Three months after Polaris CEO Scott Wine said he expected a "no drama" 2020, the recreational vehicle maker reported Tuesday that the coronavirus crisis has upended the company's momentum and reduced sales in the first quarter.
Although it started the year with better-than-expected demand, the company reported a loss of $5.4 million for the three months ended March 31, compared with a profit of $48.4 million during the same period a year ago. Adjusted earnings per share was 22 cents, well below analysts' consensus estimate of 55 cents.
Sales decreased 6% to $1.41 billion for the first quarter, which met analysts' estimates, as a result of a rapid decline in retail demand as the world grappled with the threat of COVID-19 last month forcing the company to temporarily close its manufacturing plants and furlough and cut pay of some of its workers.
"The abrupt shutdown of global commerce was certainly a shock to our business," Wine said, during a Tuesday morning earnings call. "But our aggressive plan for response has positioned us to navigate and win through this lockdown and the recession to come."
The Medina-based company estimated that COVID-19 adversely affected sales by about $125 million, while gross profit impact was about $50 million compared with the company's previous expectations.
Polaris shares closed at $70 Tuesday, up 3.7% for the day.
Polaris leaders estimated that company performance in the first 2½ months of the quarter was ahead of projections before demand slowed in the last two weeks of March. During those last few weeks, the company's North American powersports retail sales tanked 40%.
The company has had seven confirmed COVID-19 cases among its 14,000 employees, Wine said. While dealer closures were a "huge problem" in early April, he said, more than 85% of off-road vehicle and motorcycle dealers in North America are open.
Polaris has had to quickly cut operating expenses — $120 million so far — similar to what it had to do in the Great Recession in 2008 and 2009, Wine said.
The company's response to the pandemic has included Wine giving up his salary for the rest of 2020. Polaris briefly halted production of its outdoor recreation products March 23. It restarted production only for "select manufacturing lines for products with adequate demand and supply chain coverage." The company was also among a dozen other major Minnesota companies to recently withdraw full-year guidance.
Polaris leadership said sales were predicted to continue to dip in the second quarter of the year, but the company is already seeing some positive signs such as year-over-year, double-digit growth in off-road vehicle retail sales so far in April, Wine said.
"Powersports customers don't hibernate," Wine said. "And I think that even with these stay-at-home orders prevalent throughout the country people do want to get outside."
