Arctic Cat stock sheds $10.6 million in second quarter

Weaker overall sales and a shift in snowmobile shipments hurt results for the Plymouth dealer.

July 30, 2016 at 3:26AM
A factory worker assembles the 2016 Wildcat X side-by-side vehicle in the Arctic Cat factory in Thief River Falls on Wednesday, September 30, 2015. ] LEILA NAVIDI leila.navidi@startribune.com / BACKGROUND INFORMATION: Arctic Cat management did not allow the photographer to get any names of the workers.
A factory worker assembles the 2016 Wildcat X side-by-side vehicle in the Arctic Cat factory in Thief River Falls on Sept. 30. (The Minnesota Star Tribune)

Struggling ATV and snowmobile maker Arctic Cat lost $10.6 million in the first quarter and downgraded 2016 expectations after sales declined amid a delayed shipment and the weakening power-sports marketplace, officials said Friday.

The company's stock price plunged nearly 15 percent Friday as investors digested the latest disappointment.

The Plymouth-based maker of all-terrain vehicles and snowmobiles said its long-term restructuring process remains on track. For example, excess dealer inventories were down 9 percent during the most recent quarter that ended June 30 by offering rebates and extending select financing rate agreements, CEO Chris Metz said.

Arctic Cat also made the strategic decision to launch its 2017 off-road vehicle models in June instead of the traditional August time frame, Metz said.

Yet the numbers still have not turned around. First-quarter sales fell 22 percent to $104.9 million. The company's loss of $10.6 million, or 81 cents a share, was greater than analysts expected and much higher than the $1.1 million loss reported for the same quarter in 2015.

On average, analysts surveyed by Thomson Reuters expected an earnings loss of 38 cents a share.

Arctic Cat's stock price fell $2.66 per share to close at $15.61 Friday.

Metz said in a statement that the quarter's loss was greater than expected "chiefly due to the timing of snowmobile shipments that shifted to the second quarter as well as a more competitive retail environment that led to higher promotional spending than planned."

Besides the weakening of the sports market, negative currency exchange rates also hurt profits by 20 cents a share.

Arctic Cat has been aggressively developing new products and launching new partnerships with racing venues, both of which are expected to help sales in this year and beyond, Metz said.

He noted six new product models and 27 updated machines aimed at off-road work and play. The new 2017 lineup includes an HDX Crew six-passenger utility vehicle, a Prowler utility vehicle and the Alterra TRV that features passenger seating for two. A host of new products is also expected during the fourth quarter.

Those are expected to affect sales "in a big, big way in fiscal 2018," he said.

For fiscal 2017, Arctic Cat will spend $30 million to $35 million on factory and product improvements but expects to reap those rewards later.

For the fiscal year ending March 31, 2017, the company's prior sales forecast remains unchanged at $635 million to $655 million. However, it now expects to lose 70 cents to $1 "due to the weaker power sports market, increased promotional costs and unfavorable product mix."

Dee DePass • 612-673-7725

Christopher T. Metz named president and CEO of Arctic Cat on Nov. 14, 2014, he'll offically start on Dec. 3.
Christopher T. Metz, president and CEO of Arctic Cat (The Minnesota Star Tribune)
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about the writer

Dee DePass

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Dee DePass is an award-winning business reporter covering Minnesota small businesses for the Minnesota Star Tribune. She previously covered commercial real estate, manufacturing, the economy, workplace issues and banking.

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