Polaris Q2 2020 Earnings summary

Polaris recently reported their financial results for fiscal year 2020 2nd quarter and they were better than expected. The company reported sales of $1.512 billion for the quarter, a decrease of 15% year over year. Adjusted income decreased 25% from $107 to $81 million. Management stated that results “significantly outpaced company expectations” in the face of the pandemic. In the ORV/Snow segment sales were $953 million, a decrease of 9% year over year with ORV decreasing 14%. The powersports industry experienced strong retail sales, especially in off-road vehicles. Management attributed the strong sales to people seeking family enjoyment, having more free time and fewer alternatives for spending money because of the pandemic.

Polaris Q2 2020 Earnings Highlights

The following are highlights from the earnings call that relate to the small task-oriented vehicle market.

• NA powersports industry retail was up high 30% in Q2
• Polaris off-road vehicle retail increased low 60% as side-by-side and ATV sales were both strong.
• New customers were key drivers with more females, people of color, families and younger buyers
• Management reported that 75% of their off-road vehicle and motorcycle buyers in Q2 were new to Polaris.
• Solid demand for four seat and crew UTVs for family usage
• A significant portion of ORV sales came from existing dealer inventory which decreased 45% in the quarter as Polaris shutdown or decreased plant production
• Production is “chasing demand with some shortage”.
• Japanese competitors are gaining share, in part, due to having more product available.
• Global Adjacent Market sales decreased 36% for the quarter to $78 million from $122 million
• ORV retail sales continued strong growth in July

Guidance for 2nd Half

• Polaris retail sales anticipated to outpace overall market.
• Strong performance in second half expected by ORV.
• ORV/Snow sales down 7% for the first half of the year but expected to be up overall for the full year as dealer inventory is replenished and powersports demand maintains modest growth.
• Management anticipates continued weakness in adjacent markets given the dependence on government, university, commercial and rental sales.

Learn more: Polaris Q2 2020 Earnings Call Transcript

SVR’s Take

The fallout from the pandemic appears to have been good for the off-road utility vehicle market, at least for recreational purposes. As a relatively safe activity in terms of avoiding the virus, riding UTVs appears to have provided an antidote to being in lockdown or some degree of it. It will be interesting to see if it continues to do so. They are still large purchases and with the virus flaring up in many places, potential buyers could become more cautious. However, the acquisition of a large portion of new customers to date bodes well for Polaris in the future. Marc Cesare, Smallvehicleresource.com