Improving supply chains and price gains drove Polaris to record results in the fourth quarter, but the Medina-based company predicts slower growth in 2023.
The powersports company has benefited the last couple of years from people's increased interest in outdoor recreation. And it got creative in managing production to meet the increased demand while wrestling with lingering supply-chain issues.
While supply-chain and inflation issues for most manufacturers have improved in the past several quarters, makers of outdoor products are now facing higher interest rates, unfavorable foreign exchange rates and more cautious consumers as many experts predict a slowing economy or worse in 2023.
After seeing a 15% increase in annual sales and adjusted earnings per share from continuing operations for 2022, the company's initial forecast for 2023 is that sales will be flat to up 5% in 2023, and adjusted earnings to be in the range of plus or minus 3%.
"Polaris ended the year strong," Mike Speetzen, Polaris' chief executive, said in a news release. "Although macroeconomic headwinds may persist in 2023, our team remains agile and poised to deliver industry-leading innovation that is consistent with the Polaris brand."
Analysts were generally more pessimistic about the 2023 outlook with the consensus estimates showing Polaris sales and adjusted earnings down 2% and 4% respectively.
Speetzen noted in a conference call with analysts that the demand environment for the fourth quarter and into 2023 is mixed. On the retail side, the strong demand of the pandemic years waned some. But Polaris' sales in the utility markets don't go through the same retail channels, and demand from farmers, ranchers and contractors purchasing utility vehicles is more stable.
"In off-road, there remains a delineation between utility and recreation," Speetzen explained on the conference call. "Demand indicators are stable in utility, while recreation is soft with more pronounced moderation as you move through models with less content."
