Can-Am recently reported their earnings for Q2 fiscal year 2021. North American retail sales were stronger than expected across all categories given the COVID pandemic. Management reported revenues of $1,233.3 million, a decrease of $226.2 million or 15.5% which was primarily related to the COVID related temporary suspension of production. Revenues for the North American Year Round segment, which includes side-by-sides and ATVS, decreased by $113.4 million, or 15.4% to $621.2 million. Revenues decreased despite strong retail sales because sales were drawn from existing dealer inventory while production was lowered because of Covid.

Retail Exceeds Expectations

Similar to reports from Polaris, Can-AM Q2 earnings had very strong sales for side-by-sides and ATVs. Consumers turned to off-road riding as a socially distant alternative activity during the pandemic. In addition, discretionary income from money not spent during Covid inactivity drove sales. Similar to Polaris, Can-Am also attracted a lot of new powersports customers, but lost market share as dealer inventory was depleted while production greatly reduced.

Can-Am Q2 Earnings Highlights

The following are some of the highlights from the earnings call that are related to the small, task-oriented vehicle market.

• Can-Am powersports retail sales were up 40% in North America (NA) and were strong in all categories
• Company is constructing a new facility in Juarez, Mexico to meet side-by-side vehicle demand – should be online in fall 2021
• Management reports doing  better than expected when first going into Covid
• Can-am NA side-by-side retail up high 50% compared to industry up low 70%
• Lost market share because high product demand and production shutdown depleted inventory.
• NA dealer powersports inventory was down 51%
• People turned to powersports in their free time under the restrictions of the pandemic
• Can-Am attracted new powersports customers and customers from other brands with off-road vehicles leading the way – new to BRP customers up 51% overall for the quarter with up 74% for off-road
• Usually around 10-15% are new customers
• For the season, NA off-road retail increased low 20% for industry with Can-Am side-by-side up low 40%
• Side-by-side retail strong internationally up almost 50% in EMEA and ~30% in Asia Pacific
• Total NA dealer inventory down 51% and this represents down $1 billion of inventory
• Management reports loss of maybe 1-2 points of market share as depleted inventory drove customers to other brands

Learn more: Seekingalpha.com (Earnings call transcript)

SVR’s Take

This was a good quarter for Can-Am and the industry in general. New customers with money to spend and in search for Covid safe activities turned to powersports and off-road riding in particular. The large portion of new to powersports customers gives the companies a chance to create more lifetime off-road customers as well as cross sell them other powersports products. It will be interesting to see if the strong consumer demand can be maintained going forward.