business

Shares of snowmobile and all-terrain vehicle maker Arctic Cat fell more than 24 percent Friday after company officials downgraded their earnings outlook for the third quarter because of lower-than-expected ATV sales.

Officials said they now expect a net loss of 55 to 60 cents a share for the quarter. They previously predicted a 30- to 37-cent loss per share. Sales are expected to be $155 million to $160 million, down significantly from a record $228.1 million a year ago and from previous sales guidance for the quarter of $170 million to $180 million.

"We are disappointed with these results and the sluggish ATV environment," said Christopher Twomey, CEO and chairman of the Thief River Falls, Minn.-based company. "Retail sales of ATVs industrywide continued a yearlong decline."

Industrywide, ATV sales were down 11 percent through September, and the company will cut production by 10 percent to bring itself in line with the current trend.

Twomey noted that sales of the higher-end Prowler model have done better than standard ATVs, but the company believes many less-affluent consumers are holding back from making a discretionary purchase that can cost from $3,500 to $10,000.

"Their decision to buy a new ATV can be put on a back burner until they get more confidence, until their income increases," he said.

Arctic Cat's stock price fell $2.98 to $9.21, with about four times as many shares changing hands as on a typical day.

The company also reported that its board of directors has authorized a new share-repurchase program of as much as $10 million of common stock, which at current prices would retire about 9 percent of the shares on the market.

Twomey said that sales for the full fiscal 2008, which ends in March, should be in the $645 million to $665 million range, down from $782.4 million in 2007 and from the most recent estimate for 2008 of $710 million to $736 million. Earnings for the full fiscal year are expected to be 1 to 7 cents a share; earnings for 2007 were $1.15 a share.

Analysts noted that ATV sales have generally peaked after years of intense growth.

The market has been flooded with competing models, and consumers are battling rising fuel prices, tightening credit and mortgage woes, crimping spending on big-ticket recreational items, analysts said.

While ATV sales are off, Twomey said that Arctic Cat's snowmobile sales "remain on plan" for the quarter.

December's healthy snowfall across the nation helped lift snowmobile sales, which were up 20 percent from a year ago, as well as sales of parts, garments and accessories, Twomey said. However, production is determined months in advance, so the snowfall doesn't mean the company will produce more machines this season.

Arctic Cat will report third-quarter results Jan. 23.

Dee DePass • 612-673-7725