Polaris Industries Inc. laid off about 100 workers, half at operations in the Twin Cities, executives said Tuesday as the company announced a drop in fourth-quarter profits and warned of a steeper dip in the first quarter of this year.
The Medina-based manufacturer of off-road vehicles and motorcycles informed workers of the cuts on Monday. Polaris was aiming to reduce employment costs by 7 percent as it grapples with revenue and profit pressures.
“We just wanted to make sure that we are aligning our employment costs with our growth projections and so we’ve been taking every step we can to remove costs from the organization,” said Kelly Basgen, senior director of communications at Polaris.
Over the last few months, the company had already reduced costs by not filling some open positions and utilizing temporary workers, Basgen said. She said Polaris has no other plans for major cuts in jobs or hiring freezes. Polaris will still proceed with plans to open a new factory in Alabama later this year.
While the company produced a slight gain in profit for full year 2015, bringing in $455.4 million, it encountered challenging financial and market conditions in the last quarter. Light snowfall in much of North America compounded slower-than-expected demand for all-terrain vehicles and snowmobiles.
In the fourth quarter, sales of off-road vehicles, snowmobiles and their related parts, garments and accessories decreased 18 percent from the same period the year before.
The company’s stock plunged 9.15 percent Tuesday to close at $72.99. The company’s shares are now about half the value they were six months ago and at their lowest level since May 2012.
“We clearly saw a more cautious consumer,” said Chief Executive Scott Wine in a conference call with analysts.
There was a bright spot with Polaris’ motorcycle sales, including parts and accessories, increasing 33 percent in the quarter, driven by the Indian and Slingshot brands. For the full year 2015, Polaris motorcycle segment sales increased 67 percent compared with the prior year.
Executives said the combined effect of the high U.S. dollar, a jump in expenses and lower product shipments would cut profits in the first three months of this year to be about half the level it was a year ago. A portion of the jump in expenses is to cover the cost of severance to employees.
The company said it earned $110.7 million, or $1.66 a share, in the October-to-December period. It earned $135.4 million, or $1.98 a share, in the same period of 2014. The results were slightly higher than analysts’ expectations of $1.64 a share.
Sales amounted to $1.1 billion in the quarter, down 13 percent from $1.28 billion a year ago.
Wine said executives have been forced to re-examine strategic priorities and they concluded they were on the right track. “Our execution must improve,” he said.
Inventories for both off-road vehicles and snowmobiles spiked at the company’s dealers late in the year, leading Polaris last month to reduce production. Wine said an inventory metric would be added to the compensation evaluation of executives to create more incentive for the company’s leaders to focus on it.
He and other executives described the projected drop in first quarter profit as “atypical.” The company’s full-year profit forecast suggests a recovery later in the year. Executives said they expect sales and profit margins to be under pressure all year because of the high value of the U.S. dollar.
The company forecast its full-year 2016 net income to be in a range of $6.20 to $6.80 per share, lower than analysts’ prior estimates. The median of that range, $6.50, is about 4 percent lower than the $6.75 per share that Polaris earned in 2015.
Staff writer Evan Ramstad contributed to this report.