Arctic Cat posts loss as demand for power-sports vehicles sags

Arctic Cat's woes continued during its fiscal second quarter as the all-terrain vehicle maker suffered steep sales and profit declines amid a softening power-sports market.

The Minneapolis-based maker of ATVs and snowmobiles saw sales sink 22 percent to $165 million for the fiscal second-quarter that ended Sept. 30. The company lost $12.8 million, or 98 cents a share, a reversal from a profit of $11 million in the same period a year ago.

Results, which missed expectations, included a new $1.4 million charge resulting from a product liability settlement.

CEO Christopher Metz said that the company will be looking to see if the election of Donald Trump as president will reverse a "general slowness" in the current power sports market.

"Who knows whether the general election — where a lot of our core users are in those red areas of the country that voted for the president-elect — is going to have a positive effect on people's mind-sets and assist future vehicle sales," he said.

Metz said the second-quarter results were disappointing, "impacted by lower sales volumes, unfavorable product mix and a heightened promotional environment." Sales fell across all three core businesses — ATVs, snowmobiles and parts and accessories.

"We expected that Arctic Cat's second quarter would be challenging, as we continued to implement our turnaround strategies," he said. "However, we encountered a softer than anticipated power sports market in the quarter."

Arctic Cat's stock fell 3 percent to close at $14.51 per share Wednesday.

The company, which is trying to become a stronger player in the ATV racing and snowmobile arena, has a host of new product launches planned for the next two years, executives said.

The second half of this fiscal year should be helped by "new product launches, an improved product mix … and [by] creating a brand marketing powerhouse," Metz said.

He added that Arctic Cat just signed two strategic partnerships and continues to improve its dealer network. Arctic Cat added 28 new dealerships in the last year on top of another 15 the previous year. At the same time, Metz said Arctic Cat will cut old inventory at dealerships by $55 million by the end of fiscal 2017. The company will curtail production if needed to meet the goal, he said.