Polaris Industries is Optimistic for 2017, Despite Fourth Quarter Struggles
Polaris Industries, an international leader in the snowmobile industry, struggled through the fourth quarter following unexpected recalls and the cost of their acquisition of Transamerican Auto Parts.
Profits were decreased by 43.5% and stock finished down $1.14 at just $86.41. For the entire year of 2016, Polaris reported $4.52 billion in sales, down from $4.72 billion in 2015.
However, CEO Scott Wine is optimistic looking forward through 2017.
“While prospects have certainly improved for our power-sports customers to enjoy [a] better economic environment, Polaris is entering 2017 with a strong commitment to returning to profitable growth through consistent execution and aggressive innovation,” he said.
Despite the significant loss in revenue, Polaris snowmobile sales did rise by 13% as they’ve improved their shipping efforts. Cargo airlines carried their products both nationally and internationally, increasing the scope of their sales.
Additionally, the acquisition of TAP increased sales by $108.7 million, excluding initial buyout costs.
The drop in revenue overall was partly due to the drop in motorcycle sales. As the motorcycle market weakens, Polaris anticipated a 25% loss. However, the loss was much closer to 35%. Higher spending on marketing as well as extended warranty offers contributed to the gross profits as well.
Motorcycle recalls were to blame, in part. The recall of the three-wheel Slingshot hurt sales significantly in the fourth quarter, especially since the motorcycles were heavily pushed in the previous year.
In order to combat the rapid decline, the company has decided to discontinue its line of Victory motorcycles. Polaris will record Victory termination costs this quarter, but the costs will not be reflected on the adjusted earnings guidance for this coming year.
The company is forecasted to rise from $4.25 to $4.50 per share, and sales are anticipated to exceed $5 billion in 2017, with a 13% year over year growth.
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