Polaris beats quarterly estimates as it prepares for Indian relaunch
- Article by: Dee DePass
- Star Tribune
- July 23, 2013 - 8:14 PM
Polaris officials did a fair amount of gushing as they released the company’s second-quarter earnings results Tuesday. But they were far more pumped about the upcoming relaunch of the Indian Motorcycle brand, set for Aug. 3. at the Sturgis Motorcycle Rally in South Dakota.
“We expect to generate significant dealer and consumer excitement and orders in the months ahead,” CEO Scott Wine told analysts during a conference call Tuesday. “It is going to be interesting over the next six to eight months.”
Strong demand for the iconic brand, once considered a rival to Harley-Davidson, prompted Polaris Industries to boost its earnings guidance for the full year. Already, the Medina-based company has built 300 of the redesigned bikes so it will be ready to accept orders.
Polaris bought the 112-year-old company in 2011 and has since invested millions expanding factories to accommodate the return of the nearly defunct bike.
“You guys are usually a little bit more conservative about your product launches. It sounds like you are excited. And it sounds like you could pick up more market share,” Citigroup analyst Greg Badishkanian told Polaris executives Tuesday.
Since the 1920s, Indian Motorcycles have won several races and even appeared in the 2005 Anthony Hopkins movie “The World’s Fastest Indian,” which told the story of how New Zealander Burt Munro spent years building a 1920 Indian Motorcycle.
In addition to the launch, Polaris expects improved profit margins in its Parts, Garments and Accessories unit to bolster its earnings performance for the full year.
Polaris overcame several challenges to deliver solid second-quarter results. Sales of its Victory motorcycles slumped due to an unusually wet spring, while snowmobile sales receded with the end of winter. The company also overcame sluggish international demand.
But those setbacks were not enough stymie results. Sales climbed 12 percent to $845 million, while net income rose $80 million, or $1.13 per share, 2 cents more than analysts expected.
Helping results was a bump in Polaris’ largest division, ATVs (all-terrain vehicles) and side-by-side vehicles, which represent about 73 percent of total sales. ATV sales rose 7 percent and were particularly strong in North America during the quarter. Polaris also enjoyed price increases and cost cuts.
Polaris also had “significant” growth in its Parts, Garments and Accessories unit and Small Vehicles division during the quarter because of acquisitions. In April, Polaris bought Aixam Mega, a French maker of tiny, sporty quadricycles that generated $110 million in annual European sales. With that addition, Polaris’ Small Vehicles division more than doubled during the quarter to $33.7 million in sales.
Meanwhile, its Parts, Garments and Accessories sales grew by 33 percent to $133.5 million, with help from the December acquisition of KLIM, a maker of motorcycle and snowmobile gear, which generates $30 million a year.
“We expect that business to grow faster than the overall portfolio,” Wine said.
Company earnings are now expected to grow to $5.20 to $5.30 a share in 2013, up from $4.40 in 2012.
Polaris shares closed Tuesday at $106.02, up 2.45 percent.
Dee DePass • 612-673-7725
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