"Increasingly Cautious Consumer": Polaris Shares Crash As High Interest Rates Crush Demand For ATVs & Jetskis
A toxic trifecta of high interest rates, elevated inflation, and increasingly cautious dealers and consumers led Polaris to report dismal second-quarter results. The earnings miss and reduced full-year forecast for sales and profit indicate the once-thriving outdoor adventure market for ATVs, UTVs, jet skis, and snowmobiles is now in a deep freeze.
Polaris reported $1.96 billion in sales for the second quarter, missing the Bloomberg estimate of $2.17 billion. Sales for off-road, on-road, and marine all missed estimates, indicating that consumers are dialing back purchases of outdoor vehicles because of high interest rates.
Here's a snapshot of second-quarter earnings (courtesy of Bloomberg):
Sales $1.96 billion, -12% y/y, estimate $2.17 billion (Bloomberg Consensus)
Off Road sales $1.53 billion, -6% y/y, estimate $1.64 billion
On Road sales $293.3 million, -19% y/y, estimate $334.8 million
Marine sales $134.1 million, -40% y/y, estimate $203.9 million
Gross profit margin 21.6% vs. 22.8% y/y, estimate 23.1%
Cash and cash equivalents $322.7 million, -5.2% y/y, estimate $267.7 million
Adjusted EPS from continuing operations $1.38, estimate $2.23
"The second quarter proved challenging as our industry continued to contend with elevated interest rates, inflation, and an increasingly cautious dealer and consumer," Chief Executive Mike Speetzen wrote in a statement.
Polaris now expects full-year sales to decline 17% to 20%, compared with previous guidance of down 5% to 7%. It expects adjusted EPS to slide 56% to 62%, compared with prior guidance of down 10% to 15%.
Polaris now forecast full-year sales to decline by 17% to 20%, a significant drop from the previous guidance of a 5% to 7% decrease. The company also expects adjusted EPS to plummet by 56% to 62%, compared to the prior forecast of a 10% to 15% decline.
Speetzen said, "We have lowered our full-year guidance to reflect the decision to cut shipments and our expectations that current industry challenges remain in place for the remainder of the year."
In premarket trading, shares are down 14%, the largest intraday decline since early Coivd when government-enforced shutdowns closed the economy.
Also, watch MasterCraft Boat, MarineMax, Camping World, Brunswick, and Malibu Boats.
Polaris is a proxy of consumer health. Certainly, high interest rates and elevated inflation have crimped demand for ATVs, UTVs, and jet skis. The broad theme here is that a consumer slowdown continues to worsen.