Polaris expects tariff relief; otherwise it may have to move production

As tariff costs continue to affect Polaris' bottom line, CEO Scott Wine said the company expects the Trump administration to look at its exemption requests soon. But if it does not happen, he will continue to explore options such as relocating some of its productions overseas.

While the off-road vehicle maker beat Wall Street expectations and raised its 2019 guidance Tuesday, it reported an 11% drop in third-quarter adjusted earnings because of extra tariff costs, negative foreign-exchange rates and other restructuring costs.

Wine told analysts during a conference call he is hopeful that the company will see some relief after exemptions from tariffs.

If not, Wine said the company will continue to explore all options, including the possibility of relocating some production overseas. "We know that this is something the [administration] doesn't want to see happen and we don't want that to happen," he said.

Medina-based Polaris imports a number of components from other countries that are ultimately assembled into power sports vehicles in factories in Roseau, Minn., as well as other plants in Iowa, Wisconsin, Alabama, California, Mexico and Poland.

Earlier this year, President Donald Trump ordered tariffs on another $200 billion worth of products made in China to jump to 25%. The levy was to jump again — to 30% — this month. But after negotiations, the second increase — which would have affected various steel, aluminum, chemical and industrial products — has since been delayed.

Wine referred to this most recent "List 3" group of tariff-affected imports as "the big kahuna," with significant consequences for Polaris unless its exemption requests are met.

Sales rose 7% to $1.77 billion. Its biggest product line, off-road four-wheel vehicles, had a sales jump of 11% to $1.1 billion.

Executives narrowed their full-year profit guidance upward. The company's shares jumped nearly 11% Tuesday to close at $101.36.

During the conference call with analysts, Wine noted Polaris' new 2020 off-road vehicle lineup and the company's recently revised corporate name and brand tagline. He said the company "continued to improve dealer satisfaction and engagement."

Wine also praised increased sales of the company's four-wheel RZR and Ranger products "despite an increasingly competitive market."

Sales of the much smaller snowmobile line rose 53% to $106 million. Motorcycle sales fell 3% to $150 million as both the Indian and the Slingshot brands slipped. Sales in Polaris's newly acquired boating businesses fell 11% to $119 million.

Polaris now expects full-year per-share profit to be in a range of $6.20 to $6.30, tightening from the previous range of $6.10 to $6.30.

The 2019 forecast includes the effect from new U.S. trade tariffs and costs from various lawsuits, such as those from at least 18 customers who claim their Polaris four-wheelers suddenly overheated, caught fire and burned them.

Polaris said its 2019 guidance includes $17 million to $20 million for class-action litigation-related expenses plus trade-related, supply-chain transformation and network realignment costs of $25 million to $30 million.