Polaris says it's the end of the line for Victory Motorcycle brand

Polaris Industries will exit the Victory Motorcycle brand it started from scratch 18 years ago, citing a mix of competitive pressures and lack of market share.

The Medina-based company's announcement Monday will not affect Polaris' fast growing Indian Motorcycle brand or other divisions, officials said. CEO Scott Wine said the "winding down" of the Victory brand will begin immediately.

"Victory has struggled to establish the market share needed to succeed and be profitable. The competitive pressures of a challenging motorcycle market have increased the headwinds for the brand," Wine said in a statement.

Victory's share of the motorcycle market slid to just 2 percent last year, from 3 percent in 2013. Wine said the company decided to focus on the Indian brand given its strong performance and growth potential and the significant additional investments that would be necessary for Victory to succeed.

Polaris will help dealers liquidate existing Victory inventory and will continue to supply parts and service for 10 years and honor warranty coverage accordingly.

Polaris said it "remains committed to maintaining its presence" in the Spirit Lake, Iowa, facility where Victory and Indian bikes are now made. It also remains committed to its new Huntsville, Ala., plant which makes the three-wheeler Slingshot motorcycle, among other products.

It is unclear how employment at the plants might be affected as Victory winds down.

Dealers are taking the news as best they can. "We sunk a lot of money into this and so we are sad to see it go," said Jamie Kurkowski, assistant sales manager at Mies Outland in Watkins, the largest Polaris dealer in the state.

"We had years where we sold 150 Victorys a year," Kurkowski said. "Lately it was about 75 and 100 Victorys a year. But what are you going to do? It sounds to me that it was a profit margin problem."

While Polaris directed a lot of energy in recent years at buying and relaunching the Indian Motorcycle brand, the launch of the Victory bike came first and represented a bold attempt at product diversification.

When the first Victory Motorcycle roared off the assembly line in Spirit Lake in 1998, it broadened Polaris' product line beyond snowmobiles, four-wheel all-terrain vehicles and personal watercraft. Since then, Polaris has designed and produced nearly 60 Victory models that won 25 industry awards.

The experience, knowledge and infrastructure gained in launching Victory gave company officials the confidence to acquire and develop the Indian Motorcycle brand, Wine said. "So I would like to express my gratitude to everyone associated with Victory Motorcycles and celebrate your many contributions."

For the first nine months of 2016, Victory and Indian motorcycles sales were about $603 million. That's up from roughly $192 million for the first nine months of 2012, when the bulk of sales reported in that category represented Victory motorcycles.

Motorcycles now represent about 15 percent of Polaris' annual revenue of $4.7 billion.

Polaris' stock fell 3.3 percent to close at $83.72 a share Monday. It's trading at nearly half the value enjoyed in February 2015.

The decision to shut down the Victory line did not surprise Wall Street analysts. The end of Victory is just "as some in the industry had conjectured since the launch of Indian," said UBS analyst Robin Farley.

"Sales of Victory had peaked in 2012 before the introduction of Indian in 2013. And Victory had declined each year after that, with the business being unprofitable … for three of the last five years," she said. "We expect this to be neutral to positive" for Polaris' earnings outlook."

The product change comes at a tough time for Polaris, which has battled a downturn in the recreational sports industry and massive recalls of its four-wheel ATVs and Indian Motorcycles due to the potential risk of fire. Research, repairs, warranty, legal and other costs associated with the recalls have cost Polaris more than $120 million to date.

The company is expected to reveal costs for the Victory brand shutdown next week, when it reports fourth-quarter earnings.

Dee DePass • 612-673-7725