Polaris Industries on Tuesday reported plummeting sales and soaring costs for the third quarter with swelling costs associated with several serious recalls. As a result, company officials downgraded their forecast for full-year 2016.
The Medina-based maker of off-road vehicles and motorcycles has struggled during the past year with product recalls stemming from fire hazards that have injured some riders and resulted in at least one death.
Polaris has issued at least eight recalls since January 2015, two of them in September. The latest ones prompted another round of tongue-lashings from consumers upset about waiting for repair parts and not being able to enjoy fall rides.
A spate of company promotions and offers followed and that ultimately affected the third quarter's bottom line.
Third-quarter profits plunged 79 percent to $32 million. Sales fell 19 percent to $1.185 billion. Operating expenses shot up 16 percent to $223 million amid higher recall, research and product development expenses.
CEO Scott Wine called the results "discouraging," and acknowledged that Polaris' recall woes landed during a weak time for the entire power sports industry.
Still, the results "reflect our ongoing execution of the [four-wheeler] RZR recalls and [our] significant quality and safety improvement initiatives," he said. "During the past three months, we have accelerated our efforts to get our loyal owners back to riding safely."
The company has completed more than 50 percent of the repairs needed for its RZR 900/1000 recalls and has completed slightly less than 50 percent of the work needed on recalled RZR Turbo vehicles.
If the third quarter is any indication, it could take awhile for sales to return to normal.
Sales for Polaris' largest business — off-road four-wheelers and snowmobiles — fell 23 percent to $923 million during the quarter. Motorcycle sales rose 3 percent to $183 million, while its "adjacent markets" business that includes electric and military products grew 6 percent to $78.4 million.
The uptick in the smaller businesses wasn't enough to offset the one-two punch of the four-wheeler recalls.
For full-year 2016, Polaris said off-road vehicle sales could fall by double-digit percentages. As a result, the company narrowed its 2016 earnings forecast to $3.40 to $3.60 per share, from the prior guidance of $3.30 to $3.80.
Officials said the new guidance does not include Polaris' recent announcement that it plans to buy California-based Transamerican Auto Parts (TAP) for about $665 million.
Polaris' stock closed Tuesday at $78.61, down 3.7 percent.