Arctic Cat Q3 financials: Sales up, profits down

Publish Date: 
Jan 27, 2014
By Vince Guerrieri

MINNEAPOLIS, Minn. – Arctic Cat posted snowmobile sales increases of 16 percent during its third quarter ending Dec. 31 and executives said during a quarterly earnings call that the company plans to continue expanding its dealer network.

Executives said that since forming a dealer development team two years ago, the manufacturer of snowmobiles and side-by-sides has added to its dealer network, and will continue to do so.

The company saw increased sales and market share, but profits decreased; executives cited Arctic Cat's snowmobile partnership with Yamaha as the reason for the drop in profits.

Net sales were $225.8 million in the quarter, an increase of $7.8 million year-over-year but below financial projections of $241.6 million. North American sales were up 15 percent year over year.

Retail snowmobile sales were up 16 percent year over year for the quarter, and 27 percent year to date. Chairman and CEO Claude Jordan attributed the increase in part to the higher snowfall so far this winter in many areas of the country. The sales increase combined with a decrease in dealer inventory.

“These increases have allowed us to take market share,” he said. “We are seeing double-digit increases in retail sales.”

In side-by-sides, sales increased 12 percent to $78.2 million. Jordan said he anticipated SxS sales to grow to half of the company’s sales, up from 45 percent from fiscal 2013 and 39 percent in fiscal 2012. Sales figures for the most part do not include sales from newly-introduced Wildcat models. Jordan said he anticipated a boost in sales in the next quarter from those new models, including the Trail, X Limited and 4X.

PG&A sales also saw a double-digit increase, up 13 percent to $29.5 million.

Gross profit margins were 17.8 percent from a previous 23.3 percent during the same time the previous year. Jordan attributed the drop to the agreement with Yamaha: Arctic Cat produces chassis for Yamaha, and Yamaha produces four-stroke engines for Arctic Cat. Because Yamaha products sell for less than Arctic Cat products, profit margins decreased, Jordan said.

Arctic Cat’s stock tumbled at the news, down $5.91 on Jan. 23, the day earnings were announced, to $47.82. The stock opened for trading Jan. 27 at $43.30.