Increased interest in outdoor recreation because of COVID-19 fueled sales in the powersports industry during 2020, and Polaris responded, introducing more than 100 new products and doubling its earnings in the fourth quarter.
But now dealer supplies are low, putting pressure on the Medina-based company's ambitious goals for 2021.
Added to low inventories is supply-chain challenges, as the coronavirus pandemic continues to affect the global economy, the company said.
"While supply-chain challenges remain front and center for Polaris and most of the industry as we enter 2021, the operational track record of our team gives me great confidence in our ability to navigate those constraints," said Michael Speetzen, the company's interim CEO.
Polaris faced an unprecedented shutdown of dealerships in the spring, forcing the company to be creative. It also had to temporarily shut down factories in the spring, and Speetzen praised Polaris workers for their agility.
Yet the company still introduced 120 products and more than 900 accessories during the year.
Fourth-quarter earnings doubled to $198.8 million, or $3.15 a share, over the same period a year ago. Sales were up 24% to $2.1 billion. Adjusted earnings were $210.9 million, or $3.34 per share, up more than 80% and 15% better than analyst expectations.
For the year, Polaris posted sales of $7 billion, up 4%. After losses earlier in the year, net income was $124.8 million, down 61% over last year.
After adjusting for impairment charges related to its aftermarket segment and other charges, adjusted earnings for the year were $7.74 per share, up from $6.32 per share in 2019 and better than the analyst expectations of $7.30 per share.
As the coronavirus hit the U.S., Polaris delayed merit-pay increases and instituted furloughs.
Yet, employees will be rewarded with the financial turnaround. The employee stock-ownership plan holds about 5% of Polaris shares, which increased 22% since the start of 2020.
The majority of Polaris' 14,000 workers are also eligible for profit-sharing.
"We beat the original plans that we had in place, substantially. So employees are going to benefit there," Speetzen said in an interview. "We are recognizing that employees made a sacrifice."
Speetzen, most recently chief financial officer of Polaris, was named interim CEO and Bob Mack was named interim CFO in December after former CEO Scott Wine announced he would be leaving to lead CNH Industrial, a London-based maker of agricultural and construction equipment.
The board of directors is conducting a CEO search and while Speetzen is a candidate, he said he is focused on running the company.
"I have a high degree of interest, but I also respect the board and they have a big decision to make," Speetzen said. "Right now, I'm spending zero percent of my time worried about that, and 100% of my time focused on us executing against our goals."
Those goals include introducing more new products for 2021, rebuilding dealer inventories that are at the lowest level in years, and converting new customers gained in the last year to lifelong devotees who may also attract more friends and families to the brand.
The company announced guidance for 2021, saying sales would be in the range of $7.95 billion to $8.15 billion, an increase of 13 to 16% over 2020. Adjusted net income is expected to be in the range of $8.45 to $8.75 per diluted share.
Issues within Polaris' supply chain will be a constraint on the ambitious guidance.
While the company has always given financial and logistical support to critical suppliers when needed, "it's far more pronounced this year," Speetzen said.
Polaris has sent teams of its lean manufacturing experts to help key suppliers manage through the crisis and increased the amount of financial support, including to some of the company's smaller suppliers
"We've done a lot of work to get closer and closer to our supply chain and have more of a strategic relationship with them," Speetzen said. "That has really aided us."
Shares of Polaris closed Tuesday at $123.68, up 3.5%. That is higher than the past 52 weeks, which saw the stock ranging from $37.36 to $121.35 per share.
Patrick Kennedy • 612-673-7926