Motorcycle Sales, Recalls Hurt Polaris’ Profits In Q4

The company's net income for fiscal 2016 was half that of the previous year.

Profits plunged 42 percent at Polaris Industries in the fourth quarter of 2016, despite an overall increase in sales, driven by reduced motorcycle production and an increase in recall, acquisition and promotional costs.
The Medina-based recreational-vehicle manufacturer reported net income of $63.6 million—or 97 cents per share—on sales of $1.2 billion. That’s down from net income of $110.7 million during the same quarter last year.
“2016 was a difficult and challenging year for Polaris, but our culture is geared to deal head on with adversity and learn from it, and that’s what we did in 2016,” CEO Scott Wine said in a statement.
The company’s motorcycle segment, in particular, took a beating as profits fell 94 percent to $1.6 million due to recall expenses and lower production rates as the company prepared to end its Victory motorcycle line. The only bright spot was its Indian motorcycle line, which saw sales rise 20 percent.
Sales of the company’s off-road vehicles increased 5 percent to $905 million, though profits slipped as promotional costs increased and the company dealt with fire hazard-related recalls.
It wasn’t all bad news for Polaris. Despite incurring some expenses for the acquisition of Transamerican Auto Parts, the company attributed at least some of its 10 percent sales bump to the deal. TAP brought in nearly $109 million during the quarter and the company expects it to continue to rake in sales.
For the full fiscal 2016, Polaris saw its profits slashed in half to $213 million, down from $455 million, or about $3.27 per share. The company expects fiscal 2017 profits of $4.25 to $4.50 per share.
The overall poor performance didn’t seem to surprise financial markets. Shares in the company were down just over 1 percent by early afternoon to $86.41. The company’s net income of $1.18 per share—after taking out non-recurring expenses—actually beat Wall Street’s expectations of $1.15 per share, according to Zacks Investment Research.