POLARIS REPORTS 12% SALES INCREASE FOR 1Q FY18
May 7, 2018
Source: Polaris news release
Reported and adjusted sales for the first quarter of 2018 increased 12% to $1,297 million;
First quarter 2018 reported net income was $0.85 per diluted share; adjusted net income for the same period was $1.06 per diluted share, up 41% over the prior year;
North American retail sales increased 3% for the quarter; ORV N.A. retail sales were up mid-single digits % with side-by-side vehicles up high-single digits %. Gained market share in RANGER, RZR and Sportsman ORV brands during the quarter along with share gains in both Indian and Slingshot motorcycle brands;
Total first quarter 2018 dealer inventory was up 6% year-over-year; ORV dealer inventory was flat;
Polaris increased its full year 2018 sales guidance to up 4% to 6% and narrowed its full year earnings expectations by raising the lower end of its earnings per share range and now expects adjusted net income to be in the range of $6.05 to $6.20 per diluted share which includes the absorption of an additional approximately $15 million of commodity, freight and tariff costs anticipated in 2018.
Minneapolis, Minnesota -- Polaris Industries reports first quarter 2018 sales of $1,297 million, up 12% from $1,154 million for the first quarter of 2017. Adjusted sales for the first quarter of 2018 were $1,297 million, up 12 percent from the prior year period. The Company reported first quarter 2018 net income of $56 million, or $0.85 per diluted share, compared with a net loss of $3 million, or $0.05 per diluted share, for the 2017 first quarter. Adjusted net income for the quarter ended March 31, 2018 was $69 million, or $1.06 per diluted share, up 41% compared to $48 million, or $0.75 per diluted share in the 2017 first quarter.
"We delivered record first quarter Off-Road Vehicle retail sales to begin the year, driven by innovation and improved dealer engagement. This translated into strong revenue and earnings growth for the quarter. Through the tireless efforts of our team and the efficacy of various quality and productivity initiatives, we overcame commodity and freight inflation and product mix pressures in the first quarter to maintain our gross margin year-over-year, while leveraging operating expenses even as we continue to invest heavily in research and development," commented Scott Wine, chairman and chief executive officer of Polaris Industries.
"We are fully prepared to build upon this early success and deliver solid growth for the full year. Our production flow improved steadily throughout the quarter and inventory, snow notwithstanding, is in great shape. With the recent introduction of the all new Ranger XP 1000 and the 72-inch RZR XP Turbo S, and a robust innovation pipeline, we are exceptionally well positioned to bring more customers into Polaris dealers. While we must overcome significant commodity, freight and tariff headwinds throughout the remainder of the year, I am confident Polaris is taking the necessary steps towards becoming a customer centric, highly efficient growth company," Wine concluded.
Off-Road Vehicle ("ORV") and Snowmobile segment sales, including PG&A, totaled $833 million for the first quarter of 2018, up 15% over $724 million for the first quarter of 2017 driven by growth across all categories. PG&A sales for ORV and Snowmobiles combined, increased five percent in the 2018 first quarter compared to the first quarter last year. Gross profit increased 14% to $244 million, or 29% of sales, in the first quarter of 2018, compared to $213 million, or 29% of sales, in the first quarter of 2017.
Gross profit percentage was approximately flat year-over-year, as unfavorable product mix and higher commodity and freight pressures were offset by lower warranty expense.
ORV wholegood sales for the first quarter of 2018 increased 17% primarily driven by strong Range, RZR, and ATV shipments. Polaris North American ORV retail sales in units were a record for the company in the 2018 first quarter, increasing in the mid-single digits percent range on a comparable first quarter basis. Side-by-side vehicles grew retail sales in the high-single digit percent range and ATVs were up low-single digits percent. All brands, which includes Ranger, Polaris General, RZR, and Sportsman, gained market share during the quarter in their respective categories. The North American ORV industry was up low-single digits percent compared to the first quarter last year. ORV dealer inventory was flat in the 2018 first quarter compared to the same period last year.
Snowmobile wholegood sales in the first quarter of 2018 increased 28% to $18 million, due to strong international sales. Polaris snowmobile retail sales were down high single digit percent during the 2018 first quarter and down about 10% for the twelve month season ending March 2018. North American industry retail was down high-single digits percent for the first quarter and up mid-single digits percent for the 2018 March season-end. Polaris lost share for the quarter and season partly due to a lack of snow in regions where the Company has its highest market share which disproportionately impacted Polaris' retail sales and market share relative to its competitors.
Motorcycle segment sales, including PG&A, totaled $132 million, an increase of nine percent compared to $120 million reported in the first quarter of 2017. Indian Motorcycles wholegood sales increased in the low-double digits percent range in the first quarter of 2018, while Slingshot sales were down low-double digits percent. Gross profit for the first quarter of 2018 was a positive $17 million compared to a loss of $20 million in the first quarter of 2017. Adjusted for the Victory wind down costs recorded in both the 2018 and 2017 first quarters, motorcycle gross profit was $17 million, or 13% of sales in the 2018 first quarter compared to $19 million, or 15% of sales for the 2017 first quarter, down on a dollar and percent of sales basis due to higher warranty expense for Slingshot.
North American consumer retail demand for the Polaris motorcycle segment, including Indian Motorcycle and Slingshot, increased low-single digit percent during the 2018 first quarter. Indian Motorcycle retail sales increased low-single digits percent. Slingshot's retail sales were down mid-single digits percent during the quarter. Motorcycle industry retail sales, 900cc and above, were down mid-teens percent in the 2018 first quarter. Both Indian Motorcycle and Slingshot gained market share for the 2018 first quarter on a year-over-year basis, in spite of unusually cold and wet weather in March and an overall weak N.A. industry motorcycle market in the first quarter.
Global Adjacent Markets segment sales, including PG&A, increased 24% to $113 million in the 2018 first quarter compared to $92 million in the 2017 first quarter. Both Aixam and the Commercial/Government/Defense group delivered double digits sales growth during the quarter. Reported gross profit increased 11% to $31 million, or 28% of sales, in the first quarter of 2018, compared to $28 million, or 31% of sales, in the first quarter of 2017. Gross profit as a percent of sales, declined slightly due to product mix.
Aftermarket segment sales increased 1% to $220 million in the 2018 first quarter compared to $218 million in the 2017 first quarter. TAP sales in the first quarter of 2018 were $201 million, which was down slightly compared to the first quarter of 2017. Soft industry light-duty truck sales negatively impacted TAP's wholesale aftermarket accessory business, while TAP sales through its retail stores remained strong during the first quarter of 2018. Gross profit increased to $58 million, or 27% of sales in the first quarter of 2018, compared to $42 million, or 19% of sales, in the first quarter of 2017. Adjusted for the TAP acquisition step-up adjustment in the 2017 first quarter, Aftermarket gross profit increased 7%, or 160 basis points as a percent of sales, due to more favorable product mix within the business.
2018 Business Outlook
Given the 2018 first quarter results, the Company is raising its full year sales guidance and now expects sales to be in the range of 4%-6% over 2017 adjusted sales of $5,428 million and narrowing its earnings guidance range for the full year 2018 and now expects adjusted net income to be in the range of $6.05 to $6.20 per diluted share, compared with adjusted net income of $4.85 per diluted share for 2017. The revised guidance takes into account additional costs related to commodity price increases, higher freight costs, and the estimated impact of additional tariffs totaling approximately $15 million, pre-tax.