecting the higher sales and perhaps developing unrealistic projections.

“We’re still selling stuff, but not to the degree that we were certainly during the pandemic. I think that’s spoiled a lot of dealerships,” Glassman said. “And, you know, bad habits are made during good times.”

If you are a consumer on the hunt, now is a better time to buy a powersports vehicle. Discounts and rebates are available.

“Honestly right now is probably the best time ever to buy,” Glassman said.

The favorable buyer’s market might not last long.

Megan Alexander, an equity analyst who covers Polaris for Morgan Stanley & Co., said Polaris’ earnings may have bottomed out and should start to improve with the inventory adjustments. She also said in an investor’s note that Polaris has taken “surgical actions on the cost structure.”

The actions include reducing 8% of the salaried workforce since the start of the year. Much of the cuts were from closing open positions and not replacing retiring salaried employees.

Alexander is still bullish on Polaris and maintains a buy recommendation.

“It was clear to us that momentum in PII’s operational efficiency efforts are finally trending in the right direction,” Alexander wrote.

Polaris has seen down cycles in the market before. Despite cost cuts, the company has preserved R&D spending, focusing on operational improvements and efficiencies.

Polaris also started shipping new 2025 Ranger and Sportsman models and the recently redesigned Indian Scout motorcycle. And this week at their Polaris Summer Dealer Meeting in Las Vegas, the company plans to unveil more new products.

“We have seen this before and know that staying on the gas with innovation is key to emerging as a stronger company when the market stabilizes,” Speetzen said.